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., 1990.

• 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.