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2016 Budget – Health care

Today, Minister of Finance Chris Sinckler delivered the 2016 Financial Statement and Budgetary Proposals. He dealt extensively with the island’s spiralling health care costs and announced a new levy to help Government offset that cost. He also revealed that serious consideration is to be given to the establishment of a National Health Insurance Scheme.

Fiscal Consolidation, Debt, and the Social Development Nexus

Mr. Speaker Sir, there is absolutely no dispute among academics, practitioners or policy makers that a fundamental connection exists between a country’s ability to sustain itself financially and the level, quality and variety of social services it affords its population. Indeed, both of these variables directly correlate to the standard of living and quality of life enjoyed by citizens. Barbados is a typical example of that type of society.

Over the years, we have been able to provide high quality social services to citizens and visitors alike, to such a degree, that Barbados has been and continues to be ranked highly on the UN Human Development Index as one of the top developing countries in the world.

However, like all similar states, prolonged periods of economic and financial challenge can and do have deleterious impacts on systems of social service delivery especially when resource allocations are either cut or slowed.

For us here in Barbados this is a particularly sensitive issue since we are perhaps without comparison in the region, relative to the vast sums of the national budget that go towards health, education, transport, waste management and other social interventions.

Naturally, we have witnessed some of these negative side effects as Government, hampered by cash flow constraints has struggled at times to make timely allocations to key players in the social sector over which it has direct responsibility.

One such area has been in the provision of primary, secondary and tertiary health care services to an ever-demanding population. Indeed, the challenges that we have experienced across the system and in particular in our main general hospital have caused all of us to pause and seriously reconsider the financing platform on which the current system is based.

The current discussion on Health Care Financing in Barbados has occurred at a time when there is decreasing Government fiscal space for addressing the rapidly increasing cost of health care. The factors driving health care costs are complex, and include: an increasing prevalence of non-communicable diseases (NCD); the occurrence of new and re-emerging communicable diseases; and the public’s expectations for services on par with industrialised countries.

In October 2015, the Ministry of Health convened a consultation on the topic Health Care Financing: Can We Afford to Wait?, in which stakeholders drawn from academia, the Barbados Association of Retired Persons, the health insurance industry, and the medical and public health fields presented views and ideas on the matter. That initial meeting was followed by five town hall consultations in February 2016, in which a cross section of the Barbadian community also presented their views on the topic.

It is now widely acknowledged that the aggregate cost of healthcare in Barbados is substantially impacted by the prevalence of non-communicable diseases. The 2014 Health of the Nation Survey has confirmed that one in 10 adults has an NCD, and that eight in 10 men and nine in 10 women have at least one risk factor. These statistics are saying that if the current trajectory remains unchanged, it is expected that by 2030, the prevalence of NCDs would double (i.e., increase to one in five adults).

Complications occurring as a result of NCDs pose a serious financial challenge for individuals and the country. The Chief Executive Officer of the Queen Elizabeth Hospital (QEH) had reported that sixty percent of all surgical admissions are NCD related, of which 80 per cent are associated with diabetic foot care. Additionally, there are over 200 persons diagnosed with end-stage renal disease and who are currently on renal dialysis. The burgeoning prevalence of hypertension and diabetes in Barbados contributes on average to five new cases per month referred for dialysis at a cost of $62,000 per person per year. The aggregate cost of renal dialysis is $15 million annually.  In addition to NCDs, the occurrence of Dengue fever, and the emergence of new diseases like Chikungunya and now Zika are placing demands on the Ministry for resources to perform laboratory analyses and for treatment where complications arise.

Who Contributes to Health Care Financing and How Much?

Health financing as one of the core functions of a healthcare system is concerned with the mobilization, accumulation and allocation of money to cover the cost of the health needs of the people, individually and collectively (WHO, 2010).  The following key policy questions related to health financing in Barbados were addressed by the first National Health Accounts Study in 2014: 

1)    What is the level of health spending in Barbados?

2)    What is the level of health spending relative to the size of the economy?

3)    What is the contribution of the Government and other economic entities (households, health insurance companies and donors) to the health spending?

Total health expenditure in Barbados in 2012-13 was $732.7 million, of which 98 per cent represented recurring spending i.e. spending on health goods and services that were consumed within the year of the Health Accounts analysis. The remaining 2 per cent was for capital investment (spending on goods and services whose benefits are consumed over more than one year) and care related items such as social care for HIV. Thus, total health expenditure represented 8.7 per cent of Barbados’ gross domestic product in 2012-13 and was equivalent to $2,582 per capita. Compared to the rest of the Caribbean, Barbados’ per capita health expenditure ranked the third highest in the Caribbean behind the British Virgin Islands and the Bahamas, $4,400 and $3,294 respectively.

The main source of health spending (55 per cent) was funds voted by Parliament and allocated to the Ministry of Health.  Households represented the second largest contributor to total health expenditure, of which 39.4 per cent ($285,754,466) was paid through out-of-pocket spending.  Approximately 68 per cent of this expenditure was for ambulatory care at private doctors’ offices and private hospitals.

Private health insurance plans contributed 5 per cent of Total health expenditure ($36,635,188).  It was estimated that 27 per cent of the population was covered by health insurance plans of which 13 per cent were employer-based plans and 14 per cent individual-based health plans. 

One of the weaknesses inherent in a tax-based model of health financing is that during an economic recession, any decline in Government revenues is reflected in reduced allocation to the health sector.  It should be noted that health care, by its very nature, is an essential service and in most instances cannot be deferred, unlike the demand for many other goods and services. 

Barbados’ mixed system of financing and delivering health care services is not the ideal model for the future.  The options available to the country are:

1.     Allocate more resources from the Consolidated Fund for the health services;

2.     Improve allocative efficiency;

3.     Require patients to pay more out-of-pocket by way of co-payments; and/or

4.     Find new sources of funding and dedicate them to the health services.

Barbados already allocates approximately 11.0 per cent of Total Government Expenditure to the health services. Should patients pay more out-of-pocket, and if so, for what? The current 39.4 per cent of Total health expenditure is higher than international benchmarks for Out-of-Pocket health expenditure.  Since reliance on Out-of-Pocket payments for health care exposes people to catastrophic costs, the Ministry supports the utilization of any additional financing by households towards a properly regulated and managed “pool”.  This concept is making the case for a national health insurance fund.

A national health insurance fund would be based on employer and employee contributions, which would be actuarially determined and be separate from the Consolidated Fund.  It would be a more stable source of funding for health services and not be subject to the fiscal space constraints of the public finances, or the other competing priorities.  The national health insurance fund would work by guaranteeing a basic benefit package to the population, would be efficiently administered, and would engage the private sector providers of care as well as Nongovernmental Organizations (NGOs.) Canada and some European countries are examples of social health insurance funds that work. 

My understanding is that the Ministry of Health is currently working with key stakeholders and partners both in and outside of Barbados to begin the process of putting together a firm proposal to the country for consideration after approval by the Cabinet for such a scheme. However, with the best wills in the world such a process is likely to take no less than two years before implementation.

In the meantime, Government still has a responsibility to ensure that the systems which we currently have are adequately provisioned so as to ensure that we do not compromise on such a critical part of the country’s development. I go further to say that it is a responsibility which must be shared among Barbadians who from time to time call on these services in one way or another.

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