Nova workboard

a blog from young economists at Nova SBE

The Portuguese Health Insurance, accessible to everyone and truly beneficial?

There are several types of health insurance systems being applied worldwide, and its differences are important to be known. Those can be found in the article below entitled “Health Systems Classification” by my colleague Jorge Moreira dos Santos. Portugal, as the same article describes, uses the so called National Health Service (NHS) which consists on a tax-based funding and public provision with relationships between agents being determined by the state. This basically means most people working discount to be able to ask for the health care treatment for free or at a reduced price, but then there are some others that privately contract it or benefit from some subsystems (some public, some private) depending on their professional work.

But is this accessible to everyone? How? Well, there are some differences on what it covers and how it is accessible. Let me take the students example, someone with no income. If I am Portuguese, the most common situation is to be covered by my parent’s discounts and whenever needed be able to take health care for free. If I am an international student from within the European Union, the health care system and plan from my home country make my access to the Portuguese NHS easier as according to the European Union rules the right is extended. Finally, the third option is if I am an international student from outside the European Union but studying in Portugal. In this case I am covered by the NHS with free medicines and doctor appointments. To have more than those basics, a contract should be done (usually Universities help with those). Overall, the system covers quite well all the possible situations in which students can be, but does that mean it is efficient and truly beneficial?

Taking my personal experience from the system, I cannot say I am unsatisfied. I am not a frequent user of the NHS but due to some breathing difficulties that sometimes appear when the season changes, I have felt already the need of benefit from it and apart from the time spent taking the treatments I cannot complain, for me it has been working quite well. Moreover, last week for instance I had a problem which cared for medical attention and two days after I was well again.

To conclude my brief comment, independently from your situation, the Portuguese NHS is quite easily accessible for all and the results derived from it – taking my own experience as example, are good and truly beneficial. Have you also the same idea of easy accessibility and good treatment? What has been your experience?


José Miguel Filipe
#1586 Masters in Management


Affordable Care Act: A necessary reform

The healthcare debate in the United States is an old one that extends for more than a century. The greatest changes came in the Johnson administration when Medicare and Medicaid were instituted, respectively, insurance for seniors paid for by a federal employment tax and a program of insurance for the poor managed together by the federal government and the individual states.

In 2009, according to World Bank statistics [1], the U.S. had the highest healthcare costs relative to the size of the economy in the world, despite an estimated 15.6% of its population lacking insurance. Given this scenario a healthcare reform was badly needed.

The law is quite complex, as are the problems it intends to tackle, but it can be summed up as way to expand the insurance market to those that don’t have access to it and a way to control healthcare costs.

It expands coverage by requiring insurance companies to cover people they would otherwise reject (such as those with preexisting conditions) and requiring them to offer similar premiums to similar individuals based on a community rating. Individuals will acquire their insurance through health insurance exchanges and there is an individual mandate that requires individuals to buy health insurance or pay a fine. This individual mandate is the source of much of the controversy surrounding the law, however it is absolutely necessary otherwise there would be a risk of premiums going through the roof due to adverse selection, that is, only risky and sick applicants would enroll since they cannot be rejected and healthy individuals would not enter the market since they would feel no need to buy health insurance.

In addition to this changes the law expands Medicaid coverage and includes subsides to those with income below a certain threshold in order for them to be able to afford health insurance in the new exchange system. To pay for this changes, as well as to reduce healthcare costs, some new taxes will be levied, for instance, a tax on so-called “Cadillac health plans” which consists on plans that have a large coverage with small or no co-payment by the patient and which lead to an over demand for healthcare.

Regulation of the insurance industry has also been tightened, for instance, insurance policies need to have a minimum quality standard and companies will have to spend 80% to 85% of their premium collection on healthcare expenditure.

Taken as a whole this reform will increase insurance coverage in the population and, according to estimates by the Congressional Budget Office, will increase the sustainability of government’s expenditure in the health sector.





Jorge Santos nº 616

Obamacare: missed opportunities

In this post, I suggest some ways of making health insurance more affordable and accessible with less, rather than more, government interference in the market.

