Healthcare burden on course to double
Jonathan Kent, Business Editor
Bermuda’s working population can expect to paying out twice as much on healthcare in 20 years as they do today — and that’s if the island’s healthcare costs remain the same.
That is the view of Ricky Brathwaite, acting chief executive officer of the Bermuda Health Council, who was speaking about the impact of demographics on the healthcare system.
Total annual healthcare spending on the island is about $700 million, or $11,300 per person, Mr Brathwaite said during a panel discussion at the Bermuda Insurance Market Conference, organised by the Bermuda Insurance Institute.
“The number of working individuals to every senior is 3.9 — in 20 years that number’s going to shrink to 1.7,” Dr Brathwaite, a health economist, said.
“That means that even if we stayed at $700 million, and unless we want seniors to pay more, that 3.9 to 1.7 means a doubling of the cost for those contributing.”
The panel, which also featured Michelle Jackson, senior vice-president, group lines health and life at BF&M, and Michael Richmond, chief of staff at the Bermuda Hospitals Board, agreed that the Bermuda healthcare system needs transformational change as it faces pressures from the growing prevalence of chronic diseases and an ageing population.
“The burden of the population not growing, but ageing, will fall on you,” Dr Brathwaite added, referring to a relatively youthful audience. “Solutions have to be arrived at now, or you will face the results of non-action.
“Unless something is done in the next ten to 15 years in transformational ways, you’re going to bear the cost of a system that didn’t adjust to deal with higher levels of chronic conditions. That has a huge effect on productivity and on the economy.”
Dr Richmond joined the BHB two years ago, having previously worked in Qatar, where he said the health system’s challenge was dealing with 20,000 more people every month.
He expected Bermuda, with its stable population, to be less challenging, but soon discovered the island’s complexities.
“The demographics facing Bermuda are simply quite staggering, the growth of chronic disease is staggering, the lack of integration in the health system is staggering, the lack of information is quite staggering, and we have a primary care and community care system which is under enormous pressure,” Dr Richmond said.
He added that the pressures on the healthcare system had shifted from infectious to chronic diseases over recent decades. In the US, he said the obesity rate had gone from 11 per cent in 1973 to 70 per cent today. In Bermuda, 75 per cent of people are obese or overweight, according to research cited by the BermudaFirst group.
The management of chronic disease should be much more in the domain of primary care than the hospital, Dr Richmond said. “The role of the hospital is when those chronic diseases get out of control,” Dr Richmond said.
“Have we reached that point?” asked Kim Wilkerson, the panel moderator, who is head of claims at Axa XL in Bermuda.
“We reach it every day,” Dr Richmond replied.
Asked about the impact on the hospital of the ageing population, Dr Richmond said an increase in chronic diseases, such as diabetes and dementia, could be expected in an older population.
“If nothing were to change, we would need another 70 to 80 inpatient beds at the hospital,” he said. “That’s an enormous cost and it’s also not a very good plan.”
Most other jurisdictions facing similar issues had looked to increase community care provision, he added.
Ms Jackson said the solutions to the healthcare challenge had to be comprehensive. Blaming particular parties, such as insurers, the Government or physicians, was not the way forward, she said.
“The system is multifaceted and we need a multifaceted solution,” Ms Jackson said. “We all have a part to play.”
The solution had to encompass technological, educational, social and regulatory components. “You can’t achieve transformational change with one magic bullet,” she said.
Ms Jackson defended the health insurance industry against the notion that they took too much out of the system in profits.
“All of the health insurers have diversified businesses, so to think that the financial statements of these companies are all about health inurance is missing the point,” she said.
“It’s not a high-margin business — quite the opposite. The margins are really slim and if you’re profitable, you’re lucky.
“To suggest that health insurers are making out like bandits in this environment is way off the mark.”
The medical loss ratio of the government health insurance plans was about 140 per cent, she said, meaning that for every dollar in premium, $1.40 was spent on claims.
“If the private insurers did that, there would be no private insurance available,” Ms Jackson said. “If you think of the risks and the extreme probability of high catastrophic claims that are absorbed, it’s a very challenging business.”
Mr Brathwaite said naturally private insurers were in business to make a profit, but posed the question of whether healthcare should be regarded as a social service, rather than a profit-making business.
He added: “There’s only a certain amount of money in healthcare and if some of that money that could be going towards prevention is going on profit, then you have to take a step back and ask: are we benefiting the population in how we allocate the money?
“So it’s not a question of whether health insurers should make a profit, it’s a question of are we using all the money we have to spend on healthcare in the best way for the people?”
Ms Jackson said health insurers contributed through the valuable data they provided to the regulator and through the incentives they provide to clients to live healthier lives, she added.
“The health insurance business does better when people are healthier,” Ms Jackson said. “So the insurers on the island spend a lot of time trying to put together packages to try to get people to live healthy lifestyles.
“It’s simply good business for health insurers in a business where frankly, the demographics are not in our favour.”
The BermudaFirst group has proposed a change from the “fee-for-service” approach to an outcome-based system.
Dr Brathwaite said: “Are there incentives within physician practices to make money based on the number of services provided? Yes.
“Are there individuals who may take advantage of the opportunity to do so? Yes.
“That doesn’t mean that they’re wrong. It means that the system is set up for them to be able to do it.”
He said the outcome-based approach needed everyone in the industry to work together and agree to the same set of standards.
Ms Jackson said: “The vast majority of physicians on the island are high quality, but there are perverse incentives within the Bermuda healthcare system.
“There are tremendous conflicts of interest where physicians own additional services — labs, or pharmacies, for example. I think there are some fundamental things there that we have to address to eliminate those conflicts of interest.”