Egypt's Road towards Social Health Insurance -
The Road to be Traveled (5)
What
could be the factors that would speed Egypt’s transition to expand universal
coverage using social health insurance? We
will try to respond to this question based on the experiences of other
countries and opinions of international experts. In principle, the lower the country has in
terms of income per capita, the smaller the formal sector, the higher the prevalence
of poverty, and the higher the dependency ratio, the more it would be
challenging to initiate or scale up SHI.
Economic Development, in terms of a country’s annual
general level of income (GNI) and growth rate. The greater the income per capita the more capacity enterprises and
citizens will have to prepay SHI contributions. The higher the wages and salaries, the more
opportunity to finance a broader benefit entitlements and the less there could
be an economic burden of payroll tax. Tax revenues are likely to increase with
income, facilitating the subsequent channeling of any
government subsidies into SHI. Steady economic growth, therefore, is likely to
enhance the capacity to prepay.
In 2010 before the January 25th
revolution, Egypt’s GNI was about USD 2,440 and its growth rate ranged between 5-7%
annually. As a result of the slow in economic activity post the revolution, growth
rate is predicted to go down to 2% or less for 2011. Egypt’s current GNI is
similar to the GNI of those countries adopting SHI at the time of its introduction
such as Germany (USD 2,237 in 1883), Austria (USD 2,420 in 1887), Belgium (USD
1,808 in 1851), and Japan (USD 2,140 in 1922). The same applies to growth rates. Economic growth was either high or at least
steady for each of these countries during the transition period.
Structure of the Economy, in terms of the relative
sizes of the formal sector and informal economy. Many developing countries do
have sectors where a notable part of employment is informal, thus facing difficulties
in assessing incomes and collecting contributions from workers who do not
receive a formal salary. This hampers protecting those working in the informal economy
as SHI scheme relies on contributions. The larger the formal sector employment,
the ease it would be to administer mandated payroll tax on employers and
employees.
In Egypt, informality has been on the rise mainly due to two
reasons: (i) a reduction in employment by the public sector and replacing those
by employment using temporary contracts; and (ii) creation of most of the jobs in
the private sector that are informal. More than half of those working are in
the informal economy (53%) with an increased estimation of 20% of pre-revolution
level. Looking more in-depth, 58% of those working don’t contribute to any
social security scheme, 63% are working without contract, and 13% are working
without being paid. As the public sector is shrinking and being perceived as
the place providing “safer” jobs, and given the private sector’s inability to
produce formal sector jobs, the challenges for coverage by social health
insurance increase.
Urbanization, determined by the
distribution of the population intended to be covered. Population living in
urban areas, with minimum quality of infrastructure and communications, and
higher population density, is likely to be easier to cover than a widely
dispersed rural population. About 43% of Egypt is urbanized with governorates
ranging from high as 100% urbanized such as Cairo to a low as 22.5% such as
Sharkia. The more urbanized the
governorate the more insured people would be present.
Ability to administer, in terms of availability of skilled
labor force with capacities in bookkeeping, banking, and information processing;
and related markets, such as in financial services, other insurance businesses that
can provide appropriately trained personnel, actuarial, and legal services. Presence of a sound administration
of social security system is in place would be a favorable factor.
Although HIO has been present for about half a century, yet most
of its experience is in service provision and has lost a number of experts who
understood insurance without being properly replaced. The HIO payer functions
will need efforts to be built and investment in this area would be a
pre-requisite if Egypt would continue to pursue health insurance as a financing
scheme for universal coverage.
Poverty Prevalence, in terms of size of
government’s contribution to subsidize their premiums and co-payments. The
higher prevalence of poor and near poor Egyptians, the more the government
would need to contribute and the higher the burden is on the government’s
budget. The society as a whole, and not only the government, would need to
define what appropriate level of solidarity it is ready to contribute to cross
subsidize the services of its poor people either fully or partially for the
near poor. The higher the level of solidarity,
the more SHI is able to provide protection to its most vulnerable segment of
its population. While policymakers could impose solidarity; however, without a
society that believes in solidarity, it will be difficult to sustain SHI.
Two more important factors that need to considered. The first is the presence of efficient
functioning provider networks, in terms of (i) ability to provide an improved
access to members; (ii) ability to provide greater choice of providers to
members, and (ii) ability to provide an environment that allows for
quality-based competition among providers. The second is the government’s capacity to
regulate for quality and manage grievance procedures.
In summary, Egypt’s ability to
expand universal coverage through SHI will depend mainly on the following: (i)
its ability to recover from the aftershocks of the revolution and resume its
pre-revolution high growth rate, as well increase its level of GNI; (ii) its
ability to formalize its economy with protected jobs; (iii) its ability to
become more urbanized; (iv) its ability of building its health insurance
administration system; (v) its level of poverty and society’s willingness to
cross-subsidize the poor; (vi) its ownership of an efficient and functional
provider network; and (vii) its ability to regulate.
Until we meet again...
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