Friday 27 April 2012

The moral case for health insurance for all

By Jeremy Lim, Published The Straits Times, 26 Apr 2012

HEALTH insurance is vital for protection against medical bankruptcy. Illness and the often substantial costs associated are unpredictable. Insurance pools monies and enables the many fortunate to support the unfortunate few.

However, voluntary insurance has proven challenging: Healthy individuals opting out of buying insurance reduce the funds available while exclusion of pre-existing conditions by insurers prevents a substantial proportion of society from receiving complete coverage.

Hence, national health insurance covering the entire population through government fiat is increasingly called for throughout the world. Most developed countries already have some form of national health insurance and/or coverage. Even in the United States, Obamacare mandates that all Americans must possess health insurance, and insurers must offer plans even to those with pre-existing medical conditions.

Health insurance is more than just financial protection. This myopic view - that health insurance is only about paying medical bills when you're sick - is unhelpful and unenlightened as health insurance should also encourage healthy behaviour such as disease screening and in national insurance systems, promote equity and social solidarity.

Insurers can maximise profits through charging higher premiums, lowering payouts or excluding high-risk individuals. But there is a better and socially responsible way, and that is through improving the health of the insured population.

If members are healthy, they consume less health-care services and the insurer's spending is hence reduced. Kaiser Permanente, an American integrated health plan and provider with more than 8.9 million members, is renowned the world over for its success in health promotion, including achieving high rates of preventive health adoption such as breast cancer screening and other regular health checks. Such an enlightened approach has healthy financials too: US$1.6 billion (S$2 billion) net income on operating revenues of US$47.9 billion in 2010.

Another important positive effect of health insurance is that it promotes social cohesion.

This is an important element often underestimated or overlooked. Political commentators have openly mused that inequality is the biggest challenge facing modern society whether in America, China or Singapore. And few things are more offensive to people's sense of equity and social justice than the notion that a society should condone the notion that wealth buys health, or that the poor should be condemned to a life of illness without treatment.

Former British health minister and architect of the National Health Service Aneurin Bevan famously proclaimed that 'no society can legitimately call itself civilised if a sick person is denied medical aid because of lack of means'.

Given the objectives of health insurance beyond financial protection, a national health insurance where every citizen is covered is not only desirable but necessary. To encourage preventive health measures such as regular screening, economies of scale and heavy upfront investments are needed. Only governments have the muscle to achieve this, and importantly, the financial incentive to do so.

Citizens largely remain citizens all their lives, but the insured flit from insurer to insurer, especially those who rely on employer-based insurance. Insurers have no interest in measures that need to be paid for today with benefits reaped decades away, potentially by other insurers.

To ensure every citizen is covered and optimise the risk pool actuarially, universal insurance has to be mandated.

Healthy citizens cannot be allowed to opt out, enrolling only when ill; this 'adverse selection' destroys the economics of risk pooling. Likewise, insurers cannot cherry-pick and leave the sickly to struggle alone. The market fails for both insurers and insured, resulting in the socially fracturing world of haves and have-nots.

Would private insurers care much about societal cohesion? Unlikely. Even NTUC Income in Singapore, a social enterprise from the labour movement, finds it hard to insure for pre-existing medical conditions unless every other insurer does likewise.

The direction then is clear. If countries hope to achieve truly national health-care coverage for all citizens, national health insurance is needed.

What about Singapore? MediShield has been incorrectly described as a national insurance scheme; it is not. MediShield is a catastrophic insurance scheme; it does nothing for preventive health care and is hardly national given the explicit exclusion of so many vulnerable Singaporeans: those with congenital illnesses, those with 'severe pre-existing diseases' and those over 85 years old.

Government subsidies in public hospitals are actually more effective than MediShield as currently designed, to provide more universal coverage. Needy Singaporeans enjoy much greater health-care security by virtue of the government-funded subsidies to hospitals compared to many other countries in the region.

But two challenges arise. Firstly, co-payment, an integral part of Singapore's financing philosophy, hits low-wage earners harder as health-care expenses will constitute a proportionately larger share of disposable income. Secondly, there is no cap on the individual's share, unlike in some other countries where the government assumes the responsibility of financial underwriting.

National health insurance is not an economic decision. Cost-effectiveness analyses and actuarial models can inform decisions on coverage extent and funding needs, but these tools cannot decide for us.

National health insurance (and the consequent endpoint of national health-care coverage) is at its core a moral decision, defining what sort of society we are and want to be.

The writer is CEO, Fortis Hospital Singapore.

Proposal works only if all insurers offer it
WE THANK Mr Aaron Lee for raising the issue of universal health coverage ('Wrong to not insure the unhealthy minority'; last Saturday). He calls it a worthy goal to pursue. To make it a reality, universal health coverage must be nationally mandated so that all insurers offer it, eliminating anti-selection against any one insurer.

