For the last half century and more, the American Medical Association (AMA) was vehemently opposed to publicly-operated health insurance. The profession believed that their interests were better served by a system of (itemised) fee-for-service, paid for out-of-pocket or via a multitude of private medical insurance schemes.

Whether it was foresight or reflex antipathy towards 'socialist' medicine, the US medical profession was wary about the negotiating clout of consolidated purchasing power in the form of a national health insurance authority.

A single-payer, publicly-operated health insurance scheme, it was feared, would inevitably move towards a regulated fees schedule, if not a capitated, pre-paid system (fixed sum pre-paid to healthcare providers which entitles eligible clients to medically necessary care during the stipulated period of coverage).

That was until the private health insurance industry consolidated and metamorphosed into for-profit managed care, the system which is now preferred by US employers to meet their obligations for their employees' health benefits.

Far more driven than even the most cost-conscious of health insurance authorities, profit-oriented managed care has been relentless in its drive to hold down costs, by improving efficiency in some cases, but all too often, by withholding medically necessary care to patients, and by making inroads into the remuneration of healthcare professionals.

The AMA, among the most conservative and privileged of professional guilds in the US, has lately turned to unionising its members to resist the erosion of professional autonomy and the 'depredations' of profit-driven managed care. With impressive fervour, they castigate its avarice and cannot demonise enough this modern incarnation of the health insurance industry. Such indeed is the power of finance capital.

Short on details

The Malaysian Medical Association (MMA), wiser and more enlightened perhaps than its US counterpart, has opted for a different tack and has thrown its weight behind the proposal for a publicly-operated health insurance scheme for Malaysia.

A national health (insurance) fund, after all, represents effective demand for healthcare services, and a National Health Financing Authority (NHFA) would be a less formidable adversary than a confederation of profit-driven health insurance entities (including managed care and HMOs).

The proposal for a National Health Financing Authority is now being finalised by the Health Ministry for submission to the National Planning and Development Committee, and eventually to the Economic Planning Unit for consideration under the Eighth Malaysia Plan.

Health Minister Chua Jui Meng's announcement on the NHFA is a long-awaited and welcome development ( The Sun , March 4). It is however very short on details, particularly in the light of the corporatisation of public hospitals which has proceeded in the absence of the promised parallel scheme for healthcare financing.

Since 1992, these corporatisation exercises, involving the National Heart Institute, the University of Malaya Medical Centre and the hospitals of the Universiti Sains Malaysia and Universiti Kebangsaan Malaysia, have been accompanied by steadily rising patient charges. The public remains uneasy about the future status of the remaining Health Ministry hospitals.

This brings to fore several questions which the Health Minister and other authorities should address:

Additional taxes

1) What will be the source of funds for the National Health Financing Scheme? If it is to be funded largely out of payroll deductions (employer and employee contributions, plus levies on the self-employed), it amounts to an additional tax.

Citizens by and large are wary of tax increases, especially when there is little transparency and accountability, and widely perceived mismanagement of public funds. In June 2000, the Citizens' Health Initiative (CHI) conducted a web-poll to canvass the public's views on how healthcare should be financed. Of 237 respondents, 18.6 percent were willing to pay additional taxes if the government could ensure publicly-provided healthcare of quality which is widely available to all.

A clear majority however (61.2 percent) preferred a dedicated fund earmarked for healthcare, i.e. a publicly-operated National Health Insurance Fund financed by contributions from employers, employees, self-employed and the government, which would pay for medically necessary care for all.

(Patients could choose public or private healthcare, and the providers would be reimbursed in accordance with a standard fees schedules. Excess charges for services not considered medically necessary would be the individual's responsibility).

Market fragmentation

2) What will be the role of private health insurance in relation to the National Health Financing Scheme? Will the NHFS allow for opting out by those who prefer private health insurance? One of the key lessons from public health insurance is that universal coverage, solidarity and cross-subsidy, the defining principles of social insurance, are fundamentally incompatible with risk-rated private health insurance.

