Nova workboard

a blog from young economists at Nova SBE

Is it necessary to have private insurance in a welfare state like Norway?

Norway is on the second place of the OECD countries when it comes to healthcare expenditures (2011). Their position can almost alone be explained by public spending. While other OECD countries have larger private expenditures, for example the US, Norway has a very low level of private healthcare spending. When only looking at public expenditures, Norway is on top of the OECD data. An easy explanation for this is Norway’s huge reserves built up from exploiting oil.

 

In recent years though, the private part of the health expenditure has increased. The number of people with private health insurance has for the past ten years grown from 30.000 to more than 360.000. There is an ongoing debate about the effect of private health insurance on the quality of the supply of health care. Insurance companies argue that the problem is not black and white. An efficient public health system does not mean that private health insurance is unnecessary, and the need for private health insurance does not mean that the public healthcare system is poor. Higher competition will increase the efficiency of healthcare supply. The public system will benefit both qualitative, economically and operationally from being challenged by other agents trying to solve the puzzle smarter and more efficiently.

 

The arguments against private health insurance are based on the fear of increased inequality. A central pillar of the Norwegian welfare state is that the distribution of healthcare assistance should be decided by medical needs and not by people’s ability to pay. It is this principle that is at stake. Private health insurances will divide the healthcare system into two. Those with higher income can buy their way to quicker treatment, while others have to wait in long queues.

 

The Norwegian elections in September saw a victory for the right-wing parties. The Conservative Party which got the most votes has always had a health policy of privatizing the health sector. Their goal is to do this completely without private health insurance. The party wants to socialize funding and privatize the supply of health care. This is done by directly covering the bill of treatments through the patients local health trust. There is a direct settlement between the supplier and the government at a fixed price. From the year 2016 they want to finance all private health production. In that way the market for private health insurance will disappear by itself. The reason behind their policy is the arguments mentioned regarding a divided health system

 

What will be the effects if the new government manages to implement their policy and eliminates private health insurance? Scholars argue that one of the drivers behind the growing healthcare expenditures over the last ten years is easier access to health insurance. If every Norwegian can get healthcare almost for free, we could see expenditures increasing even more, instead of flattening like the trend since 2009. Another question is if cheaper healthcare would make people consume more and even too much of healthcare seen from a social point of view.

 

Instead of increasing the private side of healthcare supply through directly paying the treatment bill, maybe the solution for eliminating the health queues would be to improve the public side of supply. Let the market for private insurance live on so that those who wants to pay their way to a quicker treatment through private hospitals are able to, as long as it’s not on the expense of the quality of the public services.

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Author: studentnovasbe

Master student in Nova Sbe

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