The New NHI Scheme Part 3

The New NHI Scheme Part 3

So far, this series of articles have attempted to provide a coherent and studied critique of the newly proposed National Health Insurance scheme (NHI).

The first installment of the series was an attempted to move beyond the reactionary criticism about the two per cent contribution that swallowed up the news cycle. The goal was to focus on some of the big, unanswered questions that policy failed to address.

The plan, in its current form, does not provide enough information to embark on a truly technical assessment. If I’m entirely honest, I’m not a healthcare economist or policy expert, so I wouldn’t have been able to make that assessment anyway.

I’d like to think that I am able to identify when key components of a policy is missing, and the failure to contextualize the policy and give evidence for the policy’s rationale are two examples of this dearth of information.

Whether companies that already provide insurance would be required to pay the “non-exempt” contribution of $21 per employee or how regulations will treat co-payments, deductibles or lifetime/annual maximums also remain unanswered.

The second installment of the series focused on highlighting a troubling pattern that the proposed scheme has adopted.

The successive administrations’ reliance on regressive taxation has found its way into NHI too. And, while proponents of the policy would argue that the 2% wage “contribution” or 50% of the $83 premium required to cover the Standard Health Benefit (SHB) is not a tax, the reality is that wealthy people, once again, will be spared paying their fair share into the scheme.

None of the previous critiques disqualify the policy in its entirety, but they do beg the question, what are the options for plugging the gaps that have been identified and the deficiencies that have been highlighted?

For example, what is the best way to organize employee and employer contributions so that the wealthy pay their fair share and employers don’t mitigate their losses by cutting back on hiring and laying off staff?

In her 2013 article comparing the French and American healthcare systems, Kathryn Moore noted that funding the French system had evolved.

Traditionally, the mandatory health insurance, equivalent to the proposed SHB, was financed almost exclusively by “social contributions” (cotisations socials) imposed on both employers and employees.

As healthcare costs increased so did employee and employer contributions, and by 2016 employers were paying about 13 per cent of an employee’s salary toward healthcare.

To mitigate costs for the employer, exemptions and cost reductions were made available for “low-cost,” unskilled or disabled employees. The French system, however, eventually moved away from relying solely on contributions from wages. The French government implemented a general social contribution (contribution sociale géneralisée or CSG).

The CSG is based on total income, with the rate depending on the source of income. It was intended to be employment-friendly; reduce the burden of employment-based taxes; reinforce social equity by expanding the tax base and raise revenue to reduce the social security deficit.

In her 2013 article, the CSG rate was generally 7.5 per cent on earned income, 8.2 per cent on capital, 9.5 per cent on gambling winnings, 6.6 per cent on pensions, and 6.2 per cent on benefits. In this scheme, not only wages or earned income are taxed—the tax base is much wider and for the extremely wealthy among us who may not earn a wage including capital gains and income from investments, for example, could mean a huge difference for government revenues.

One comment on the second article in this series argued that the two per cent contribution with a cap at 50 per cent of the total of the premium might be regressive, but a flat tax would be idealistic and counter to our national culture which has previously eschewed any talk of income tax.

This is an important point, but what may be even more idealistic is the belief that we can go on for much longer without any income-based taxation.

Catherine Kelly makes this point in her article, “The good, the bad and the ugly of WTO membership.” Beyond the other challenges the government must face in the attempt to raise more revenue, accession to the WTO will mean the drying up of government tax revenue from customs duties, which was the primary source of tax revenue before the implementation of value-added tax (VAT).

Kelly asserts that it is for this very same reason that the International Monetary Fund has recommended the implementation of an income tax.

The French example may not be perfect for us here in The Bahamas but balancing the core objectives of the CSG—employment-friendly contributions, reducing the tax burden overall, reinforcing social equity and raising revenue—is perhaps where we should start.

When I began this series of articles, I argued this administration, like administrations before it, has become all too comfortable claiming that their answers to the challenges we face are the only answers.

Unfortunately, despite criticisms of the scheme’s current architecture, neither opposition nor civil society has proffered any viable solutions during the consultation phase.

If we are to have a truly comprehensive national discourse about a policy that proposes to change radically, not just the healthcare system, but our economy—deeper, more substantive engagement with the is vital.