Economics of health care -- the demand and supply sides

From time to time, discussions on health care in Bangladesh take place in various forums. It is also a subject of some importance in the print media which publishes various news and reports, depending on occasions. Almost the same views are expressed in these discussions creating a sense of de ja vu among readers. But the news published recently on the subject conveys a new idea, at least in Bangladesh and therefore, one had to sit up straight to think about the implications.
Experts at a seminar organised by the Health Economics Unit (HEU) of the Ministry of Health and the Institute of Health Economics (IHE) of Dhaka University said something that had not been heard in public in the context of health care in Bangladesh. It is as bold and brash as it is new. Pointing out that voluntary micro health insurance scheme has proved ineffective in Asian countries, speakers at the seminar called for introduction of mandatory health insurance in the country. It was highlighted that the overall trend of health sector is on the decline and in support of this observation increase in out-of-pocket (OOP) expenditures as opposed to its expected decline was mentioned by speakers participating in the seminar. Elaborating on this further, with facts and figures, it was pointed out that OOP increased to 67 per cent of total expenditures on health care in 2009 from 63 in 2012, although the HEU had prepared an action plan on health financing strategy for 2012-2032 to achieve the goal of universal health coverage (UHC) with reduced incidence of OOP at 32 by 2032. Experts participating in the seminar suggested initiating discussions on health insurance in parliament, narrowing down the gap in the parameters on the concept of UHC between the directorate of health and the Health Economics Unit of the Ministry of Health. It was also recommended that the present focus on input-based budget for health care should be shifted to output-based budget to promote health insurance coverage. The need for good governance and improving quality of service was also stressed. The private insurance companies in the country were exhorted to `shun profit-maximisation attitude'.
Comparing the demand of health care and provision for the same, it was pointed out in the seminar that, as per Household Income and Expenditure Survey (HIES) 2016 published by Bangladesh Bureau of Statistics (BBS) only 15.85 of population who needed health care received health services from government-run facilities. This is a minuscule improvement in terms of number of clients as according to HIES 2010, government health service providers (doctors, nurses and ancillary staff) could make health services available to 11.69 of population who needed such services in that year. It is learnt from the figures given in the seminar that at present the size of health insurance market in Bangladesh is between 20 thousand to 25 thousand clients with an accumulated premium of Tk. 250 million, not much and many, according to the speakers which implied that the potential is much higher.
CASE FOR MANDATORY HEALTH INSURANCE: From the above it is seen that a case for mandatory health insurance has been made out mainly because OOP expenditure have not declined. Furthermore, it has been argued that with the pre-dominant role at the public sector, the voluntary micro health insurance scheme has not feared well, far less becoming effecting. To add strength to the case for a greater role of health insurance scheme by making it mandatory, it has been pointed out again and again that the coverage of population under health care of the government has increased very slowly (15.85 in 2016 compared to 11.69 in 2010). In this connection the government's target of raising contribution of insurance to 4.0 of GDP (gross domestic product) by 2021 from 0.9 at present has also been mentioned in support of introducing mandatory health insurance in the country.
The reasoning made by experts in the seminar appears convoluted and anything but straight forward. The demand and supply sides of health care have not been discussed in clear terms. When the HIES figure of 15.85 of population who needed health care service in 2016 is mentioned an idea is given about the size of demand. In all probability this figure covers people who expected health care services free of charge. Perhaps some of them were made to incur OOP expenditures while receiving health services from government facilities.
TWO PROBLEMS: Two problems can be identified here. Firstly, the population segment mentioned here leaves out those who went to private health facilities and paid for the services received. This group of people had, what is called `effective demand', that is demand backed by their income. But the 15.85 who went to public health facilities for health care did not have `effective demand' and looked for subsidised or free health services. Health insurance scheme, whether voluntary or mandatory, anywhere in the world does not cover people who do not have effective demand. Therefore, making out a case for mandatory or universal health insurance lives out the age of population who need health care services but does not have money to cover the costs. Of course, under health insurance scheme costs of health services provided are not always covered by premiums paid by the insured claiming its benefit. But this difference is made by premiums paid by others who do not use health facilities because of their healthy well being. Under an insurance scheme someone will always pay for expenses of health services whether one uses it or not and the insurance companies see to it that such payment is not at their cost. So, from the demand side only those having `effective demand' are eligible for coverage under a health insurance scheme. In Bangladesh, only those with regular income from employment in government, business and other activities fall into this category. The rich and the upper middle class are already paying for their health care costs when they avail of the same from private health facilities. They will not be enthusiastic about health insurance scheme because of the need to pay premiums for which they may not see any justification in normal condition. That is why the promoters of health insurance want to make it mandatory. Knowing that the free market for health care offers choices to those who can afford to pay, the advocates of health insurance want to take their choice away.
From the discussions in the seminar it becomes clear that, it is not the demand for health care of all classes that the speakers had in mind but the effective demand of only those who are paid health allowances as part of income by government and non-government institutions. They want to make this group the captive clients of private health insurance companies by making health insurance mandatory. Here the first objection is that it takes away the rights of employees with regular income in choosing the form of financing their health care.
Secondly, as pointed out earlier, this leaves out the vast majority of the population who do not enjoy medical allowances from the government and other bodies. Making insurance mandatory in this case would be unfair, unjust (for those with medical allowances) and inequitable (for those without regular income and medical allowances). More importantly, mandatory health insurance of those having effective demand will leave out the need for covering those who do not have that kind of demand, as has been stressed earlier.
The problem of health care in Bangladesh is complex, as it is in all the countries in the world. It is not only a problem of the demand side (people not having regular income), it is also a supply side problem. While private health facilities in Bangladesh are more or less equipped with manpower and inputs to meet the demand of health care services of those who can afford to pay, the same cannot be said about public health facilities. Lack of skilled health personnel is endemic, particularly at primary and intermediate levels. From manpower to inputs like medicines, testing facilities and operating technology, public health facilities lag far behind the demand in terms of capacity. Since health care services for those without effective demand have to be provided free of costs or at subsidised costs, health insurance does not address the need of this dominant health service provider at all from the point of view of enhancing capacity, that is strengthening the supply side. Neither does it promote health facilities in the private sector because the sector is already assured of a clientele having effective demand. In Bangladesh context, therefore, health insurance scheme is premature at this stage, both from the demand and supply side of health services.
TWO MODELS: In developed countries there are two models of health services, particularly from the point of view of financing and providing the services. The first is the National Health Service (NHS) system of the UK which is entirely government financed. Employed men and women make contributions to this but the services received are not matched by this payment, nor are those without income deprived of the same. Though not foolproof, the NHS has withstood the test of time. It was spared the de-nationalisation onslaught of Margaret Thatcher because of its many advantages. The NHS has become almost an article of faith for British politicians, so much so that the incumbent Prime Minister Boris Johnson told President Trump that NHS would be off the table in any future negotiation on trade between the two countries.
The second model of health service provision as seen in America is mostly dependent on private insurance. The system has remained so contentious that it figures as a major issue in presidential campaign to win the hearts and minds of voters with promises to fix up the `broken system'.
Does Bangladesh have to hesitate in choosing which model is preferable? Granted, the resources for putting in place a NHS-like system will not be available any time soon. But if it is a question of basing our health care system on a model that takes into account the distribution of income among various classes and consequently considers health care as a public good, the answer is clear and straight forward.

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