Health Insurance

In populations where people self-select for cover for health insurance and it is not mandatory no degree of insurance is affordable for anyone: those who are healthy and who would subsidise those who are not would tend to leave, raising the risk profile and costs leading to a new marginal group who would leave. Until the worst risk members would be clustered and they would not be able to afford the premiums as a class. In populations where people have mandatory health cover and where risk / morbidity is normally distributed, 2/3 would be much better off than without such mandatory cover and 1/6 would be very badly off with such mandatory cover. The remaining 1/6 could live with it, if unhappily. However, risk / morbidity is not normally distributed, nor is it binary. Those with the worst risks are least able and least inclined to deal with them.

 

This means that mandatory health insurance is unfair to those who take care of themselves - however large a minority they are. How responsible people are depends also on their level of development. (This is also why HIV prevention efforts are doomed to fail: those most at risk, <25, are not able to adopt the behaviours necessary to make a difference. And preventing MTCT simply delays infection by a median of 15 years – not accounting for child rape.)

 

So, insurance that is not mandatory and non-profit has to discriminate against a large proportion of any population. It also has to rely on imperfect information, non-rational choices, and high transaction costs.

 

What do you insure against? Why?

A layman's healthcare economics

What is the ideal median age for a country with a population greater than 10 million? What is the ideal demographic profile, long-term? What is the optimal healthcare expenditure as a percentage of GDP?

 

My personal shortcut for a human development index (HDI) is a combination of median age and Gini co-efficient: a high median age and low Gini equals a high HDI; a low median age and low Gini is not likely to obtain anywhere in the world and most countries with a low HDI have high Ginis with variable median ages, however larger populations tend to have lower median ages because of high fertility, high maternal and infant mortality and low life expectancy.

 

The ideal demographic profile does not exist – it is too complex, depending on the size of the population, extant infrastructure, literacy levels, life expectancy, savings levels….

 

The optimal healthcare expenditure too is complex and depends on gains to be made by spending on infrastructure, education, public health and security. Most non-healthcare expenditures tend to have higher health related benefits than direct healthcare expenditures. In all cases, I would expect the optimum healthcare expenditure to be less than education related expenditures.

An open letter to South African policy makers

The standard of medical care is now global: this means that the expertise, the skill, the consideration expected of a medical practitioner in South Africa is the same as would be expected of one in the USA, Australia, Canada and the UK. True, levels of litigation and liability differ but the expected levels of care do not.

South African doctors are good and are welcome in the countries abovementioned.

Professional fees in South Africa are not determined by market forces because the government believes, correctly, that market forces would price most consumers out of receiving necessary care. However, most medical expenditure does not go to heath care providers: a larger proportion is spent on administrative costs in the industry than on doctors’ fees.

Given the small proportion of people capable of being doctors, doctors in South Africa are paid considerably less than their counterparts elsewhere whereas business people are paid considerably more. This says a great deal about what South African society values and how little political capital doctors in South Africa have.

The NHRPL has one purpose, to drive down the cost of medical care: it seeks to broaden access rather than fairly remunerate health care providers. Access is a laudable goal as is fair remuneration. However, these two are mutually exclusive. So, trade-offs are necessary and expected and not objectionable. My point, made repeatedly, is that healthcare providers should not be expected to bear such societal costs disproportionately as they currently do. That is inequitable and unsustainable and drives emigration.

The HPCSA’s primary remit is to protect the public not serve the interests of health care providers. The only body charged with acting in the interests of health care providers is the SAMA.

As a doctor, I believe that doctors in South Africa get a raw deal and I know that that will not change for a number of reasons and that it arouses very little sympathy. I also know that it is short-sighted because good health is the base of the human capital pyramid. Good health is the base of all economic measures including Gross National Happiness.

To the law of unintended consequences!