EDITORIAL: Prime Minister Imran Khan while launching Naya Pakistan Sehat Card scheme in Lahore stated that “this is a defining moment towards our course to make Pakistan a welfare state.” There is no doubt that provision of free medical service to all citizens is a major component of a true welfare state however it is the responsibility of the state to ensure that the scheme is financially sustainable. The key question today is whether the Sehat Card launched in three provinces with the intent to include all citizens by next year, barring Sindh, is sustainable?
There are public-private sector models with varying degree of state participation for providing free healthcare facilities at the point of delivery. For example, in European countries, the principle of providing free health facilities to all is well established though the extent of private sector healthcare providers’ participation varies from country to country.
In France, for example, the state aggressively negotiates with the private hospitals on the cost of medicines and services while in the US Medicare is not empowered to negotiate the price of medicines/care. But in all these welfare systems, the taxpayers bear a significant cost for healthcare. In marked contrast in Pakistan, the cost is not payable by the taxpayers but is to be borne by the government/state-owned insurance provider State Life Insurance Corporation (SLIC) and there is no evidence as yet of aggressively negotiating the costs of care.
In 2015, free medical insurance was launched by: (i) Punjab titled Prime Minister National Health Insurance Programme extended to 1.28 million beneficiaries by 2016, renamed in 2019; and (ii) KPK independently pursued its social health protection initiative/Sehat Sahulat Programme in four districts with support from KfW development bank (German) and technical support from GIZ (German Agency for International Cooperation).
By 2019, an actuarial analysis of the Sehat Sahulat Card was commissioned by the GIZ undertaken jointly with the International Labour Organisation’s Impact Insurance, a facility that enables insurance companies, governments and partners to embrace impact insurance to reduce households’ vulnerability, promote stronger enterprises and facilitate better public policies.
The findings of the study were as follows: (i) admission rates were very low not only in comparison to developed countries and new economies (Thailand) but also in comparison to baseline Survey in Pakistan. The obvious conclusion was that with rising awareness there is likely to be a substantial increase in the future; (ii) projected claims costs and expenses (nominal terms) are extremely sensitive to the assumed increase in utilisation, assumed increase in unit cost and fairly sensitive to the family size assumption. In this context, it is relevant to recall that in April 2019 when the analysis was completed (before the country went on the International Monetary Fund programme) inflation was less than 7 percent, rose to around 12 percent in 2019-20 and was estimated at over 11 percent last month.
Medicine prices have sky-rocketed since as have all other associated costs including the price of electricity; (iii) projected demographic changes – if they are small then there would be minimal impact on cost of claims and premiums; and (iv) the baseline indicative premium required from the projection model was 1,755 rupees per family per annum for 2019-21 — an amount that without doubt would need to be substantially upgraded today.
The study’s recommendations included frequent monitoring of incidence rates, every two years a full actuarial and statistical experience analysis — due this year, premium adequacy review, and an annual report by SLICP on experience relative to premium received. There is no information on SLICP’s website of how much premium was or has been agreed, or its key performance indicators for example loss ratios, rejection ratios and expense analysis.
To conclude, it is critical for the government to seek support from the taxpayers for this programme or else there is danger that like the massive rise in outlay on pensions with no contribution from the employees this commendable programme too may become unsustainable, requiring the government to borrow ever larger amounts to pay for it which in turn will negatively impact on inflation.
Copyright Business Recorder, 2021
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