SOCIAL HEALTH INSURANCE ASSOC PROF PHUA KAI LIT, PhD FLMI School of Medicine and Health Sciences Monash University (Sunway Campus) & ASSOC PROF PHUA KAI HONG, PhD Lee Kuan Yew School of Public Policy & Yong Loo Lin School of Medicine National University of Singapore

Outline of Presentation What is “Social Insurance”? Why Social Insurance for health? Advantages and Disadvantages Common Problems Implications for Malaysia

What is “Social Insurance”? What is “Social Health Insurance”? Social Insurance – a scheme set up to protect its members against financial risk Social Health Insurance (or National Health Insurance i.e. NHI) – provides protection against financial risk arising from large medical bills and other high health-related expenses (e.g. long term care)

Why Social Health Insurance? For middle class people, primary care (GP care) is affordable. However, an extended stay in a private hospital or a major medical procedure such as an organ transplant may give rise to a “catastrophic” medical bill Social health insurance is necessary to provide catastrophic illness coverage

Issues: Social Health Insurance Scheme EQUITY Who pays? Who benefits? When do they benefit? - Distribution of financial burden - Access to & actual utilisation of services EFFICIENCY Services provided & Costs - Costs arising from scheme SUSTAINABILITY ! Economic Viability

Social Health Insurance (National Health Insurance) Compulsory enrollment (for a specified population e.g. elderly, formal sector workers) Risk-pooling (financial risks are pooled) Premium collection and admin issues – are there large numbers of non-payers, irregular payers, and what are the admin costs? What services to cover, any cost-sharing (to prevent abuse by enrolees), how much to pay providers (& how to prevent waste and fraud) What NOT TO COVER, should “balance billing” be allowed, what are the financial limits to coverage of members’ expenses

Social Health Insurance REDISTRIBUTION. rich  poor (the poor are less healthy and tend to utilize more services); young  old; healthy  sick Should be compulsory and not allow people (the rich, the young, the healthy) to opt out The larger the size of the risk pool (the larger the number of people enrolled), the better. Why? Lower average admin costs; the scheme is more financially viable

Other Methods of Financing Can Be Used At the Same Time in the NHI Scheme Payment by individuals (cost-sharing) e.g. co-payment, deductible, co-insurance Government funds (general taxes) put into the scheme Insurance: purchase of (supplementary) private health insurance can also be allowed Medical Savings Accounts (S’pore)

Advantages and Disadvantages ADVANTAGES More $ raised to fund medical care Risk-pooling Earmarked benefits Promotes social solidarity Can bargain better vis-à- vis providers e.g. “single payer” in Canada DISADVANTAGES Moral Hazard Adverse Selection No guarantee that costs will not escalate e.g. Medicare in USA

Common Problems of Social Health Insurance Schemes Social health insurance schemes face major challenges: - population ageing (more chronic & degenerative diseases) - costly new technologies (including those that prolong life of the very sick) - political pressures to increase benefits (including long term care and new drugs)

Common Problems of Social Health Insurance Schemes Third-party payment challenges: - moral hazard (e.g. excessive consumption of covered or “free” services) - adverse selection (e.g. parallel private health insurance schemes try to “cherry pick” or “cream skim” i.e. cover low risk people only so that high risk people are dumped onto the social health insurance scheme). Some people - the young and healthy - try to opt out.

Variations to Typical SHI Model (favoured by market-oriented conservatives in USA) Employer mandates i.e. government forces employers to buy private group health insurance for employees. If they don’t, they must pay money into a common government- managed pool of funds (“play or pay”) Individual mandates i.e. government forces all individuals to buy private health insurance. Those who are poor will receive subsidies from the government to do so. Employer self-insurance scheme: large employers like General Motors provide health insurance coverage for their employees (i.e. they don’t pay premiums to an outside insurance company). Actual running of scheme may be contracted out to non-GM “benefits management” company

Implications for Malaysia Logically, should build upon existing social/financial mechanisms e.g. EPF, SOCSO Requires efficient premium collection system e.g. payroll deductions is easiest method System of cost control is absolutely necessary Must define the “basic benefits package” Must protect individual against catastrophic costs How to cover self-employed and informal sector workers e.g. fixed monthly payments into scheme? How to cover the poor? Should the poor be excluded and be covered by some other scheme?

Growing scepticism of purely “free market solutions”

References Phua KH, “Health Care Financing in the Asia Pacific Region”, Public Administration and Policy, 11(2): 13-36, 2003 Griffin CC. Health Care in Asia: A Comparative Study of Cost and Financing. World Bank, Washington D.C., World Bank. Innovations in Health Care Financing, Schieber, G (ed). World Bank Discussion Paper No. 365, Washington, DC,1997. WHO, Social Health Insurance: Selected Case Studies from Asia and the Pacific, Western Pacific Region and South East Asia Region, March 2005.