Vouchers and Medical Aid

I was watching family friend and South African talk show host Judge Dennis Davis on his show You be the Judge. The topic was about the free market vs government on service delivery. I came in late in the show so there may have been more discussed but really it looked like from where I was standing that the free market speaker was losing the debate. Quite simply he didn’t have good arguments which was a pity for the free market camp. Instead of accepting accusations that the free market allows for some powerful players to have disproportionate impact on consumers, but showing how this tends not to be a problem when there are lots of players in the market and the service delivery is still better on aggregate than government, he chose instead to deny the existence of this problem. This had the effect of making him look phony compared to the speakers arguing in favour of government intervention.

However the debate centred around the interesting problem of national health. Now I could site material that my dad told me about showing how life expectancy in the US on terminal diseases was better than that of the UK NHS but I won’t. It’s a mute point as France has come out tops in health ratings by a number of studies over recent years. France has had private doctors but public health care (and public hospitals for doctors to operate in) for all citizens, although there is some evidence that is not financially sustainable. The sustainability can be left for a different debate.

To the pro government speaker’s credit, he didn’t mention whether he wanted state provided health or state funded health (not that I saw anyway). We’ll give him the benefit of the doubt and assume he was only proposing state funded health like France and not like Britain. Now his argument can be put as follows “Even if a government solution provides better health care for the people than a private one, players in South Africa like the company Discovery health insurance will fight against such proposals by scaring patients with marketing claims of how they will be left destitute and lobbying against proposed bills to make sure they aren’t passed”. I personally don’t think Discovery has that much power … but again that’s not the point.

The point is I started wondering if there wasn’t a solution that would work for both debaters. My dad had always told me about the benefits of a voucher system for education, and so successful they are in countries like Sweden that despite it’s more socialist attitudes can’t do anything to remove it. Could the same system not be used for medical aid?

It seems so simple that I couldn’t believe that no-one else had thought of it. I did a brief search in google but found only rru.worldbank.org/Documents/PublicPolicyJournal/243Sandi-042302.pdf describing how the voucher system lowered the emotional transaction cost of providing health at clinics in a poor country case study. Not the same thing.

So this is how it would work. The country would offer medical aid vouchers to all citizens at a particular value defined by the budget to give whatever health standard the government could afford to pay from taxes for the entire population. These vouchers would only be redeemable from registered health insurance firms. The government would also create and maintain a default insurer similar to France with policies on what they are and not prepared to cover for that amount for equal cover for all citizens. This is where it gets interesting. You would be able to move your voucher to any private insurer that you wished. The private insurers would have to offer a basic plan equal to that of the government one, BUT would give you the option of topping up the amount for more cover. The top up feature is unique to that of a voucher as opposed to pure public health which doesn’t offer better service even if you’re prepared to pay for it. See more about the advantages of that on education vouchers on wikipedia. Also by empowering the population with vouchers, it gives people the power to decide which insurer they are going to move their account to, which improves service delivery. Discovery might actually make more money under such a system as they would potentially have revenue from the budget assuming they delivered a good service. Everybody wins!

There are other details that need ironing out like insolvency of firms and past payments, and moving people back to the default insurer, but all these issues can be sorted out. I think that such a system would improve the lifes of all. Is it likely to happen? You’d need some serious visionaries in power to suggest and implement such a system, so I’m not hopeful.

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