It has become commonplace to use the case of the United States as evidence that leaving health care to the workings of the free market results in worse outcomes than if it provided by governments, as is usually the case in Europe.

Unfortunately, the health insurance market in the US can hardly be described as free, even before Obamacare. It has long become little more than a playground for politicians to push their pet social goals.

One of the reasons why health insurance tends to be so expensive is that government regulation forces insurers to include some benefits in their plans that buyers don’t want, don’t need, and are not even insurance against any discernible risk in the first place. A case in point is that, under Obamacare, everyone must buy health insurance that includes maternity care benefits. Even men.

These mandated benefits are not new to Obamacare, but they differ widely among states. Instead of mandating additional benefits, the federal government should allow people to buy insurance from outside their state. This would those living in states where politicians see themselves as social engineers to “escape the asylum” and get affordable health insurance that only covers actual risks to themselves, and not socialized care to others.

Another way of making insurance more accessible would be to shift away from employer-provided health plans to individually purchased insurance. Why exactly anyone thought that employer-provided insurance was a good idea in the first place beats me, but the problems are obvious: when you lose your job, you lose your health insurance. Even if you don’t lose your job, you will not want to change jobs if you already have a serious health condition, because it may not be covered by the new health plan.

Unsurprisingly, this problem was also created by the government. Employer-provided health benefits are excluded from taxation, which means that if you want health insurance, it is cheaper to ask your company to provide it (in exchange for a lower salary) than it is to buy it yourself. In fact, this is the biggest tax deduction in the US. Not only does it present an enormous cost to the treasury, it also creates huge distortions in the health insurance and labor market.

Since it is such a bad policy, it should come as no surprise that not only will it be maintained by Obamacare, it is being expanded! From 2015, companies with more than 50 employees will be forced to buy insurance for them.

Instead of fixing what was broken with health insurance in the US, Obamacare has managed to take every bad policy in the book and make it worse.

Diogo Pereira

Obamacare: redefining the meaning of insurance

A major provision of the U.S. Affordable Care Act is scheduled to come into force in January 2014: from this date, health insurers will no longer be permitted to discriminate on the basis of health status. This means that individuals with pre-existing conditions cannot be denied coverage, the pre-existing condition itself must be covered and the insurer cannot charge a higher premium because of it.

The whole idea of insurance is based on the transfer of risk. A healthy person signs up for health insurance because he or she faces the risk of developing a condition requiring expensive medical treatment. But what risk is being transferred when a cancer patient signs up for insurance? That he will require expensive treatment is by then a certainty, and the prohibition on charging higher premiums ensures that he will always in effect be receiving subsidized care.

This provision, by itself, would create a system in which no one would get insurance until they developed a serious problem. So the government, ever so eager to “solve” problems (of its own creation), decided to require everyone to purchase health insurance (the individual mandate provision).

Remarkably, while the individual mandate is by far the most unpopular provision in the ACA, the provision that guarantees coverage to people with pre-existing conditions is one of the most popular: even Republican legislators have steered clear of criticizing it.

In any case, the penalty for not holding insurance is so low that many young, healthy adults may prefer paying it to purchasing insurance they don’t need anyway. The end result is a classic case of adverse selection, where only sick old people buy insurance.

Obamacare is socialized medicine through the back door: by introducing even more senseless regulation in the already over-regulated health insurance market, it puts the whole system on a near-certain road to complete failure. But fear not: when that finally happens, the government will be there, as always, to solve the problem.

Diogo Pereira

Aren’t we underestimating palliative care?

It is true that the developments of health care, treatments, drugs and even cures have been increasing considerably with time, but that does not apply to every disease. Unfortunately there are still some chronicle diseases that urgently need a cure, but that specialists and technologies were not able to discover yet. For example, in Portugal, cancer already kills 24 thousand people, and according to World Health Organization, this number is about to increase by 34% until 2030, while in worldwide terms the number will reach the 13 million people.

