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| Sunday, 15 August 2004 |
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A dose of Eco-medicine for our ailing health service Prof. Jagath Wickramasinghe Professor of Economics,University of Sri Jayawardenapure Major criticism of economic liberalisation is that it makes way to push the poor and disadvantaged groups into economic misery, as the competition envisaged by such a system would always be biased in favour of the rich. As a remedy to this flaw in the model, economists and the international lending institutions recommend a safety network for the poor, managed by the state. This network needs to be in conformity with the competitive economic system pronounced by liberalisation. However, this liberalisation model's inherent major weakness, ie automatic enhancement of the disparity between haves and have-nots can be minimised by strengthening economic status of the have-nots by the state and encouraging them to step into the market while allowing the haves to continue to compete in the market. This in other words, is proverbial fixing a 'human face' to liberalisation activities. Both public and private sector institutions can engage in the supply of the service in question, both facing the market demand on equal footing, in a so called 'level playing field'. The main advantage in this system is that the existing public sector institutions now operate according to market forces very much conscious of the advantages of cost minimising. However, when all the institutions are brought under the price mechanism existing system will change and the state sector institutions will also have to sell their service at a price, may be closer to the private sector price, and to compete with the private sector institutions for the clients, similar to monopolistic competition. Unless the state sector institutions provide comparable services at competitive prices these institutions will face a situation of loosing clients, which would pave way for bankruptcy. This will bring pressure for the management to be conscious of cost savings and customer satisfaction. Accordingly, the cost of providing services in the state sector too will come in line with the private sector cost. State sector institutions are also compelled to think of innovations and new methods of attracting clients. All these will benefit the client and the country at large. As the competition strengthened, the price of the service will move closer to the marginal cost minimising wastage and maximising internal economies. According to the present set up the cost of providing the service by the state sector institutions is very much higher than that of the private sector institutions. The supply of service is limited to the extent of the state funds. However, after the reforms cost curve falls and get close in line with the private sector curves. The supply of the state institutions will increase as the supply now depends on demand rather than on availability of government funds. As the service has improved we can expect more clients who patronised private sector earlier would now think of using state institutions increasing the demand for their services. Let us consider our health sector. Hence, what is required is overhauling the system while ensuring a scheme for the poor people to continue to have access to free health services. Any reform, which deprives poor people, this facility is not only unfair and costly in social terms but also highly politically sensitive. The national health scheme that we propose ensures the fulfilment of this requirement within a more dynamic, efficient and productive system. The poor people need some assistance from the state. One of the main objectives of a national health insurance scheme is to continue to extend this free service in a more rational way by avoiding duplication waste and abuse, while enforcing those who can afford to contribute a certain percentage of their income to the health fund. Such a scheme would make the public sector health institutions more cost effective and efficient, as they have to compete with the private sector on an equal footing. In 2001 the Health ministry has spent Rs. 14,608m for patient care, which is 57% of the total health expenditure. This money is available to the state to purchase health insurance policy and distribute among the poor free of charge ie, among 5.4m people at Rs. 2705 per person per year.. Then the poor people will also stand equally with the rich as far as health services are concerned. By 2002 Rs. 389.18 was spent on and health expenditure by a household, which amounts to Rs. 92.66 per head, according to survey report of 2002. The government expenditure on the patient care was Rs.14608m in 2001 when added to the household expenditure of Rs.20829m on personal care and health the total available financial resources in 2001 would be Rs.35437m. Except the ultra poor balance population can contribute towards health insurance fund as they are already spending for private medical services. This means 13 m people who are in an economic position to contribute for health services will contribute Rs 14455m at he rate of Rs.1112 per person per annum. This is less than what they have been spending now. This amount has to be levied according to ability to pay basis. If Rs. 14455m could be collected as a special compulsory levy on health insurance and bring the entire population under the scheme a better service could be provided as the interest on the fund at a more conservative rate of 5% on the fund of Rs 29063 would be some where around Rs.1453 m. The advantage in this scheme is that all will get medical treatment from the institution of their choice, either government or private. The benefits of the basic insurance policy will be the same whether one contributes to the fund or not. However, if a wealthy person wants to have better service in a more comfortable atmosphere there is provision for a person to buy a special policy at a price. This type of discrimination is widely available in the existing system. As the patient has the option to choose his institution a competitive environment between government and private institutions would emerge passing the benefits to the patients. Government institutions stand to reform their system to fit into the new environment. The above description points to a strong case for charging user fees from the rich and well to do. A National Health Insurance Board has to be appointed to manage this scheme. This Board has the authority to frame rules and regulations, about the hospitals, nursing homes, clinics, and other health institutions; medical and paramedical persons qualifications, experience, their emoluments and service conditions; fees chargeable by professionals as well as institutions. This will also prevent income tax evasion by the health sector personnel. |
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