Health Care
Health Care
The vast difference in income levels means Asian countries are at very different places in terms of what the government can provide.
Even so, the policy challenge is the same. As countries get richer, people gage much of their satisfaction with government on their ability to get health care. The more prosperous a society gets, the more people expect. Health care also costs the public treasury more than anything else.
(Note: Don’t love this metric. Health expenditure as percentage of budget would be better, but hard to find for enough countries across same year. We will work to develop this number on our own and update.)
In Western countries, these generous health care systems that now eat 40 percent or more of government expenditure did not start out as Budget Godzilla. In the beginning, there were lots of young people to pay for the old. This is a huge warning for Asian counties with large young populations that will one day be old. It’s politically very expedient to create generous government health systems now. But governments down the road will be trying to figure out how not to sink most government dollars into them.
I worked for two ministries in government. Health took 40 percent of the total budget ($30 billion). Transportation, which funded vital infrastructure like roads and transit, got 1.5 percent of the budget ($1 billion).
For Asian countries rising up the prosperity continuum, it might be tempting to let the market work. The problem is health care is such a fundamental need, it’s there for every politician and revolutionary to exploit. Tempting as it may be, there’s almost no way in the modern world to leave provision of health care to the market.
However, like quicksand, once you wade in — you’re in. And health care is a quagmire like no other.
I worked for 18 months at the Ontario Ministry of Health (which seemed like 18 years). So, I know these to be the outline of the health care swamp:
1) Demand will always outstrip supply.
The invisible hand of the market doesn’t work. We all want to live forever. Our mother’s cancer is the most important health care problem in the world.
This is why so many ideas that seem good on the surface don’t work. Our government wanted to provide extensive E-services, meaning you could computer chat or phone a doctor 24 hours a day rather than go to a hospital or office. But when your kid has a cold you fear is turning into something more serious, most people still go to the hospital and the phone lines remain unused.
Nurse practitioners met a similar fate. The idea was not every ailment needs to be treated by an expensive and scarce doctor. Nurses with extra training can handle many condtions. Again, when it’s your kid, you demand the doctor.
Politically, your opponents will call these kinds of new methods “cutting access to doctors.”
2) Insurance needs the young to subsidize the old.
It is very difficult for private insurers to find the right prices. Make premiums too high for the young, and they won’t buy. If enough of them don’t buy, the company loses a mint. And can’t supply quality coverage for people who need it.
People hate private insurers. But they have a very hard business model.
3) Because demand outstrips supply, every system rations care.
In Canada and Britain, everyone gets treatment. Everyone waits for it.
In the U.S., 40 percent of people have no insurance. They get no preventative treatments and end up in public hospitals when those conditions get chronic. They’re forced into personal bankruptcy and the taxpayer gets stuck with the big bill.
In Asia, there are still billions who get access to health care at extremely rudimentary public clinics that can barely treat the flu or a basic wound. That’s a form of rationing, too.
INSURANCE
Given that, what’s the best mix of insurance to get the best care to the most number of people?
Right now, countries providing a decent caliber of care to most of the population use two types of systems:
Beveridge: The government acts as the insurer and pays health care providers. Funding health care through income taxes allows for health care to be “free” at the point of service; the patient does not have to pay any out-of-pocket fees because of the system is funded by taxes.
With the government as the sole payer, costs can be kept low and benefits are standardized across the country. However, because everyone is guaranteed access to health services, over-utilization of the system increases costs and creates long waiting lists.
When healthcare providers don’t make a profit, they have little to invest in innovation.
Britain’s NHS is the classic example (in fact, William Beveridge, seen left, developed it.)
Politics are a huge problem. The Canada Health Act says government must pay for all procedures that are “medically necessary.” Chemotherapy and dialysis seem clear enough. What about varicose vein removal and gender reassignment … turning men into women? Ontario pays for both of those. You see what a quagmire this is when politicians and civil servants make these decisions.
