The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The proposed National Health Insurance (NHI) scheme will generate annual savings greater than $157 million within 10 years of implementation, the Government’s consultants promising it will stem the “alarming growth rate” in healthcare spending.

Sanigest Internacional’s October 2014 report to the Christie administration on the proposed NHI plan pledged that “the potential savings for the country outweigh, by far, the financial and economic cost of implementing a new national insurance plan”.

The Sanigest report suggests that NHI will produce three savings sources for the Bahamas and its economy - a lower rate of healthcare cost growth; reduced private healthcare spending; and lower costs associated with mortality.

The projections contained in the report suggest that total potential savings from these three sources will be $45 million or 0.46 per cent of Bahamian GDP if NHI is implemented in 2016, as the Christie administration is targeting.

While the Government is some way behind the necessary schedule, the Sanigest report forecasts that NHI will deliver increased savings for the economy that peak at $157.1 million in 2025 - the scheme’s 10th year.

The average annual savings for that period are pegged at $85.2 million, with total savings for the 10 years coming to $652.3 million.

“Healthcare costs are estimated to be 7 per cent lower by 2025 as a result of lower mortality and out-of-pocket payments,” the Sanigest report forecasts.

“The reduction in avoidable mortality is expected to provide the Bahamas with $16 million in savings, while NHI would contribute more than $30 million in disposable income as resources are freed up from the currently high levels of out-of-pocket payments and high private health insurance premiums in the unregulated market.”

Sanigest said 2025’s $157 million-plus savings would be equivalent to 1.13 per cent of total Bahamian gross domestic product (GDP), a sum it described as “very significant” given that the Bahamas spends 9.4 per cent of its GDP on healthcare annually.

“The model’s projections show that without NHI, 12 per cent of GDP would have been dedicated to healthcare in 2025, which means that around 10 per cent of what the Bahamas would have expended can be dedicated to other goods, services and investments,” the report said.

Breaking down the projected savings, Sanigest said a $29.9 million reduction in private healthcare spending would account for 66 per cent - or two-thirds - of the 2016 savings, “meaning households will benefit greatly in the form of higher disposable income”.

“Avoidable mortality will provide the country with resources that would have otherwise been lost, amounting to 31 per cent of all saving in 2016,” Sanigest forecast.

“Over time, the savings from lower healthcare costs will grow to become the most important share of savings. By 2025, they would account for 67 per cent of the total.”

While the numbers look impressive, many in the medical and health insurance fields are likely to be sceptical and much less convinced about the ‘savings’ and whether they will be realised.

And many Bahamians will not forget that they will be taxed more to pay for these ‘savings’, probably via a payroll tax (increased National Insurance Board contributions) of between 1-5 per cent, depending on how comprehensive a benefits package the Government opts for.

The ‘macroeconomic’ projections contained in the Sanigest report will likely be one strand of the public relations campaign that the Government uses to ‘sell’ NHI to the public, yet the scheme effectively represents a ‘wealth transfer’ from one group to pay for the healthcare costs of another. The segment likely to be hit hardest, again, is the middle class.

And with an NHI ‘tax’ being heaped upon the economy so soon after Value-Added Tax (VAT), it is highly probable that many businesses will be unable to bear the additional cost, resulting in reduced working hours and lay-offs.

Still, the Sanigest report warned: “Historically, healthcare costs in the Bahamas have grown at alarming rates, doubling in 10 years from 2003 to 2013.”

The Costa Rican consultants estimated that healthcare costs would grow at an average annual rate of 6.25 per cent without NHI, compared to a 1.25 per cent drop in 2025 without it.

“It was estimated that without NHI, expenditure would reach 12 per cent of GDP by 2025,” the report suggests. “With NHI, the percentage would decrease to 11 per cent by 2025 and continue to decrease throughout the years.

“If NHI was implemented, the Bahamas could save up to $265 million in the next 10 years with yearly savings of $37 million.”

When it came to private spending on healthcare, Sanigest said some 130,000 persons in the Bahamas were covered by private health insurance.

It added that the average premium paid was $2,359 annually, with employer-sponsored insurance plans costing more. And packages covering dependents attracted annual premiums worth $3,600.

Drawing on the Bahamas Household Survey, Sanigest then pegged out-of-pocket healthcare spending (expenditure not covered by private health insurance) per household at $1,681 per year, adding up to $194 million.

“One of the most important benefits of NHI is protecting families and households from catastrophic healthcare expenditures,” the Sanigest report said.

“Of the 30 per cent of individuals with private health insurance, over 50 per cent of them dedicate an important share of their income to purchasing healthcare services in the form of private heath insurance, and the majority of Bahamians also incur out-of-pocket expenses.”

The switch to NHI, the consultants suggested, would save Bahamian families $26 million collectively per annum, and up to $263 million in the next 10 years.

Their report then said the Bahamas could reduce avoidable deaths by 200 per annum, dropping these to 523, if NHI brought mortality rates into line with the average for OECD member states.

Adopting $64,500 as the “value of a year’s life”, Sanigest said combining this number with the reduction in avoidable deaths could save the Bahamas $115 million over a decade or an average $15 million annually.