LONDON, 19 August — Saudi Arabia is about to issue temporary licenses to a number of insurance companies which would allow them to offer health and medical insurance products in the Kingdom.
Last June, the Ministry of Health issued a law under which it would become mandatory for all expatriates working in the Kingdom to have private medical insurance. The law takes effect on Sept. 1, 2002, but the government has agreed that Saudi employers be allowed to implement the scheme over a maximum three-year period.
The law preceded by a week the introduction of a new comprehensive health bill which aims to regulate all aspects of healthcare services in Saudi Arabia, which hitherto has offered free medical services to some 22 million people, including some 6 million foreigners.
The introduction of compulsory private medical cover to foreigners is aimed at easing the financial burden of the Ministry of Health. Perhaps more importantly, the government reportedly plans to make private medical insurance mandatory for all Saudi citizens.
While it is clear that the government is in no rush to enforce this particular aspect of the new health bill at least over the next three years, both the ministry, the Cooperative Health Insurance Council, the body entrusted with overseeing the enforcement of the new Cooperative Insurance System, and the Shoura Council should use this time to consider the full implications of compulsory medical insurance as a policy. This especially in a socio-economic and political culture such as Saudi Arabia.
A report titled "UK Health Insurance 2002" released last week by independent UK market analyst Datamonitor warned that due to rising premiums, the individual private medical insurance market in the UK was continuing to lose customers. Rising claims and the cost of claims forced private medical insurance companies to push up premiums, even though companies were trying to combat this through claims management initiatives.
Another result is that medical insurers are innovating new products with lower premiums. However, with such "innovations" come policy exclusions, usually serious illnesses, terminal illnesses, and those related to old age, when people need medical attention the most. In the UK, those on private medical insurance, have a safety net if things go wrong. They can simply revert to the free National Health Service. No other country, except the Gulf states, have this luxury.
There are basically five options regarding a medical or national health service. Singapore is usually touted as the success story of mandatory medical insurance for all by its proponents. The cover premiums are deducted at source from the salaries of citizens. Singapore, of course, is not an ideal model for the Kingdom because its population is miniscule (well below a million) compared with the total 25 million population of the Kingdom. Even Singapore is now having to cope with associated challenges such as increased longevity of citizens due to improved medical care; medical technological and clinical advances; and greater affluence.
Medical insurance in the US is a political hot potato, as former White House First Lady Hillary Clinton found out with her failed attempt to introduce a comprehensive Medicare program. In America, the rule is that if you are wealthy or in employment, then you can afford medical insurance. Otherwise you are at the mercy of a run-down over-crowded under-funded second-class state hospital system.
It is not unusual for hospital ER departments to turn down patients because they do not have the requisite medical insurance. The line between reality and the TV hospital soaps have indeed become blurred.
The German system has also attracted much positive attention because it combines a contributory compulsory medical insurance payment through the employment national insurance system with funding through general taxation. Supporters stress that in Germany, as such, the quality of medical care is excellent and the waiting times almost non-existent. But Germany too like in all industrialized countries is faced with an aging population, which requires longer medical care.
In Britain, of course, you have a National Health Service (NHS) free at the point of delivery and with no bearing on your ability to pay. This is funded out of general taxation. Critics of the NHS argue that the status quo is unsustainable because the service consumes money like water, which puts an unfair burden on taxpayers. Not surprisingly, the NHS, they allege, is creaking at the seams, with the result that waiting lists are increasing and that some patients are dying before they can be treated.
The NHS, introduced by the post-War Labor government and championed then by Labor stalwart Nye Bevan following the publication of the Beveridge Report, is a unique British institution. The fact that it has now shown signs of creaking is not because the model is not successful, but because of chronic under-investment by successive British governments on both sides of the political spectrum.
Today the NHS is the largest single employer in the world, with a budget running into billions of dollars. Not surprisingly, a culture of bureaucracy and wastage, undermined both by rigid working practices especially by senior clinical staff and trade unions representing ancillary and auxiliary employees, became entrenched over the years. Abuse of (especially by those who were not entitled to use the NHS) and corruption, albeit on a limited scale, also remained unchecked for years.
Mrs. Thatcher tried to introduce an ill-advised market mechanism into the system whereby different departments and providers competed with each other to provide services on a local, regional and national basis. Hospitals in the form of trusts were perceived more to be operating under the rules of businesses than healthcare providers.
The current Labor government abolished this internal market and has for the first time committed a huge injection of new investment over a sustained period of time. This has been welcomed by most but the effects will take some time to filter through. However, progress could be undermined by New Labor’s obsession with spin especially through the meeting of various clinical and waiting list targets. Many of the NHS teaching hospitals remain centers of world excellence in various fields. It is quite common for gravely ill patients to be transferred from private hospitals in the UK to NHS hospitals because the private hospitals very often do not have the state-of-the-art equipment or the comprehensive facilities and staff complement available.
The fifth option, of course, is the French way, where citizens are willing to pay higher taxes and national insurance, a component of which is ring-fenced for healthcare services. It is not that different to the German system.
The option of a government abdicating its responsibility of providing primary medical care to its citizens cannot be contemplated. In the case of Saudi Arabia, as in the Gulf states, the problem is exacerbated because citizens do not pay income tax.
Therefore, government treasuries are deprived of a vital source of financing, which puts an extra burden on national finances.
Saudi Arabia like the other Gulf states have got to take stock of its macro economic, monetary and fiscal management. In many respects, the real economy is catching up with decades of state subsidies, patronage, and hand-outs, which some critics say, have nurtured a civic culture of unrealistic expectations and instant delivery.
Just as oil price volatility and unemployment are economic realities, which are plaguing even many oil-producing countries, no Gulf economy can sustain an on-going situation of no income taxation for long.
Healthcare services is a costly business. Given the Kingdom’s structure, policymakers would have to come up with a system that suits its unique conditions. Unlike the industrialized countries, the Kingdom’s population is very young — some 60 percent under the age of 25-years-old.
An ideal situation could be a contributory scheme topped up by government funds, and down the line by general taxation. But then this would tie in with the government’s ability to generate sustainable employment for this growing pool of local labor, which inevitably will continue to grow as more graduates and other young Saudis come onto the job market.
For policymakers to adopt a long-term view, they will also have to consider a fundamental overhaul of monetary and fiscal policies, especially in tune with the demands of a real economy and of a transparent and sustainable budget.