Make health insurance affordable

Economics is a social science, but it may not be that simple to many. A friend always tells me that there is a lot of money to be made in teaching the principles of economics ,even to the “most intelligent”

A few days ago, Madison Insurance directed attending doctors to only prescribe generic medicines to their customers and all dispensing chemists and pharmacies were also advised to only dispense generic medication. This has ruffled feathers of doctors who have combatively termed the directive by the insurer as trying to predetermine clinical decisions which is strictly within their domain and have vowed to defy the order.

The doctors are right that the discretion on which type of drug to prescribe patients lies with them and their obligation is to the patient and not the insurer.

What seemed to have happened is terrible communication from the insurer when announcing their position. The insurer seem to essentially be communicating that they will no longer be covering prescription medicine costs for branded drugs but generic drugs only, not forcing doctors hands to only prescribe generic drugs.

Because in the communication the insurer is also asking doctors to help sensitise patients about the effectiveness of generic drugs.

From an economic perspective, the insurer is simply looking at a position where the patient is making an informed choice that is cost effective to both parties, the patient and insurer. In many countries, one of the key contributor to high drug spending by patients is physicians prescribing choices when comparable alternatives are available at different costs.

This has thus informed private insurers all over the world to design insurance benefits by deciding what prices patients pay out-of-pocket for drugs and what the insurance covers.

So this kind of move from Madison Insurance is not something wild, they just need to communicate effectively about the policy position they are taking.

Where doctors are wrong is the argument that the insurer not covering branded drugs will compromise quality of healthcare. This argument has been given by representatives of the various medical professional bodies quoted in the media. This is a very fallacious argument to mislead the public, though not surprising coming from occupational licensing professional bodies - they tend to inherently pursue industry capture.

In the US which has the highest standards of quality, safety and efficacy profiles of drugs, it is actually dominated by generic drugs capturing 80 percent of the market - 80 percent of more than three billion new and refilled prescriptions were filled by generic drugs - and the US Government Accountability Office estimates that generic drugs has saved the US healthcare system more than $1 trillion in just an 11-year period. In fact, the reason why per capita prescription drug spending in the United States exceeds that in all other countries is because of branded drug prices which drives a large portion of that high spending.

So the truth is that generic competition actually reduces cost on drugs and its big ripple effect to healthcare systems is that since private insurers typically price health services on price cost, a drop in cost of drugs would lower cost of private health insurance making health covers fairly affordable.For any economy, the more you crowd-in people in various health insurance covers the easier you make health care accessible and affordable thus improving the general quality of healthcare.

So its misleading for doctors to be against generic competition but at the same time push for affordable healthcare. Doctors are aware that only three percent of Kenyans have medical cover other than NHIF and an estimated one million Kenyans are driven into poverty every year due to high medical costs.

Therefore, it’s imperative to make health insurance affordable which also means the spending cost on prescription drugs have to come down, and generic drugs offers that alternative greatly.