The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Implementation of National Health Insurance’s (NHI) primary care phase now will make the Bahamian economy almost $500 million bigger in 2040, the scheme’s advisers are predicting, adding: “Better health equals better wealth.”

The KPMG accounting firm yesterday unveiled a 20-page study on NHI’s projected economic impact, forecasting that the greater gross domestic product (GDP) output would come from a healthier, more productive workforce that contained more workers.

The report, coinciding with an NHI presentation at the Bahamas Business Outlook conference, said NHI’s primary care phase would drive an extra 5.1 per cent increase in household consumption by 2040, due to the larger economy and improved productivity.

And it forecast that Bahamas-based companies would experience a 1 per cent productivity increase by 2024, along with a reduction in insurance premiums and improvement in worker mobility.

Arguing that the $100 million primary care phase was “an investment that will continue to pay off for generations to come”, the KPMG report said: “The headline finding – that over the course of a generation the primary care phase of NHI will be producing an additional $500 million a year in additional GDP – should come as no surprise.

“It is consistent with a growing body of literature around the world showing that health investments generate up to nine times their costs in terms of economic growth. This is in addition to related benefits such as lower mortality and morbidity rates, a more productive population, higher employment, a more skilled workforce and lower health inequalities.”

The KPMG study added that NHI primary care implementation would in 2030 make the Bahamian economy $248 million, or 2.7 per cent, larger than it would otherwise be if the scheme was not implemented.

And it estimated that NHI would make Bahamian GDP, or economic output, some $358 million or 3.7 per cent greater in 2035 than if the scheme was not executed. These figures rose to $485 million, or 4.8 per cent, by 2040.

“Our model suggests that if implemented now, by 2035 the economy of the Bahamas is likely to be around 3.7 per cent larger as a result of the primary care phase of NHI (+$350 million per year in 2006 terms),” the KPMG report. “This figure rises to almost 5 per cent (around B$500 million) by 2040.

“The majority of this economic growth comes from a larger, healthier and more productive population (due to lower mortality and less morbidity due to chronic disease).

“Other factors include the addition of more skilled workers to the economy (with additional primary care doctors and nurses), and a small shift in precautionary saving on the part of households.”

The KPMG study also estimated that based on current taxation rates, NHI’s primary care introduction would generate $110 million in extra per annum taxes for the Government by 2035 as a result of the greater GDP growth.

Still, the report cautioned: “It is clear that government revenues will rise as a result of a stronger economy under the NHI primary care phase scenario, but it is unlikely this additional income will make up for the full costs of implementation.

“The policy is a strong investment in the economy of the Bahamas; it should not be viewed as a major revenue engine for government.”

The KPMG report added that the improved health expected to result from NHI would produce a reduction in the unemployment rate, while also leading to cost savings for the Government as a result of reduced demand for hospital services.

“NHI is also expected to have a positive direct impact on households, businesses,” the KPMG report forecast.” “Today, most Bahamians do not enjoy the security that comes with a meaningful right to healthcare. They must live with the fear of what might happen to them if a loved one becomes ill, including how they will pay for care.

“For households, the increase in the size of the economy and its productivity equates to an additional 5.1 per cent in total household consumption by 2040 (2.9 per cent by 2030) if the primary care phase of NHI is implemented. This equates to around B$224 in today’s cash terms per household.

“Firms will benefit from a gradual increase in worker productivity, reaching +1 per cent by 2024. Firms are also likely to see a slower rate of growth in private health insurance premiums for staff (due to larger healthier risk pools), and lower levels of ‘job lock’ (lower worker mobility due to employees not wishing to lose benefits when moving).”

The study’s findings are likely to be received with scepticism by many in the Bahamian healthcare industry, particularly the private doctors, insurers and other professionals who believe that the NHI scheme as designed is not the best way to finance the Government’s Universal Health Coverage (UHC) ambitions.

Many in the industry are likely to view the KPMG study and its publication as an attempt to get Bahamians and businesses ‘on side’ with NHI, despite concerns about its cost and whether new or increased taxes will eventually be required to finance the scheme.

Simon Townend, a KPMG (Bahamas) partner, was yesterday challenged at the Bahamas Business Outlook conference by Rhonda Chipman-Johnson, the Bahamas Insurance Association’s (BIA) co-ordinator, who accused him of “glossing over” how much NHI will cost, who will pay for it and how much.

“In all of this, it is disingenuous to gloss over the cost of all this,” Mrs Chipman-Johnson argued. “The Bahamian people are being told they’re dedicating $100 million to this primary care phase.

“Primary healthcare is very expensive and I fail to see how we can have a discussion until the Bahamian people are told how much they’re going to have to invest in this.

“Not talking about cost, our system needs upgrading. The condition of our hospitals and clinics, we must talk about the upgrading of our system.”

Mr Townend denied that “anyone is glossing over the cost” of NHI, and described the primary care phase as the “foundation” of further healthcare reforms to come, once the system and economy could bear it.

“I would imagine that future governments, as they build on healthcare in the Bahamas, everything will be done in an affordability envelope,” he explained.

“There’s a cost to the Government in rolling this programme out, but there’s a return for the country and a return for the population’s health.”

Mrs Chipman-Johnson, though, suggested that the $25 million the Government is allocating for catastrophic care, as part of the primary phase roll-out, was woefully inadequate.

“Twenty-five million dollars for catastrophic care might just cover 25 people, depending on the nature of the care,” she said. “All that needs to be communicated to the populace.”

The KPMG study, meanwhile, identified 15 impacts that would generate a return on the Government’s annual $100 million primary care investment, some $60 million of which will be ‘new money’.

They included a reduction in healthcare inequalities and inequities, coupled with an improvement in defences against pandemics, increased health industry employment, and improved national security and social cohesion.

It will also “give peace of mind to citizens on no, low and middle incomes, as there is less need to worry about the impact of future healthcare costs on household finances, and less need to sell assets or exhaust savings if a family member does become sick”.

The KPMG study said it based its mortality rate estimates on two studies, which assessed spending on health coverage and primary care in 127 countries and 153 countries, respectively.

“Taking the more conservative extremes of both estimates, we scaled them to the size of investment required for the primary care phase of NHI to project that over 25 years there would be a potential gain of 12.5 fewer adults per 1,000 dying as a result of NHI, and five per 1,000 children (under-15s) dying,” KPMG said.

“The result is that ‘with’ NHI, it is expected that the population will be almost 15,000 higher by 2030 than it would be ‘without’ NHI, driven primarily by increases in the lower, more productive age groups.”

On the labour front, the KPMG study said the $100 million primary care investment would reduce worker absenteeism, increase productivity at work and make it “less likely” that workers need to retire early due to ill-health.

The study was produced in conjunction with Cambridge Econometrics, a UK-based think-tank.