Universal coverage will also require mechanisms to ensure that costs are shared equitably by all insurance companies and their policyholders. There needs to be a national consciousness on the importance of being insured and an acceptance that insurance premiums for the average person will rise to reflect greater inclusiveness.

Mr Lee says it is time for insurers 'to look beyond their actuarial tables and quest for ever-increasing profits, and contribute to the greater good of society'.

As a social enterprise, NTUC Income agrees wholeheartedly with this call. We seek to maximise good and not profits. In any case, the issue here is not profits but long-term sustainability and soundness.

In health insurance, our responsibility is to serve the wider interests of all our policyholders, above and beyond particular groups.

Our policies are designed to make insurance accessible and affordable to the average Singaporean. To ensure we are in a position to do so in the long term, we must adhere to the fundamental principles of insurance and financial soundness. This precludes us from insuring the unhealthy on the same terms as the healthy.

Mr Goh Khee Khuan agrees with this position ('Annuities and double standards'; last Saturday), saying that insuring the unhealthy and the healthy on the same terms would mean the latter subsidising the former and rising premiums for all. But he questions why insurance companies are prepared to sell annuities to unhealthy people without higher annuity payments to them.

In general, unhealthy people are unlikely to buy annuities, as supported by our own experience and that in Britain and the United States. However, we recognise that this section of society could be missing out on an opportunity to convert capital into annuity payments more efficiently.

We are therefore studying the feasibility of offering people with health problems an 'enhanced annuity' with higher payouts as compared to regular annuities. Such a product would add to our range of offerings, including the recent 'Value Pack' term and health insurance that we provide in fulfilling our social role.

We are encouraged by the public's interest and participation in this ongoing debate on insurance for all. It is ultimately what NTUC Income strives to achieve for all Singaporeans.
Tan Suee Chieh
Chief Executive
NTUC Income
ST Forum, 23 Apr 2012

'If unhealthy people can get insurance, healthy people will delay getting insured until they become unhealthy. With only unhealthy people in the insurance pool, the system would collapse.'

MR CHRISTOPHER GAN: 'The major flaw in Mr Aaron Lee's argument ('Wrong to not insure the unhealthy minority'; last Saturday) is that if unhealthy people can get insurance, healthy people will delay getting insured until they become unhealthy. With only unhealthy people in the insurance pool, the system would collapse because premiums would be high as many claims are made.'
ST Forum, 23 Apr 2012

Wrong to not insure the unhealthy minority
I DISAGREE with NTUC Income that denying health insurance to the 'unhealthy minority' will keep premiums affordable for the rest of its policyholders ('Insure the unhealthy minority? There are trade-offs' by NTUC Income, Monday; in response to 'In Singapore too...' by Mr Dan McCaskill Butler, last Saturday).

The 'unhealthy minority' did not choose to contract heart disease, diabetes or cancer. Although lifestyle choices like smoking, diet and exercise may tilt the balance one way or another, they can by no means guarantee any particular disease outcome.

Even genetic profiling cannot provide such a guarantee. Anyone from the healthy majority can find himself in the unhappy position of being in the 'unhealthy minority' tomorrow.

Denying health insurance to people with pre-existing medical conditions does not prevent them from needing health-care services, and certainly does not help them to get better.

In fact, by making health care less affordable, their risk of developing complications could rise, and the overall burden and need for health-care services will increase.

At some point, the individual will reach the end of his means to pay for health care. The burden will then fall on taxpayers and the state. Or should he simply accept his fate and succumb quietly to the disease?

The Government knows that policies to encourage healthy lifestyle choices and good primary health care to manage chronic diseases will reduce health-care costs in the long run. It is also encouraging personal health insurance as a means to manage the burden of rising health-care costs.

It is time for insurance companies to look beyond their actuarial tables and quest for ever-increasing profits, and contribute to the greater good of society.

Certainly, there are problems and hurdles to overcome before universal insurance coverage becomes reality, but it is a worthy goal. Universal insurance coverage can include conditions and incentives that encourage people to meet risk-reducing lifestyle goals and health-care targets.

For instance, reward the diabetic who keeps his blood sugar levels under control; the hypertensive person who maintains normal blood pressure with medication; and the person with heart disease who exercises regularly and controls his cholesterol levels.

To be sure, there will always be individuals who try to 'game' the system. These are the real minority who can be dealt with separately.
Aaron Lee
ST Forum, 21 Apr 2012

Insure the unhealthy minority? There are trade-offs
MR DAN McCaskill Butler said he was denied health insurance by NTUC Income and another insurer on account of his having stents and high cholesterol ('In Singapore too...'; last Saturday) - these are serious medical conditions.

He described the practice of denying insurance based on health issues, including conditions that are managed with medication and professional care, as a problem in America and elsewhere.

It is the joint responsibility of the government and the private insurers in each country to provide adequate funding solutions to address perpetual rising health-care costs.

We agree with Mr Butler on the inadequacy of health insurance for pre-existing medical conditions, congenital or otherwise. However, we always have to remind ourselves that the more medical conditions and benefits we cover, the more everyone who enjoys those benefits will have to contribute to pay for them.

