Tuesday, April 30, 2013

Why The T&T Health System Is Failing

We have for years read and heard complaints of the poor service delivery and malpractice at public and private hospitals. Yet despite massive infusions of cash they continue to under-perform. A basic economic analysis can allow us to easily decipher why. 

The Problem With Free Healthcare

It is a common belief that when government provides something, it is free or cheap. But in reality its actually the most expensive and inefficient way to provide service. This is so because politicians cannot create wealth or resources – they can only personally consume it or redistribute it. 

Remember money for all government spending comes from the private sector / business by way of taxes on profits and the salaries of the general population -therefore the state can only spend your limited tax dollars on one area at the expense of another.

When the price of public health care is mandated to $0 as with any other service demand dramatically increases and this causes shortages, since doctors, nurses, supplies, beds etc are all in limited supply. 


The Free-Rider Problem
In economics the free rider problem occurs when someone benefits from resources, goods, or services without paying for the cost of the benefit. It leads to overuse, under-provision  and consequent degradation of a common property resource. 
Mere human nature motivates people to exhaust as much services as possible even though it may have no discernible positive impact on them. 

Instead of calling a private practitioner, checking things on-line, waiting to see whether a problem subsides, visiting a pharmacist, attending a small private clinic persons flock to the hospital clogging up the system. Paradoxically many patients find themselves without the treatment they need as there are long waits or no service at all.

Other behavioural problems are also created. When citizens know that they possess free access to health care, they do not feel the need to be as responsible for their health. Preventive care in particular minimizes cost and is the best way people can limit the effects of disease, but the presence of the health care 'safety net' removes the incentive to intentionally engage in preventive care.

Politicians Respond

Voters begin to complain and politicians spur into action by increasing bureaucracy, rules and regulations that not only increase administrative cost but make the provision of service more expensive and inefficient. In other words, politicians can decree prices to be artificially low, but they cannot actually mandate lower costs, better service and shorter waiting times.

Moreover socialized systems have no incentive to improve service, keep cost down as they are not rewarded for service excellence unlike a purely profit based system. 

On the contrary failure is rewarded as the subsequent cry is that more resources should be allocated to health care which ironically makes the problem worse.

Shouldn't We Provide Health Care For The Needy?

Consider that currently the Ministry of Health spends on average $6957 per year, per tax payer on health care or $13,914 per two income household. At these rates every working individual would be able to easily afford private insurance or just save for a potential emergency many times over and even be able to buy private insurance for friends and family if required. In fact currently family rates for private group health insurance in T&T run around $250 per month inclusive of medical, glasses, dental etc.

Moreover with less of a tax burden citizens would be more inclined to assist citizens in need and would no longer abdicate their inclination to help their fellow man because they feel that the government who has already taxed them should do it. 

Current Flaws With T&T's Private Health Care - Major Moral Hazard

A moral hazard is a situation where a party will have a tendency to take risks because the costs that could incur will not be felt by the party taking the risk. In other words, it is a tendency to be more willing to take a risk, knowing that the potential costs or burdens of taking such risk will be borne, in whole or in part, by others.

A severe moral hazard exist where private hospitals who attend to patients provide care up until procedures gets critical. Therefore many problematic procedures ultimately end up at the door step of a public institution even if the genesis of the problem originated from malpractice or negligence by the private institution. 

Consequently private institutions can earns profits while they socialize their errors and mistakes. What's worse is that private hospitals will have a tendency to take greater risks because the costs / problems / burden that could occur will not be felt by the private hospital but rather in whole or in part, by the public hospitals. A classic example is the increasing prevalence of C-Section deliveries rather than natural deliveries at private institutions.

T&T Dental Care Industry a Prime Example

T&T currently has one of the best levels of service in the world when it comes to the provision of dental services at very competitive prices. In fact the busiest times for the year for dentist in Trinidad is during the Carnival and the Christmas seasons. Why? Because foreigners who come to Trinidad for Carnival and Christmas take the opportunity to get their dental work done because it much cheaper than getting dental work done outside T&T and the level or care and service is just as good. 

The reason this occurs is because in this segment of the health care industry operates very close to free market system which have resulted in great service, great prices and wonderful options for consumers. This phenomena can be experienced in the entire health industry if the state was removed from the equation. 

A New Direction For T&T's Health System

Flooding a broken system with more tax dollars only increases tax payer cost and makes service provision more inefficient, less service oriented and fuels more corruption. What is also not considered is the man hours wasted by citizens awaiting health services because services are over subscribed.

A free market approach cannot guarantee that all medical needs are provided for - no system can. But it does give the more efficient private sector an opportunity to compete to provide the best possible service they can at the best price. Heading in that direction is the only way we can provide good health care to our citizens.

5 comments:

  1. My father died of a heart attack at the age of 59, and I believe that if he had had better medical advice before he could had had surgery that could have saved his life. T&T needs to focus on better Helthcare not free Healtcare.

    ReplyDelete
  2. That's unfortunate.
    Sadly in a misguided attempt to provide health care to everyone they succeed at providing low to no healthcare to everyone.

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  3. Why am I reading the blog of somebody who doesn't even have the decency to write under a psuedonym?

    ReplyDelete
    Replies
    1. Rich~! We're attempting to have the blog focused on ideas and less so on individuals and personalities.

      We appreciate your comments and readership.

      Delete
  4. Actually, I think that we in T&T come close to having the best of both worlds - private and public healthcare. What we need to focus on as individuals is a preventative approach to our own health so that less strain is placed on our pockets and on the system!

    ReplyDelete

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