Profit-driven health insurance necessarily discriminates between risk categories, fragmenting the market into those considered at higher risk of illness and those at lower risk in order to charge differential premiums in accordance with risk profiles.

The net result is that those people at highest risk of falling ill and requiring treatment, will be those least able to afford premiums, and therefore treatment. The experience of Blue Cross/Blue Shield in the US is instructive. Initially committed to non-discriminatory community rating, they saw their younger, healthier subscribers desert to the for-profit insurance companies such as Aetna which offered lower premiums to this low-risk group. Blue Cross/Blue Shield was left with a disproportionately high-risk subscriber pool who were intensive users of medical resources.

To no one's surprise, the Blues eventually introduced their own risk rating just to remain viable. The lesson therefore is quite clear - selective opting-out by low-risk individuals, encouraged by profit-oriented underwriting, will thoroughly undermine the implicit compact and cross-subsidy that is the essence and raison d'etre of social insurance.

Damaging cutbacks

3) Will the tax burden of national health insurance be in line with progressive taxation? What level of healthcare will be covered under the NHFS? We have noted with dismay and anxiety the damaging cutbacks in patient services at our public hospitals and clinics, in effect imposing very substantial co-payments which are a burden (if not denial of treatment) for many (re: surgical plates and screws, heart medications, anti-retroviral treatment for HIV/AIDS patients etc.).

The healthcare costs of our large migrant worker population, mostly borne by the public sector, have been repeatedly emphasised by government and public alike, but no one has asked for an accounting of the annual levies on foreign labour collected by the authorities (RM360 annually for every foreign worker). Why should not a portion of this be used to finance their healthcare needs?

Negotiated fees

4) An essential component of a national health insurance system is a binding fees schedule which healthcare providers abide by. The existing MMA fees schedule is a non-binding set of voluntary guidelines proposed by the medical profession for itself, for consultations and procedures.

For other in-patient charges at private hospitals and other facilities, an even less regulated situation prevails, with arbitrarily varying charges masked by an obstinate reluctance to provide itemised details.

At a national healthcare conference in 1997, it was reported that consultant specialists at a large private hospital had average monthly take-home pay in the region of RM40,000 (about 20 times the salary of a graduate teacher). This may or may not be typical, but it is clear that this level of remuneration cannot be sustained by a national health insurance fund.

In Canada and Japan, the public healthcare financing authorities periodically negotiate with the healthcare providers for reasonable compensation for services and materials provided. We will need a similar negotiated fees schedule for the sustainable operation of a National Health Financing Scheme. (This is obviously related to the quantum of contributions and payments deemed necessary to ensure the viability of the fund.)

Important contribution

5) What will happen to public sector healthcare? Public sector healthcare should be retained and re-vitalised with infusions of funds from the National Health Financing Scheme as its principal funding source.

Rather than dismantle it, we should continue to subsidise public sector healthcare to ensure that it remains widely dispersed and available to all in need. It should be given greater operational (including financial) autonomy in the form of decentralised regional health authorities, or divested as non-profit publicly-owned health trusts in the manner of the UK's NHS Trusts and subjected to explicit guidelines and regular review.

This further requires that rational and consistent criteria be developed and adhered to in resource allocation for the public sector. Staff salaries need to be markedly raised to narrow the gap vis-a-vis the private sector.

With better staff retention and serious efforts to raise staff morale, publicly-provided healthcare has the potential to be a benchmark for quality and a competitive price check on the private sector. By retaining senior and experienced staff, it will also re-affirm and extend the important contributions of public hospitals in medical apprenticeships and training of junior doctors.

Proper representation

6) What provisions are there to ensure that the lay public is effectively, adequately and credibly represented in the National Health Financing Authority? Partnership, if it is not merely a convenient cliche to embellish the 'new governance', must be extended beyond consultation to include monitoring and oversight in implementation.

DR CHAN CHEE KHOON is the co-ordinator for Citizens' Health Initiative, a non-governmental organisation concerned with public health issues.