Issues and concerns at the intersection of health and finance

Medical finance worries that ring eternal

In the opening line of American economist and public health expert Selma J. Mushkin’s paper titled “Towards a definition of health economics,” she pointed out two factors shaping the health issue: technological progress and increases in life expectancy. That was in 1958, a few years after the first wave of mass immunizations in the United States using Jonas Salk’s polio vaccine had raised hopes that mankind could overcome diseases that had plagued it for thousands of years. Polio had been among the most-feared scourges for children for two centuries before the introduction of the vaccine.

Over the six decades since health economics became a specialization in the economic sciences, the story of human health has been shaped and reshaped continually. Health, and with it, life, has been boosted by improved or entirely new treatments based on medical scientific discoveries. The very map of mortal existence has been redrawn by increasing life expectancies, which in turn have been driven by countless improvements in the realms (naming but some) of vaccinations and hygiene, food safety and food security, social safety, nutrition and wellness, the protection of human rights, and reduction of political violence.

As of 2018, increased life expectancy and constant improvements in medical technology have not only been with us throughout the living memory of most people, they are reaching levels that have no historical precedent outside of fairytales and myths. But these two blessings of the Anthropocene also are the drivers of countless personal worries as well as individual and systemic challenges. We now worry about diseases that in the past had hardly a chance to erupt because lives tended to be terminated early by a million other factors. And as our medical care technology is achieving new heights in its ability to treat diseases, societies face increasing challenges to align life expectancy and healthcare with finance and economics.

State-designed pension and care solutions that worked in the 19th century—when the interval between the end of a person’s work life and the end (largely) of their physical life was commonly measured in weeks and months—are becoming increasingly impracticable at a time when such intervals are on average counted in years and decades. Safety nets in medical care—which were based on compulsory mass insurance and worked when a surgical procedure, albeit primitive by today’s standards, cost hundreds of dollars or a few thousand—are becoming overstretched, now that both common chronic diseases like cancer and uncommon neuromuscular disorders require treatments that reach from thousands of dollar per month for advanced oncology drugs to up to a million dollars per year for the treatment of an infant with spinal muscular atrophy.

In the context of the Lebanese economy—keeping in mind that, despite the national love for economic complaints, Lebanon is in the higher middle income bracket, in the upper 50 percent of nations by GDP—the issue is the same as in many upper and middle income societies: how to finance treatments that are available in the country but have become hardly affordable for individuals, families, or the state. As Walid Ammar, the director general of the Ministry of Public Health (MoPH) sees it, the problem begins with expensive drugs. “We now have an increasing number of very expensive drugs that patients sometimes have to take for the rest of their lives. What this means for many countries is that [public healthcare officials] have to look at the [financial] resources and have to decide on the basis of what is available how they can offer services that are to the greatest benefit of the population,” Ammar says.

Complex/competing interests

Besides comprising public health officials who have to manage more or less scarce resources to the best utility for the largest number of citizens, the reality for any health system operating under scarcity includes patients in need of medical care as stakeholders with particular and possibly extreme private interests. People diagnosed with a serious disease in particular, understandably tend to be desperate enough to grasp at every promise of a new and untested cure, regardless of the treatment’s cost or proven effectiveness.

Other stakeholders in the complex health equation are involved in influencing the patients’ choices—in the form of physicians, who in turn are influenced by commercial interest holders, such as pharmaceutical manufacturers. In this setting, friction between public and private interests can hardly be avoided, in Lebanon just as anywhere else.   

But there are a few additional peculiarities to be observed in Lebanon’s health system, beginning with political interference. “New drugs often do not come with enough proof [to be accepted by the MoPH medical committee of highly qualified professors] while you often have evidence showing that cheaper and well tested medications generate improvements,” Ammar says. “This is a major problem since politicians are telling their constituents, ‘Yes, you have the right to get this medicine,’ but actually, no, they don’t have a right to have this medicine financed by the society. People think they have a right, and then are not happy if they are told that they can’t get a medicine from the MoPH. On the other hand, also, the government does not allocate enough [of a] budget to the MoPH.”

Moreover, under Lebanon’s entrenched dynamic of political clientelism between politicians and the public, a patient for whom their physician has prescribed a very expensive drug will often go to the minister. The minister then may sign an order to purchase the drug and in doing so contribute to the depletion of MoPH resources. “Every Lebanese can find a way to reach a minister. This then creates [a deficit] because I do not have the money to cover the others if I start giving very expensive medication to some people,” Ammar says. “It is not easy to explain to the population that we have limited resources and thus can provide them with good care but not necessarily give the latest state-of-the art medication to everybody.”

As all these factors play out in Lebanon—sometimes sparking arguments over which drugs a patient needs and which drugs their commercial insurer must cover if they have insurance, or whether the MoPH has to provide for needy Lebanese as the health payer of last resort—the local situation is driven to new heights by something that could be defined as inverted favoritism.   

According to Ammar, the MoPH has done its best to develop equal and decentralized access to the public health system, ensuring that the ministry has at least one office in every district, where citizens can obtain MoPH approval if they are eligible for coverage. This then does away with the need for travel or to have forms signed by a whole echelon of administrative entities.

“When we made the system transparent and guaranteed that everybody was equal under our rules—which mean rules of coverage of 85 percent and 15 percent co-payment—we thought that people would not need intermediaries,” Ammar says. “They would not need to knock on the door of the minister to get approval. But they still seek the intermediation by the political figure, because the minister tells them, ‘If you come to my office, I give you 100 percent coverage, not just 85 percent as under the rules.’ Because we were able to institutionalize and computerize everything and have a system where everybody is equal, so that people do not need anyone’s favor to get what is their right, now people seek to get something extra.”

