The Way Forward: A Look at Liberalization of LDC Health Insurance Markets
| Author | Karl T. Muth |
| Date | 01 March 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12210 |
| Published date | 01 March 2017 |
The Way Forward: A Look at Liberalization of
LDC Health Insurance Markets
Karl T. Muth
Northwestern University
Abstract
This article explores the historical and contemporary problem of health care provision with a focus on the least developed
countries (LDCs) and heavily indebted poor countries (HIPCs). The paper concludes that, while there may be advantages to
state-run insurance systems for vulnerable populations (e.g. the indigent or the widowed elderly), there is likely a space for
fee-for-service and pay-per-premium health care to develop alongside other familiar western institutions, like retail banking
and telecommunications services. This discussion of financial evolution concludes with a comparison to postwar Japan and
other contexts in which complex, locally unprecedented payment systems have been quick to take root and have been very
successful.
There is both a historical and contemporary problem of
health care provision in the least developed countries (LDCs)
and heavily indebted poor countries (HIPCs). The problem is
not intractable and huge improvements have been made to
both the accessibility and quality of care over the past few
decades, even in remote areas.
However, there has not been a transition to local provid-
ers in most cases. Many areas with substantial health care
provision issues do not generate the type or quantity of
workers needed to solve their own problems. Areas like
Northeastern Congo, Northern Uganda, and Eastern Rwanda
are well-known sites for tropical infectious disease. Still,
none of these areas has a credible first-tier university or
research center working on these issues. The majority of
complex surgical procedures performed in sub-Saharan
Africa are not performed by local doctors. Even today, the
system for medical services provided in LDCs is heavily sub-
sidized which generates erroneous impressions and expecta-
tions throughout the developing world about the cost of
health care.
1
This article briefly explores, and advocates for, a liberaliza-
tion of health care and a move to a private-payer system
2
in
the majority of markets, including LDCs. The concept of using
crop insurance as an educational tool and initial approach to
improve the availability of market-rate private health insur-
ance in LDCs is currently being tested in several markets and
is the focus of this article.
First, a survey of developed countries explores the effects
of both liberal and state-driven health care provision. Then,
the three main policy options for LDCs are explored: public,
private, and ‘hybrid’schemes. Next, the World Health Orga-
nization’s 2010 report and stated goal of universal coverage
are examined. Finally, the study assesses the incentive argu-
ments in favor of private, state, or quasi-state control of
health care systems.
Historical perspective: lessons from developed
countries
In most developed countries, the state plays a central role
in the provision of health care. This occurs through three
main mechanisms: creating infrastructure, subsidizing ser-
vices, and paying for services. For the purpose of this article,
other state activities that may have ancillary beneficial
effects on the health care system are not considered (e.g.
offering incentives that encourage top students to study
medicine rather than other disciplines). The following sec-
tions provide historical accounts of the reliance on each of
these mechanisms in high-income countries.
Post-war Japan
In Japan, a substantial divide developed between major cit-
ies (e.g. Tokyo), which enjoyed a high quality of health care,
and outlying rural areas, where First World War quality
health care was the norm even in a post-Second World-war
world. General MacArthur’s plan during the American occu-
pation had been one of modernization through urbanization
and building projects, which exacerbated the differences
between urban and rural Japan. By 1955, more than 80 per
cent of Japan’s GDP was estimated to come from urban or
near-urban areas.
3
By 1960, it was clear that tax revenue
from urban areas would need to cross-subsidize a national
health care system of uniform quality.
During the Yoshida doctrine years (i.e. end of the Second
World War until 1954), Japan’s focus on ‘building prosperity’
led to four of Asia’s most advanced hospitals being built in
the greater Tokyo area. Care at these hospitals was initially
heavily subsidized during the American occupation –an
arrangement that gradually evolved into today’s‘thirty per
cent’system, where Japanese citizens pay 30 per cent of
Global Policy (2017) 8:Suppl.2 doi: 10.1111/1758-5899.12210 ©2017 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 8 . Supplement 2 . March 2017 117
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