Providing health insurance for pre-existing conditions is like saying: 'You can purchase car insurance and it will pay for your windshield that was cracked before you bought your coverage.'

To keep premiums affordable for the healthy majority, insurers have no choice but to decline insurance for the unhealthy minority who have a much higher chance of incurring large medical bills.

A broader issue discussed in last Thursday's commentary ('Can 'an apple a day' become law?') is that of universal insurance coverage - making health insurance compulsory.

Ensuring that every person has insurance coverage is not without its problems - how will lower-income families afford the mandatory premium? How do we ensure that the young ones do not 'drop out' when they are healthy, only to 'drop back in' when they are unhealthy?

The recent government proposal to cover congenital and neo-natal conditions is one step towards universal insurance coverage. Even that did not appear to have unanimous consensus on its merits and the consequential premium increases.

The adequacy and extent of providing funding for health care, of which health insurance is one key funding mechanism, will continue to invoke passionate debate. After all, being able to continue living a healthy life is close to everyone's heart.
Lee How Teck (Ms)
Senior Vice-President & General Manager, Group & Health Insurance
NTUC Income
ST Forum, 16 Apr 2012

Can 'an apple a day' become law?
By Andy Mukherjee, The Straits Times, 12 Apr 2012

EVEN if everyone in a society agrees with the old adage - an apple a day keeps the doctor away - is it still acceptable for a government to make a daily intake of the fruit mandatory for citizens?

That is the somewhat philosophical question Republicans in the United States are asking about the 2010 Patient Protection and Affordable Care Act, better known as 'Obamacare', whose constitutional validity was recently the subject of oral arguments before the United States Supreme Court.

If health insurance is like apples - or broccoli, as one of the judges likened it to during hearings - in other words, a commodity bought and sold in the marketplace, how can President Barack Obama frustrate free choice and force millions of uninsured Americans to either buy coverage or pay a penalty to the government?

It's an outrage, say the Republicans, a travesty of the idea of limited government. Democrats have a ready counter: Insurance is different from other goods because while it is possible for someone to not be in the market for broccoli, everyone is willy- nilly a buyer of health-care services.

A citizen who does not have insurance will still fall sick, and may still show up in the emergency room of a hospital. That's the point where the society - especially a prosperous one like the US - will find it hard to look the other way. Since 1986, it has been illegal in the US for hospitals to refuse to care for, or send elsewhere, patients who need critical intervention but cannot afford it.

But there is no free lunch. The cost of this additional burden on the health-care system from free riders is borne by paying insurance customers. Their premiums are higher than they would otherwise be. All that Obamacare seeks to do is to redistribute the costs.

Illegal immigrants and those who earn so little that health-care premiums will account for 8 per cent or more of household incomes will be exempt. Medicaid will expand to cover the indigent elderly (and US states resent the extra financial burden that this expansion will impose on them). But out of 50 million uninsured Americans, some 16 million will either have to sign up with insurance companies or pay penalties for not doing so.

The conservatives hate the penalties. But they are there for a reason. The advantage Obamacare offers to consumers is that it takes away the power of insurance companies to deny coverage on any pretext, including that most obnoxious one: pre-existing conditions.

To view Obamacare as an encroachment of government in private lives is silly, Democrats say, because the only way insurers can be forced to cover everyone at a fair price is by requiring individuals to get cover.

So who's right? Judging by the kind of questions the justices asked, odds that Obamacare - or at least its compulsory individual mandate - will be thrown into the garbage dump have risen in markets where traders place bets on uncertain future events.

A defeat for Obamacare will close the doors on a compromise between Republicans and Democrats and leave the US with two stark choices, one in which millions of Americans remain uninsured and vulnerable, as they are now, and the other in which everyone gets health-care services paid for by taxes.

Democrats will bristle about the injustice of the former and Republicans will not support the latter. What is so different, Republicans will ask, between Mr Obama requiring all individuals to eat an apple a day and the government taxing everyone, buying apples with the money raised and then giving away the fruit 'free' to all citizens?

The debate has no easy answers, but as for Obamacare being an intrusion into free choice, surely there is something inherently 'un-free' about a parent having to worry about the financial consequences of children falling sick?

There is also something deeply immoral about the tyranny of insurance companies that all of us - anywhere in the world - must suffer. Denying coverage to someone who has high cholesterol but no other manifest health issues? That's awful. And it gets worse when every insurer follows the 'industry best practice' and leaves people uninsured.

This kind of discrimination may make insurance companies worthy of their shareholders' admiration. But if the whole point of insurance is to avoid payouts, then people may as well demand that their government move towards a Canadian-type, mostly tax-funded health-care system. Today, it is seen as un-American. Maybe that view will change; maybe it won't.

To the extent that health is a subject in which every society has a keen interest, the world will pay attention to the US Supreme Court, which is expected to announce its decision in June.

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