The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The FNM’s chairman yesterday branded the proposal to change the VAT treatment of health insurance claims as “absurd, insane and inane”, warning that it will “destroy” the medical sector if implemented as originally planned.

Dr Duane Sands, himself a physician, told Tribune Business that the Government’s proposal - which would halt insurance companies reclaiming VAT on health insurance claims payouts by treating it as an ‘input’ cost - “flies in the face of everything we have been trying to accomplish over the past ten years”.

The Davis administration has deferred the change, which many doctors and insurers fear will increase medical bills and treatment costs for thousands of Bahamians with private health insurance, and will not proceed prior to end-May’s Budget debate to allow time for further consultation after medical practitioners raised concerns about the impact it would have on patients, healthcare costs and their businesses.

Dr Sands yesterday argued that it would be “unconscionable” to further increase already-high healthcare costs, saying the proposed change would inevitably increase the $400m-$500m that Bahamians already spend annually in Florida and other US states, thereby undermining efforts to further develop a Bahamian healthcare industry. Foreign exchange reserves would also be impacted, he added, as patients sought to access cheaper, non-VAT care abroad.

The altered VAT treatment had been due to take effect on April 1, and would have left patients/consumers responsible for paying the full 10 percent levy on treatment, care and medicines. They are presently only covering the VAT due on the co-payment, which is typically 20 percent of the total costs, but the revision would have also left them carrying the tax burden on the remaining 80 percent of the bill that is paid by the insurers.

“It is absolutely something they have not thought our adequately,” Dr Sands blasted yesterday. “It is an absurd, insane and inane idea. What you are basically doing is adding a massive impediment to care. If we are talking about the level of illness, as reported in the 2019 STEPS survey, which was done when I was the minister of health, we know the massive level of non-communicable diseases presents a massive threat to not just the health of Bahamians but the economy of The Bahamas.

“If you now add a 10 percent front-loaded tariff, tax, excise barrier to care, you’ll make it very difficult for people to get care. If you had not gone and added multiple increases to other taxes, there might have been some other options, sin taxes and so forth, but you have made healthcare so ridiculously expensive that any further tax will be unconscionable.

“This is a situation where they are not thinking things through clearly, having tunnel vision and are desirous of getting more money without any regard to the impact on human lives and the health of human beings. What we see is a scatter gun approach to health. This is stuck on stupid for the Government to have considered that this was a reasonable idea.”

The Ministry of Finance’s position has been that it is “clearly against the VAT Act” for insurers to claim back the 10 percent levy on medical claims payouts by netting it off against the VAT paid on the premium - a practice allegedly costing the Public Treasury millions of dollars. Its position is that VAT is payable on medical insurance claims payouts because these are being made on behalf of the end-user - the consuming patient - and thus should attract the tax.

Dr Sands said the changed tax treatment would result in VAT being levied at the point of patients receiving health treatment, and thus act as “an impediment to care that will do irreparable damage to the health of Bahamians.... This 10 percent VAT imposition is an egregious example of user fees and flies in the face of everything we have been trying to accomplish in healthcare in the last ten years.

“I would do a number of things,” he added. “It would drive people with health insurance out of the jurisdiction to access care where they do not have to pay VAT, so many people will go to south Florida. It has a drain on the foreign reserves. It will clearly be detrimental to my practice, and especially to those people who have no choice and have to access emergency care in The Bahamas.

“If we are going to try and build a healthcare system, which is already faced with $400m-$500m being spent outside The Bahamas every year, why would you now have as a national government policy a programme that says for any given procedure it’s cheaper to have it in south Florida because they’re not going to charge you VAT. It’s just dumb, dumb, dumb. We should be trying to grow the healthcare sector, not destroy it.

“It might force people to go out-of-pocket to have care, and how many Bahamians have more than $1,000 in a bank account? Last time I heard it was less than 1 percent. If you have insurance, this is making it impossible for you to access high cost healthcare and you’re forcing people to use an over-burdened public healthcare system. This is just not thought out properly. It’s time for them to go back to the drawing board.”