Private sector worries and coping strategies

It seems that, short of a reprogramming of the Lebanese cultural genome, nothing will deter people from playing games of favoritism and pursuing clientelism as a national sport, and the efficiency of the Lebanese health system, despite its remarkable gains in the recent past, does not look set to reach optimum levels—which is problematic, as healthcare costs are increasing at a faster rate than GDP growth.

Private sector health management stakeholder Joe Abou-Chacra, general manager of third-party administrator (TPA) GlobeMed Lebanon, confirms that the technology and medical skills available in Lebanon are following the innovation cycle that prevails for medical machinery and advanced procedures in developed economies and top healthcare markets, but the cost is becoming very high.

To illustrate the blown-up medical costs, he tells Executive that the price for closed-heart surgery today can be as high as $60,000 to $70,000, compared to open-heart procedures of five years ago that would cost $20,000. According to Abou-Chacra and other health finance experts, the cost for a box of certain advanced cancer drugs has increased in the past few years into the range of $5,000 to $11,000 per month, five to 10 times more in monthly expenditure than the less beneficial radiation treatments cost a few years earlier.

The extreme rise in funding needs associated with common medical risks such as cancer and heart disease necessarily leads to responses from institutions and companies dealing with the management and finance of healthcare. Over the past years, insurance companies—the prime commercial stakeholders in the management of health risks—have increasingly relied on TPA companies for cost-optimization and the processing of payments to healthcare providers such as hospitals.

Issue of the hour

In the ongoing confluence of new medical treatments and increasing cost pressures, guaranteed renewability (GR) might emerge as a key issue influencing the future direction of insurance behavior. The industry, represented by the Association of Insurance Companies Lebanon (ACAL), has welcomed the recent introduction of GR and focuses on the positive aspects of the new regime. “[GR] is the proper response to the worries of our insured, especially persons of old age,” ACAL president Max Zaccar tells Executive. “It has also the advantage of enhancing the loyalty of the insured, since a client, if she or he decides to leave the current provider, will have to submit to new thorough underwriting procedures and health assessments.”  He notes, “All insurance companies are in a position to provide [policies with GR]. It is just a question of premium calculation.”

The calculation of new premiums, however, could translate into changes that will, in the view of GlobeMed’s Abou-Chacra, be felt by the insured population. “For Lebanese society, there is a good side and a bad side to guaranteed renewability. On the one good side, every member of society will have guaranteed renewability and will not be told that there is an exclusion here or that they are not covered there. On the bad side, to have medical coverage will cost the insured more than they used to pay … So what will be good on the side of coverage, will not be easy on the side of prices.”

While the new GR rules, introduced in April, add to the complex scenarios of uncertainty on the horizon of financial conditions in the Lebanese health system, the stakeholders financing the system are turning to mechanisms that they expect to help them cope with the new GR reality. Insurance companies positioned away from the budget end of the market, such as Libano-Suisse, which has been providing GR to its policyholders for over 20 years, seek to affirm their competitive edge. At a large product launch event in April, Libano-Suisse General Manager Lucien Letayf Jr. told a crowd of insurance intermediaries and media that “we invented GR in Lebanon.” The company introduced a package of “exclusive privileges” called Health Plus for its insured, with Class A policies. But in addition to betting on reputation enhancement by offering their insured free value-added benefits and a few feel-good gimmicks, the forward thinking insurers are also seeking to enhance the health equation by expanding their focuses on wellness and prevention.

The strategy is to promote wellness under the rationale that any improvement in clients’ pursuit of wellness will lower the need for medical treatments and hospital visits, and be beneficial for health insurance costs. Efforts to increase the commitment to wellness and prevention strategies among insurance clients have been going on for a few years, but awareness appears to spread unevenly. “I think that regarding wellness and prevention, the market growth is slower than the growth in deployment of machine surgery and conventional medical treatments, and it can take a lot of time to reach older people and make them change their behavior,” says Abou-Chacra of TPA GlobeMed, in which Libano-Suisse is a major shareholder. “Wellness and prevention needs more marketing and awareness building among the Lebanese people. However, I am confident that we can market wellness and prevention quickly and very well among the younger generation.”

Stronger impulses to reposition health insurance as the primary private sector financial constituent in the national health system of Lebanon could arrive in the foreseeable future, if Insurance Commissioner Nadine Habbal—by now “interim” Insurance Control Commission head only in name—follows through on her plans to introduce rules mandating risk-based capitals in the insurance sector and to look toward a compulsory health insurance and pension plan program to power up the collective financial body of the population.

Another, non-financial, issue that in Executive’s experience plagues all stakeholders in the diverse Lebanese health system is communication with the public—and sometimes even the effective projection of one united voice when interacting with the state.   

The MoPH, for example, is perceived very differently by people who rely on its services and those who are only exposed to politically driven media rants that badmouth the public health system. “One of our weaknesses is still about how to communicate with the community,” Ammar acknowledges. “Politicians monopolize the media and thus have a stronghold on how the health issue is perceived. People who are not in need are not really informed. If you ask people what opinion they have of the MoPH and if they benefited from the ministry, you get very positive feedback—if they have received services. If they did not, you get a negative feedback because they are influenced by the media.”

Misperceptions, in this case of the Lebanese health system as backward, tend to get dangerously entrenched when they are allowed to grow unchecked. The improvement of health provisions and affirmations of the resilience of Lebanon’s health system in the past few years, and the shift in the Lebanese people’s international perception as ready to help the needy are valuable gains that it would be a shame to squander.

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.