With the cost of living taking centre stage during the election campaign, the price of healthcare has been examined as one of the factors that drive up expenses for both consumers and the government.
For its critics, Cayman’s healthcare system has become increasingly costly and fails people when they need it most – during retirement.
Health insurance is mandatory in Cayman and purchased individually or through an employer’s group plan. The latest available figures from January 2021 show that there are 65,114 people with health insurance.
For individuals, the cost of mandatory health insurance depends on their age and the extent of the coverage. Policies can range from $167 per month for the standard health insurance contract (SHIC), the minimum required under the law, to between $300 and $900 for more comprehensive coverage. The premium rates are typically twice as high for a couple and can be triple for a family rate.
Seniors might see the cost of worldwide comprehensive health insurance rise well in excess of $1,000 a month.
Two reports by the Auditor General’s Office released in 2017, showed that spending in Cayman’s mixed private and public healthcare system gradually increased over the years to $269 million or 9.74% of total GDP in 2015. Private healthcare expenditures had risen particularly strongly during the period from 2011 to 2015.
Since then, healthcare spending in Cayman is estimated to have easily surpassed $300 million.
In 2019, health insurance premiums alone amounted to $247 million. After deducting underwriting expenses of $222.8 million and other costs, Cayman’s health insurers were left with a profit of $12.6 million, data from the Health Insurance Commission shows. During that year, the industry insured between 66,177 and 69,308 people.
Cayman’s healthcare costs per person are likely to have increased from the US$5,343 spent in 2015.
That is a considerable amount, even among large, developed countries, which tend to spend on average more on healthcare.
Even the 2015 figure, calculated by the Auditor General’s Office, would put Cayman into the group of highest spenders among Organisation for Economic Cooperation and Development nations today.
Cayman has comparatively few seniors
The per capita spending figure is misleading in that Cayman’s population structure includes a comparatively much smaller number of seniors, who proportionally spend significantly more on healthcare than the rest of the population.
While the share of over 65-year-olds is more than 18% in the UK and the US, for instance, and as high as 28% in Japan, the comparable share in Cayman was only 6.8% in 2015. The smaller number of seniors indicates that the average cost of healthcare locally is much higher than the per capita expenditure suggests.
It also implies that healthcare costs could make a considerable jump, if Cayman were to face an ageing population – the major healthcare cost driver in many developed countries.
One of the cost drivers in Cayman may well be proximity to the Unites States, as it is a common choice for overseas treatment. Health spending in the US is by far the highest in the world at almost $11,000 per person in 2019, according to OECD data analysed by KFF, a non-profit organization.
This is 42% higher than Switzerland, the country with the next highest per capita health spending.
That the US spends twice as much as comparable countries on health is mostly caused by higher payments to hospitals and physicians, the analysis found.
However, more local hospital treatment options, especially with the arrival of Health City Cayman Islands’ cardiac services, have already reduced the need for, and how much money is spent on, overseas treatments, said Jeanette Verhoeven, senior broker with Bogle Insurance Brokers. But, as confirmed on the Cayman Islands Monetary Authority website which detailed health claims, the overall health costs per capita have not been decreasing.
Patients still tend to travel overseas, if they need access to a radiation facility for cancer treatment and other expensive procedures that are not offered on island because the population is too small.
How much Cayman’s insurance companies must pay for specific treatments is governed by the Standard Health Insurance Fees (SHIF) and subject to much debate.
Each insurer’s ‘usual & customary’ schedule of fees detailing the maximum amount payable for individual procedures used to be “a big dark secret”, said Verhoeven, because insurers were concerned that providers would more easily be able to charge the maximum allowable amounts.
When the Cayman fee schedule was introduced in 2005, Verhoeven said, comparable US prices were considered and converted on a one-to-one basis into Cayman dollars without taking into account that in the US those fees are rarely paid by insurers, who negotiate heavy discounts.
In addition, over time hospitals and physicians started to unbundle their services and itemise more charges according to the schedule, resulting in increasingly higher overall expenditures.
A survey on behalf of the Health Insurance Commission to assess billing practices in Cayman and review the SHIF a decade ago found that physicians said healthcare costs, and specifically operating expenses, in Cayman were high compared to other jurisdictions because of the costs of importation, staffing and malpractice insurance, as well as lower economies of scale.
As a result, most physicians felt, and still do, the SHIF rates should be adjusted. Verhoeven cautions that any overall rise in SHIF allowable charges will not occur in a vacuum and would have a knock-on effect on all health premiums. She suggests that individual problematic fees mainly be addressed.
