The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Middle class Bahamians were yesterday warned to brace for a 25 per cent cut in ‘take home’ income once the Government implements National Health Insurance (NHI), a leading surgeon describing the scheme as “an incredible sink hole”.

Dr Duane Sands, the former FNM senator, told Tribune Business this would be the combined impact from the NHI scheme, Value-Added Tax (VAT) and an increase in the National Insurance Board’s (NIB) wage ceiling.

He argued that NHI, which would cost between $500-$750 million per annum if implemented as a “comprehensive” scheme, was being “driven by the political bent” of the Christie administration without any regard for the wider economic ramifications.

Suggesting that NHI’s implementation could erode whatever gains might come from the Government’s fiscal consolidation plans, Dr Sands said the unanswered question was whether the scheme would “sink our economy”.

The Government has yet to disclose how much its NHI plans will cost, and who will finance them, although Dr Perry Gomez, minister of health, confirmed the monies would come from new taxes that will be levied on the Bahamian people.

Dr Sands, meanwhile, said the Government was adopting a “socialist” approach towards healthcare reform via a model which is increasingly being questioned and reassessed in nations such as the UK and Canada.

While acknowledging that “significant” changes were necessary in Bahamian healthcare, the surgeon expressed concern that opponents of NHI would be ‘demonised’, and that open debate on the direction reform should take will not occur.

Dr Sands said the manner in which Dr Gomez presented the NHI plan during the mid-year Budget was “very, very revealing”, especially the comments that a new tax ‘is better than death’ and somebody will have to finance the scheme.

This, the former FNM senator said, provided significant “insight into the challenges with NHI in that this is an issue being driven by the political bent of this administration, with no respect for the impact and the cost.

“They are prepared to damn the torpedoes and relinquish whatever incremental gains they might help foster in our economy by whatever effects fiscal reform has,” Dr Sands told Tribune Business.

“The Prime Minister made clear they’re going to proceed, but with what and at what cost?”

Many in the private sector believe that the Bahamian economy and consumers simply cannot sustain the kind of taxation that will be required to finance NHI, especially given that all parties are still adjusting to the new 7.5 per cent VAT levy.

That, too, has reduced Bahamians’ purchasing power and disposable income, and NHI will likely exacerbate this and deepen the erosion, given that it will probably be financed through increased NHI contributions.

The initial NHI proposal, submitted to the first Christie administration in September 2005, called for the programme to be financed by a 5.3 per cent increase in NIB contributions - split 50/50 between employer and employee.

This, in effect, was a payroll tax, and the Government is likely to opt for something similar to finance the revised NHI scheme, given that NIB’s infrastructure is available to administer.

However, the 5.3 per cent contribution rate was for an NHI plan whose total costs were pegged at $235 million. The Government’s own estimates suggest a ‘comprehensive’ NHI plan now will cost between $500-$650 million per annum, a sum that is between double and triple the 2005 costing.

The unanswered question here is whether the proposed contribution rates for employer and employee will have to double, or triple, from the initial 5.3 per cent to finance the Government’s plans.

“I don’t think that it can,” Dr Sands responded, when asked by Tribune Business whether the Bahamian economy could absorb the additional cost of NHI in the present climate, “not if it’s a comprehensive programme with benefits for all and costs for none.

“The Minister made it clear, and he used the word taxation, that there’s going to be a new tax. Based on the last thrust of this, it’s going to be 5.3 per cent.

“What we are watching is the development of a degree of socialism, where the contributions that are extracted from the pockets of the middle class........ will be anywhere from 20-25 per cent.”

Dr Sands said this would be the combined effect of VAT, NHI and NIB wage ceiling increases if the second scheme was implemented on January 1, 2016 - a target the health minister admitted was “ambitious”, but one the Government is apparently shooting for.

Predicting future rises in the VAT rate, Dr Sands said that even if NHI was introduced in phases - as the Prime Minister has alluded to - the first stage would still cost “several hundred million dollars”.

“This becomes yet again a political chicken in the pot, not unlike mortgage relief, not unlike a lot of the other programmes that were promised to be the relief for the struggling persons in this economy,” Dr Sands told Tribune Business.

“I think we all agree that significant healthcare reform is necessary and important. But please let’s understand that patriotic Bahamian want to understand not only how this is going to work but how we are going to pay for it.

“They are not less concerned about the plight of the poor than those who seem to be pushing this with no regard for how we’re going to pay for it.”

Dr Sands then revealed his fear that with the Government already firmly fixated on NHI, any alternatives to the scheme - and their proponents - would be demonised and marginalised.

“The unfortunate us versus them scenario is that you get labelled uncaring, unconcerned, elitist if you ask the question: ‘Will this comprehensive programme sink our economy?’” he added.

“What we don’t have is a debate that allows dissenting and divergent views without sacrificing them on the altar as not being truthful Bahamians, not being patriotic, and if you don’t believe in this, you don’t deserve to live here. The tone of this conversation is very unfortunate.”

Dr Sands continued: “The second troubling thing is the secrecy. If we’re going to advance healthcare, let’s have more discussion. Let’s agree that we all want better, and no one has a monopoly on good ideas.”

Much remains to be done if NHI is not only to be implemented, but succeed and be sustainable for generations.

James Cercone, of Sanigest International, the Government’s own Costa Rican-based NHI consultants, openly admitted to a Bahamas Institute of Chartered Accountants (BICA) seminar last year that the scheme would not work unless the existing public sector healthcare infrastructure - Princess Margaret Hospital (PMH) and all the clinics - saw significant upgrades.

Backing this position, Dr Sands told Tribune Business: “The assumption that it’s going to lead to a successful implementation and sustainable NHI is going to demand certain things in place, and certain modifications made.

“Barring that, it will become an incredible sink hole, and the results will not be as expected.”

He added that similar models to the proposed NHI scheme in Canada and the UK were coming under increasing pressure, amid suspicions that socialised healthcare schemes were suffering “diminished returns”.