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The cost of health care

News that public health insurance costs will soar this year should not surprise anyone who has been following the health insurance debate.

But that does not mean that there are easy fixes or solutions to the problem.

In recent years, health costs have risen much more rapidly than the general rate of inflation and no one seems to be able to explain why or to figure out a way to stop it.

At the same time, mismanagement in the Health Insurance Plan has caused massive problems.

Some people will recall that doctors began to refuse to participate in HIP because repayments were ruinously slow. Since then, the arrears have been cleared up. But in doing so, it turns out that payments were so slow that HIP was thought to be in surplus whereas it was actually running a deficit.

Leaving aside the fact that this is a shocking breach of basic accounting rules, it means that for some years people were paying too little for HIP, and now, just when they can least afford it, they have seen their premiums jump by 60 percent in just two years.

That is scandalous.

The good news in this is that costs, at least from the Bermuda Hospitals Board, may start to slow because the Board has undertaken to cut costs by 15 percent this year, without a dimunition in services.

That's welcome news, but it begs the questions of what has been going on at the hospitals that administrative costs have been allowed to spiral so much.

Health Minister Zane DeSilva also had the task of announcing that Future Care premiums will now be increased at the same time that the plan will now be opened to all senior citizens.

No one disputes that seniors need a more affordable means of getting health care than what was available prior to 2008. With costs rising, seniors were having to choose between buying groceries or paying for their prescriptions; an iniquitous choice.

But this newspaper had grave reservations about the affordability of Future Care which was not costed before it was promised in the 2007 General Election.

And its introduction has been arbitrary and unfair. If you happened to be a senior citizen who was using HIP in 2008, you were automatically enrolled in Future Care at a rate of $300, now going up to $375.

But if you were not in HIP, then you could not join until last year (if you were over 70) and were automatically charged $600. That now will be increased to $676 and any senior citizen can now join at that rate. It may be that on average, seniors in HIP before 2007 were poorer than those who were not. But this cannot have been an absolute, and it is unfair to punish people whose circumstances may have changed or who may have chosen a more expensive health plan for any number of reasons.

Even now, some 400 of the 2,840 people enrolled are receiving financial assistance to pay the premiums, and that sum should be included in the cost of the programme. Otherwise, the true cost is hidden.

At the moment, Mr DeSilva says Future Care has an $8 million dollar surplus, but Mr DeSilva as much as admitted that will not last unless premiums rise.

But no one seems to know how much it will end up costing. It seems likely that the scheme will either go into deficit, or that premiums will have to increase to somewhere close to what private insurers have charged for senior citizens. That's because medical costs for seniors increase dramatically. Insurance companies make their profits and get their surpluses from the healthy and young, not the infirm and aged.

Aside from rigorously controlling the cost of health care, the other means of ensuring that health insurance is sustainable is to charge the young and the healthy more, so that there is adequate money available for them after they retire; effectively a health pension.

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Published March 23, 2011 at 2:00 am (Updated March 23, 2011 at 10:25 am)

The cost of health care

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