The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent doctor has voiced fears that medical practitioners will have to pay VAT if their patients cannot afford to do so should the Government persists with the changed tax treatment of health insurance claims payouts.

Dr Duane Sands, also the Free National Movement (FNM) chairman, told Tribune Business that “not many medical practitioners can afford to do that” and carry the VAT burden for patients who simply cannot afford to pay the full 10 percent levy on their cost of care.

“We have a number of people who have private insurance who don’t have a co-pay,” he explained. “The Government will come looking for a VAT payment from the patient that the provider may not have received. They may be responsible for paying a tax they may not have collected.

“It will leave practitioners to carry an unreasonable level of accounts receivables. Once it’s on my books they don’t care if the patient has not paid. They want their money. Imagine if I’m carrying a $10,000, $30,000, $50,000 receivable that may not be collectable. There are not many medical practitioners I know that can afford that.”

The Davis administration has deferred the VAT treatment 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.

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.

Dr Sands said the Government appeared to have assumed that the healthcare industry was a high margin business ripe for extracting more taxes from, but he argued this was not the case. “These sorts of medical financial decisions are clearly not thought out carefully,” he told Tribune Business.

“There’s no holistic conceptualisation of the impact of these decisions. It’s somebody in an ivory tower, a silo, deciding the health industry is worth ‘x’ millions of dollars and if they add 10 percent VAT they can get ‘y’ million a year. The truth is if you impose that tax now you are going to cripple the delivery of healthcare. You are going to take the public healthcare system, which is already over burdened, and bring it to its knees.

“This is clear to the persons who work in the system. All you need to do is have a technical conversation with people who work in the industry to realise this is a dumb idea. I hope that insurance experts, medical experts, practitioners, hospitals, clinics, and dialysis centres be ready to take the time to talk to them [the Government]. They’d make it clear this would be a massive blow to one of the bright sparks in the economy,” he added.

“I know the Ministry of Finance feels this is an industry that has significant profit margins, but it doesn’t. This initiative has the potential to almost make it fairly impossible to survive.... They ought to retire this idea, think it through again and go back to the status quo. What we ought to be doing is making healthcare cheaper, not more expensive.

“I think the Government is going to do a quiet about face as they did with the pharmacists, and some of the wholesalers and retailers in terms of groceries [on price controls]. When you have this inordinate demand for tax revenues, and you are not prepared to what impact the policy decision is likely to have on human beings, you come up with the idea where people have WTH moments. I leave it there.”

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.