Everyone in SA would like to see the entire population healthy, well nourished, well clothed, well educated, living in nice houses and with all adults earning above-average incomes. Life would be much more pleasant for every one of us. Those who believe that general affluence is impossible and likely to be forever beyond our reach are wrong. All that SA needs are the right policies – fiscal and monetary policy has been relatively good but, as everyone agrees, other policies and approaches need some improvement.
Countries that now are developed and affluent did not reach their current status in a few months, or years. It took decades or even centuries. But what they do have in common are high per capita incomes, and above all, substantial accumulated capital per head of population. As far as health care is concerned, this accumulated capital includes hospitals and other buildings devoted to health care, equipment that is used in a range of activities from diagnosis of health problems to the performing of the most advanced surgical procedures. These capital investments cover the entire spectrum of medical interventions, as well as the more mundane essentials used in the care of the sick and incapacitated such as beds and linen. They also cover the production and supply of a vast range of health care requisites such as medicines and medical instruments.
Most important of all, advanced nations that offer high quality health care also have more of what economists call “human capital” – highly skilled people who are involved in the provision of health care – people whose skills that are in ever-increasing demand yet in short supply world-wide. This form of “capital”, though, is highly mobile, much to the distress of the governments of those countries that are net losers of skilled medical personnel but to the satisfaction of the governments and patients in the countries gaining these skilled immigrants.
Some of the wealthiest countries in the world, such as the UK and Canada, are battling to provide “quality health care for all” and are being forced to ration health care because of high cost and demand that exceeds the supply of services. The rationing that occurs takes the form of long waiting lists for appointments with general practitioners and specialists, and for hospital beds, operations, and access to technology, such as MRI scans.
It has to be accepted then that a relatively poor country like SA cannot provide instant “quality health care for all”. However, it is absolutely essential for policymakers to set their sights on a constantly improving quality of care being provided to the nation. How to create an enabling environment that will be most conducive to achieving quality health care for all is one of the most critical decisions facing the SA government.
We know that, with the best will in the world, this ideal cannot be delivered immediately or in the short term. To achieve it, a huge additional capital investment in both material and human resources is needed. Government can facilitate this by creating an environment that is conducive to the highest possible economic growth rate. This means that all unnecessary impediments to economic growth and capital accumulation have to be removed.
SA must move as close as possible to the top of the index of Ease of Doing Business. It must also become one of the world’s low tax countries so that we can attract as much foreign capital as possible into the productive sectors of SA’s economy. Most importantly, SA must continue to avoid the monetary madness that has occurred in the world’s major economies where the level of monetary destructiveness of the central banks has differed from Zimbabwe’s only by degree but not method.
Moving towards quality health care for all requires that positive policies be followed. An environment must be created that is conducive to increased capital accumulation and investment in health care. All unnecessary impediments that hamper Ease of Doing Business, capital formation and investment in health care must be swept away. High quality and low prices are achieved through fierce competition in an environment free of barriers to entry, not by prescription, prohibition, controls and interventions. Laws are in place to protect patients from fraud and breaches of contract on the part of insurers and providers; it is therefore unnecessary to entangle them in needless and costly red tape – the fundamental laws must merely be applied.
Currently, while there is criticism of high prices in the provision of health care there are significant barriers to entry that keep out competition. For instance, instead of welcoming the building of as many private hospitals and clinics and the installation of as many high-tech pieces of equipment as possible, the laws and regulations require investors to obtain licences or Certificates of Need before any such investments can be made. The granting of these approvals is dependent on the subjective value judgements of officials using criteria that are not based on economics or potential patient satisfaction. No such barriers to entry should exist.
To ensure the safety of patients, government should set objective criteria known in advance to investors. It should then be in the sole discretion of the investors, as long as they meet the objective criteria, to decide where, when and how they build hospitals and clinics and install equipment. Patients will revel in the increased choice of options covering a range of quality and price differences, including low-cost offerings.
Increased private hospital capacity would allow government to purchase services for indigent patients from private hospitals on preferential terms, in the same way that it purchases medicines from pharmaceutical companies at much lower prices than those paid by private health care providers. All that is needed is a reduction in red tape. Investment in private health care facilities would be dictated by economics and based on the judgement of the risk-taking investors of capital, as all investments need to be in a properly functioning economy.
A closer and more co-operative working arrangement between the public and private health sectors would be of great benefit to the country’s patients, especially low-income patients. Many synergies can be achieved between a vibrant, rapidly growing private health care sector and a service-driven public sector that can firstly, devote all its attention and resources to rapidly improving health care services for the poor, and secondly, purchase a wide range of services and borrow expertise from private providers. High economic growth and close co-operation between the public and private health care sectors is the most rapid route towards quality heath care for all.
Author: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.
FMF Feature Article / 10 February 2009 - FMF Policy Bulletin / 09 June 2009