Which is better in a pandemic - privately funded or government funded healthcare?

30 July 2020
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One of the reasons given why a lockdown is a good idea, is that it enables a country to "flatten the curve", so as to prevent healthcare facilities being overwhelmed.

What the analysis that follows does, however, is to examine a slightly different question: Assuming that the curve is not flattened, what kind of healthcare system is least likely to be overwhelmed: a mainly privately - or a mainly state-funded one?

That raises the issue of the impact of private healthcare in the Covid-19 pandemic. Which led me to investigate a sample of countries with large populations that had high incidences of confirmed Covid-19 cases as at 17 July 2020.

My sample includes the 36 largest nations with case rates higher than 1 000 per million people, except for tropical and desert countries, which, without fail, have displayed low mortality rates from the disease.

This could indicate their climates rule them out of contention as a fair test of healthcare capacity.

It is very unlikely that all desert and tropical countries happen to have better healthcare than the rest.

The resultant sample is therefore the 36 largest countries globally with more than 1 000 cases per million people each, which are located outside deserts or tropical territories.

My aim was to measure the effectiveness of the healthcare systems of the countries in the sample, and not of the factors that determine the spreading of the disease, such as lockdowns, travel restrictions, population density or similar factors.

For that reason I chose as the measure of success the so-called case fatality rate of each country, in other words, the percentage of confirmed Covid-19 patients who died of the disease. The reasoning for this is that a country that manages to keep down its death rate, probably has a relatively successful healthcare system, no matter what the reason for the size of its caseload.

Greater strain 

This approach posed a problem however: Given the object of the exercise, I had to account for the fact that some countries had very high caseloads, which would understandably have placed their systems under greater strain than countries with low caseloads.

In order to make provision for that factor, I decided to work out the ratio between the case fatality rate and the number of cases per million. In other words, the more cases per million people a country has, the lower (and better) the resultant percentage, all other things being equal.

Whatever the reasons for a country's high case rate, it would thus be credited for the fact that it had a comparatively higher caseload to contend with than its counterparts.

The resultant number (in the far right hand column of the table below) would then give a fair indication of the capacity of a country's healthcare system to save lives in a pandemic.

I first worked out if there is a correlation between private healthcare spending and low mortality, without taking account of whether a country has a large or small caseload - in other words, simply by considering the case mortality rate. It is clear that in general, the higher the private share of healthcare spending, the lower the percentage of fatalities.

So we find that countries with mainly private healthcare but with particularly high caseloads, such as the US, Brazil and Chile, have nevertheless coped remarkably well.

This is true based on pure case mortality, or based on the reworked rate that accounts for size of caseload. On the other hand, countries with largely state-funded healthcare have only done well if they managed to keep their caseloads low (whether by means of lockdowns, testing and tracking or otherwise).

To discard the hypothesis advanced by some commentators that caseload is merely a function of the number of tests undertaken, I plotted the caseloads of all the countries against their tests, in both cases per million people. It turns out that there is no noticeable correlation between the two factors, as can be seen from this summary of the comparison:

So, the evidence is in: Countries with significantly privately funded healthcare generally have much lower Covid-19 mortality rates.  

Expressed as a percentage of confirmed cases, the lowest mortality is measured in significantly privately funded systems such as those of the US, Chile, Azerbaijan and Kyrgyzstan.

On the other hand, the poorest performers in terms of mortality rates are mainly government-funded, such as the UK, France, Belgium and Italy.

The next thing that catches the eye is that countries with privately funded systems appear to have higher caseloads, and government-funded systems lower.

How is that to be explained?

Containing the caseload of a country self-evidently depends on coordination and planning.

Based on that, most people would then be quick to conclude that countries with private systems tend to be unable to carry out national planning and coordination because they have private systems, and that that is what causes higher caseloads in those countries.

It turns out that one would be wrong - because it so happens that there is also a correlation between the ethnic diversity of countries and their caseloads, as the next table (again summarising by way of quartile totals) shows:

Diversity is thus associated with higher caseloads.

It makes sense that national and similar attempts at coordination are less successful in diverse countries.

This echoes what economists have known for years, namely that coordination of an economy or labour market at national level is almost certain to fail if that market is ethnically or culturally diverse. On the other hand, homogeneous countries like those of Scandinavia are better able to carry out centralised, national economic planning. Diverse societies (think Brazil, Belgium, Spain, South Africa) are less able to do so.

By the same token, it seems that in diverse societies, national campaigns to limit the spread of the coronavirus by way of lockdowns, track and trace and quarantines, are less successful than in homogeneous societies. 

Higher trust levels

In South Africa one only has to think of the uproar caused by lockdowns in the townships, taxi regulations and the whole Sea Point promenade furore. Not to mention corruption around the Solidarity Fund and the feeding scheme scandal.

Homogeneous countries famously have higher trust levels by reason of the greater unanimity of interests in such societies, which seems to go a long way to explaining their relative success.

Interestingly enough, private systems tend to be more prevalent in diverse societies too. That can probably be ascribed to voters in diverse societies being less trusting of nationalised health systems, than homogeneous voting publics in countries like the Nordics, Germany and the Netherlands. The natural response in fragmented populations is to opt for a greater variety of healthcare offerings.

Now that we have figured out the importance of ethnic diversity in the spread of epidemic viruses, the importance of private healthcare looms ever larger.

Diverse societies

It turns out that whilst diverse societies are not very good at implementing nationally coordinated strategies aimed at preventing the spread of disease, the flexibility and efficiency of private healthcare enables them to cope with high caseloads, and keep mortality to a minimum.

South Africa has a relatively high level of infection, but a low case mortality rate.

That is at least partly explained by the fact that although we have been less successful in implementing a national lockdown because of our huge diversity, we have been better able to contain fatalities with the help of our robust private health sector.

For South Africa all this evidence contains a clear message: If we accept that this is not the last pandemic that will hit us (as we must), then implementing a single-payer socialised healthcare system like the NHS of the United Kingdom, will be the kiss of death.

Frans Rautenbach is an advocate and labour lawyer at the Cape Town Bar and the author of South Africa Can Work.

This article was first published on News24 on 23 July 2020

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