Politics also means Beveridge systems tend to preclude private health care insurance. It becomes a sick form of social solidarity that everyone waits in lines for “free” government care rather than capitalizing on the fact some people can and will pay more for a better experience. This just costs the public treasury more.
Bismarck: Employers and employees fund health insurance. Workers have access to “sickness funds” created by compulsory payroll dedications. In addition, private insurance plans cover every employed person, regardless of pre-existing conditions.
Health providers are generally private institutions. Regardless of the number of insurers, the government tightly controls prices while insurers do not make a profit.
These measures ensure that employed people will have the healthcare needed to continue working and ensure a productive workforce. The problem is what to do with those who can’t (or won’t) work.
The government also must create a system for retirees. Given 90 percent of the expense of health care comes in the last ten percent of life, these systems will have to be Beveridgian, opening you to all the incompetence and fiscal waste of government bureaucracy
In general, Bismarck systems have better patient care and shorter wait times. It’s also much easier to have a two-tier system where the rich pay more. The bigger the country, the worse Beveridge systems do. In Asia which has very high employment participation rates, Bismarckian systems seem to be the way to go.
Measuring Patient Outcomes
Measuring health care success is about patient outcomes. Our metrics:
1) Survival rates from heart disease, stroke and cancer are increasing
2) Infant mortality should be less than 3 deaths per 1000
3) Wait times. With most conditions, time is of the essence. The sooner we start treatment, the better our chances. It’s also a critical measure of public satisfaction, which is crucial because governments (especially elected ones) can fall over health care perceptions.
It is also cheaper to run a healthcare system without waiting lists. Healthcare is basically a process industry. As any professional manager knows, smooth procedures keep costs low. In general, bureaucratic inefficiency, management incompetence and union rules are the reasons for high wait times.
4) Decentralization. City states like Hong Kong and Singapore might make universal schemes guided by bureaucrats look like they work. But keep in mind, the bureaucracy is no more than 50 kilometres from the furthest hospital.
That’s not the case in the Philippines, let alone China. This is why Bismarkian schemes work best. Local people should have a better understanding of local issues. It’s also easier to fire failed leaders not appointed by the centre.
5) Innovation: Innovation in health care saves and improves lives. It should also (ultimately) lower costs, which is crucial.
However, too much of the innovation in global health care is done in just one country … the United States.
Criticize its for profit model in terms of patent outcomes, but in terms of new treatments, the U.S. generates the vast majority. The U.S. alone accounts for more than 40% of medical R&D spending.
The good news is China has made a massive commitment. China is investing the equivalent of $140 billion in reforming its health and biotech sectors. Currently the third largest global market for pharmaceuticals, it’s expecting an annual growth rate of 30 percent, prompting huge investments in R&D and manufacturing.
How can other Asian countries support innovation:
If companies can demonstrate the efficacy of new technologies in developing markets, they can present them to U.S. and European regulators and payers as proven alternatives. The benefit? Faster access to treatments. The danger? The perception patients are being used as guinea pigs.
China will only approve treatments already approved in the maker’s home country. This gives Western companies an incentive to set-up in poorer Asian countries like Vietnam or the Philippines.
Asian academic leaders who helped enable innovative research in the U.S. want to come home. Some U.S. schools have responded by creating partnerships abroad.
Governments must make health care providers responsible for better health outcomes by linking funding to success. This will incentivize them to look for more integrated, holistic, cost-effective devices combined with wellness and disease management services. They also must be incentivized to use more personalized medicine and wireless technology.
Use of blockchain to create personalized medical records that patients can take anywhere
Adopt tax and fiscal policies that encourage venture capital
How Much Should A Country Spend?
If only there were a magic formula. It depends both on the means to pay and on the age of the population. Rich countries can afford more — it’s one of the benefits of being rich.
The right answer is the mix of public and private dollars. Patients should always pay a component of any treatment (unless they are genuinely too poor), so as to reduce abuse and overuse of the system.
As noted above, we will start work on determining what countries pay for health care as a percentage of total government budgets, and begin to develop a formula for best practices from there.