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BIA responds to KPMG Economic Impact Assessment of NHI Primary Care Phase

The Bahamas Insurance Association (BIA) remains in full support of Universal Health Coverage (UHC) and welcomes the opportunity to work with the government to expand the existing UHC system within The Bahamas.

The KPMG document entitled Investing in health – An economic and qualitative analysis of the impacts of the primary care phase of NHI in The Bahamas makes interesting reading. While the document is quite academic and idealistic, it also contains common sense conclusions based on what can be expected if we commit ourselves to true comprehensive healthcare reform. The caveats in the document which implicitly highlight the correlation between good governance and strengthening of the public primary healthcare system are also noteworthy.

There is a school of thought that KPMG is conflicted in conducting an economic impact assessment on an NHI scheme for which it serves as the primary consultant. This viewpoint zeros in on the fact that the firm has received and continues to receive significant fees for extensive services provided vis-à-vis the implementation of NHI. Hence, it is almost unrealistic to expect KPMG to objectively criticize a plan for which it is one the main architects or suggest that the overall impact on the economy will not be extremely positive. In this regard, while the partnership with Cambridge Econometrics is helpful in addressing this concern, a totally independent study would have been preferable. An independent collaborative assessment with the private sector would have also dispelled the notion that KPMG was influenced or pressured by the Government to produce a document which endorses its plans in a politically charged environment and justifies the current approach.

Nevertheless, there is some useful information in the document and it seems to confirm that the benefits of primary care will be seen in the medium to long term. The document notes that “over the course of a generation, the primary care phase of NHI will be producing an additional $500 million a year in additional GDP”. It will be helpful if the detailed assumptions used in arriving at the conclusions within the report are shared with experts within the stakeholder community to facilitate a meaningful dialogue.

The commentary on Page 2 of the document which suggests that free, accessible and modern primary care services will be offered to residents should be qualified and clarified. This statement suggests that “free” healthcare will be provided to all residents and fails to clarify that individuals with primary care benefits under their private health insurance plan will not receive these “free” services per the legislation. Additionally, the report fails to acknowledge that there are no “modern primary care facilities” in The Bahamas and there is a dire need for the Government to focus on the strengthening and modernization of their 90 plus clinics across our archipelago of islands prior to the rollout of the primary care phase.

Per the report, “Firms are also likely to see a slower rate of growth in private health insurance premiums for staff. This commentary seems bold as it assumes that there will be viable private health insurance plans and the risk pool will be healthier in spite of the implications of Section 21 of the NHI Act. KPMG was right in stating that it is difficult to estimate the impact of the primary care phase on government finances and NHI should not be viewed as a major revenue engine for the government.

It is disappointing that despite several requests from the private sector as to how NHI will be funded, the costs of different options to finance this scheme were not examined by KPMG. Rather, KPMG has relied on what is currently set out in the Government’s implementation plans as developed by previous consultants.

The paper would have benefited from a more detailed and clear discussion on the assumptions underpinning the cost of the primary care phase and the source of the funding; particularly, funds that will be re-allocated from the Ministry of Health and the National Prescription Drug Plan both of which have their own major challenges.

The state of the Government of The Bahamas’ finances is a topical matter given the country’s recent downgrade to junk status by international rating agency, Standard and Poor’s. Ultimately, the decision to spend $100 million per year on NHI is a decision to increase taxes or reduce other public services, both of which will negatively impact GDP. By omitting this effect, KPMG has overstated the potential gain from introducing NHI.

KPMG’s admission that it possessed limited data to forecast all the different effects of the primary care phase and the consequent adoption of a simpler framework is instructive. According to the Government consultant, the absence of the requisite data resulted in the use of data from other countries and reduced the number of economic levers from 15 to 7. The lack of information on the local population raises questions about the projected impact on the economy and echoes concerns raised by various stakeholders previously regarding the NHI scheme.

As an example, the report suggests that more adults “may” be able to work due to improved health and those who are unemployed because of ill health “may” improve their employability. However, these assumptions are not supported by statistics on the percentage of the unemployed population that currently fall in these categories. KPMG admits this limitation in noting that “Unfortunately, we were not able to obtain any reliable estimates to measure the extent to which ill health impacts labor force participation or unemployment” albeit this did not prevent the consultancy firm from arriving at its conclusions. Other conclusions within the paper are challenged by the same deficiency and are supported mainly by theoretical references.

KPMG as a government consultant is intricately involved in the establishment of additional government-owned entities and government agencies. Hence, they are in a unique position to comment on the expected increase in the public sector due to the establishment of additional agencies such as the NHI Authority and the public insurer. The conclusions on the increase in employment in the healthcare industry; particularly in the public sector is therefore a fair one even though questions remain as to the quality of care that will be delivered under the proposed model. That being said, the increase in employment may be exaggerated due to the expected shift in employment from the private sector to the public sector as these will constitute job replacements at the state’s expense rather than new jobs that would boost the economy.

Finally, the KPMG paper fails to reference the significant fiscal challenges faced by The Bahamas. The economic impact assessment ignores key macroeconomic indicators and metrics which are vital to the implementation and success of an affordable and sustainable healthcare program. No reference was made to the negative and stunted growth environment within The Bahamas over the last 4 years.

Additionally, the high debt, high Debt-to-GDP ratio, high deficit, continuous increase in government spending and the junk bond (credit rating) status of The Bahamas were conveniently omitted from the economic impact assessment. The absence of this vital information from the study is unfortunate and puts a damper on the mood of the private sector which had looked forward to this study with great anticipation.