Indigent numbers increasing
While civil servants, civil service pensioners, veterans and seafarers are all eligible for government’s insurance plan through the Cayman Islands National Insurance Company (CINICO), all others must obtain private insurance coverage.
Caymanians who cannot afford health insurance are classed as indigent and have access to medical services paid for in full by the government.
The costs involved in indigent care have become a growing headache for government.
In addition to increasing healthcare costs in general, the overriding factor for the cost increase is that the number of people classed as indigent, who are mostly seniors and some unemployed, has jumped from 1,000 to 1,700 in recent years.
Even though people insured under private sector plans pay $10 per individual and $20 per family per month toward indigent healthcare, the $5 million raised per year does not come close to covering what taxpayers spend on indigent care each year.
For 2021, government has budgeted $30.6 million to cover just the tertiary medical care of indigents, seafarers and veterans at various local and overseas facilities. When the services provided to indigents by the Health Services Authority are added to that, the overall cost rises to more than $40 million.
Government has in the past attempted to control costs by implementing a ‘Jamaica first’ policy, so that patients on the indigent medical care programme that need overseas treatment are sent to that country, where healthcare is significantly cheaper than in the US.
‘Privatised profits, socialised costs’
The problems are structural and overall costs for indigent care are only expected to grow.
For Chris Saunders, opposition member of Parliament and a member of the Public Accounts Committee, the issue with the current system of health insurance is that it is split into two groups.
There is a large population of expat workers in the private sector, who typically require a medical for work-permit purposes and are therefore largely healthy. They are privately insured through their employer.
The second group is made up of all civil servants and government workers, plus seafarers as well as all the uninsured, who are covered through CINICO.
One of the effects of the divide is that the younger working population is insured privately and CINICO is left with a more senior client base.
The auditor general’s report in 2017 found that Caymanians represent 83% of the population over the age of 65 and 75% of children under 14. Both age groups, particularly the seniors, use most healthcare services.
“The government basically finds itself in a situation where all the people who are high risk are at CINICO, while all the low-risk people receive private insurance,” Saunders said.
As a result, a lot of the costs has to be carried by the government and the taxpayer.
“In a sense we have privatised profits and socialised the costs,” he said.
In some cases ageism can also become an issue, Saunders added, where certain workers, especially those with pre-existing conditions, are reluctant to switch jobs for fear of losing their health insurance.
Saunders said the solution is not about doing away with private health insurance entirely. Instead, he suggests an expansion of CINICO’s coverage to provide basic healthcare for everyone with private insurance, offering additional policies on top of the basic plan.
That way the risk would be spread much wider across a broader demographic.
Another problem is that the current system makes it almost impossible for people to retire and be able to pay for healthcare coverage, he said. “If you look at what it would take to get decent coverage as a 65-year-old person, that could be anywhere from $1,200 to $1,400 a month,” an amount well in excess of the maximum monthly pension payout.
That means the current system is failing people when they need health insurance the most, he added.
The main reason why this is becoming an issue is demographics, with projections showing that 20 years from now not enough young people will be coming up to maintain the system, Saunders said.
The government is not disinclined to healthcare reform.
According to Health Minister Dwayne Seymour government has so far not seriously considered proposals to ‘nationalise’ Cayman’s healthcare coverage, but in previous comments he said either that or expanding coverage provided by CINICO, may have to be considered.
The Progressives election manifesto calls for investigating a plan that is similar to Saunders’ idea of expanding CINICO’s coverage to the wider population.
The manifesto states the party would “review the effectiveness and viability of a modern health insurance system that includes a national health insurance plan alongside options for private insurance”.
It also aims to “investigate the feasibility of commissioning a single healthcare provider for the care of indigents etc. to improve outcomes for patients and reduce the cost to the Government”.
Verhoeven said the problem with a more socialised form of healthcare is that it tends to become unaffordable for most governments and restricts choice.
The costs involved can be seen in government’s unfunded healthcare liabilities, resulting from its obligation to pay for the post-retirement healthcare of civil servants and their dependents. Based on the latest actuarial valuation in April 2020, government’s estimated liability for this specific coverage was $2.3 billion.
Like most countries, Cayman does not set aside funds to meet future healthcare obligations but meets them on a ‘pay-as-you-go’ basis. For 2021, government has budgeted $30.8 million for that purpose.