Going a little bit deeper, in Portugal the number of cancer cases below 65 years old will most likely increase by 12% hence in older people the growth is about to reach the 40% mark.

The truth is that we live in an ageing population. In Portugal people over 65 represent almost 25% of the total population and this number is expected to increase to near 35% in 2050. In addition, the ageing index has been growing exponentially, to near 127%, which means that people over 65 are more than double of the ones until 14 years, and that should be a reason to be worried. To be worried first all because, as the Grossman Model predicts, the more older we are more healthcare we demand, and continuing at this pace, in a near future we will most likely not have enough active people to satisfy that demand.


Nevertheless, if we join all the dots we get to the point I want to highlight. The number of chronicle diseases it is increasing, and science hasn’t found a solution for that yet. At the same time, population is getting older, which obviously accelerates the growth of the number of these diseases. So the question that we should rise is: if science cannot do anything for these patients, what can we do that is going to increase their utility, their well being, that at least gives them dignity and release them from pain in the phase that they are heading to death?

It is curious to know that according to INE 51,2% of people would prefer to die at home, but incredibly, 61,7% of the Portuguese actually end up dying at a hospital. At the end of the day, only 10 to 12% of the Portuguese have access to Palliative care, when about 60% need it. Palliative Care are, according to World Health Organization, “Palliative care is an approach that improves the quality of life of patients and their families facing the problem associated with life-threatening illness, through the prevention and relief of suffering by means of early identification and impeccable assessment and treatment of pain and other problems, physical, psychosocial and spiritual”. Again, in Portugal there is only 1 to 1,5 domestic support services of palliative cares for 100.000 habitants and 80 to 100 beds per million of habitants (, which is incredibly low compared to the demand that we are facing.

In a time that population is changing and the healthcare necessities are changing if it, shouldn’t we be changing gears and shifting to solutions that can actually increase the utility, meaning will being, of these people? If that was not enough, one of the reasons why people do not have access to palliative care is because most of them do not have access to private health insurance, benefiting only from the public insurance offered by SNS which does not offer this type of care, which ends up being even more surprising considering the fact that palliative care is not as expensive as people in general think, especially when compared with the recurring attempts for saving people that unfortunately cannot be saved, through chemotherapy and other procedures. The question remains: aren’t we underestimating the palliative care?

Tomás Loureiro


Health in Portugal… What is the plan?

Improving the health of the population is the defining goal of any health system. To achieve this positive allocation, there is a wide spectrum of tools that can be managed– by contraction or expansion policies – under the specific needs of each population demand for health care.

Through the study of heath indicators it is possible to conclude which measures should be implemented in the future to rectify previously ineffective policies and, at the same time, to reinforce those that maintain a good perspective in the long-term.

In Portugal, the indicators give us some important details about the actual country heath status:  there is an increase in life expectancy at birth, while, at the same time, we assist a decrease in peritoneal and infant mortality rates; Portugal has the lowest percentage of population who assessed his health as “good” in all Europe; women had lower self-assessed health status than men and there is high parameters of inequality in self-assessed health status by level of education. When we address the main risk factors, Portugal registers even worst results: nearly 20% of Portuguese aged 18 and over reported smoking on a daily basis; prevalence of obesity and, despite the small decrease from 2011 to 2012, alcohol-related motor vehicle accidents seem to persist.

An inversion of the actual health conjuncture urges. The high incidence of risk conducts (smoking, incorrect nutrition habits, mediocre level of physical activity, alcohol consumption and driving habits), the actual male–female gap among different indicators and some extreme inequality situations emerge, making urgent the adoption of new policies.

Primarily, it is necessary the development of an integrated strategy to address the male-female gap in health status, by enhancing the regulatory and organizational environment, and promote the exchange of information about gender inequalities. Investing in upstream and gender-responsive health promotion activities can also help to correct some associated risk factors, conducting to the integration of determinants of health into public health, health promotion and disease prevention programmes.

The promotion of health literacy, positive nutrition, physical activity and other health and social strategies focused on the young is also fundamental and must be paired with campaigns that emphasise the danger of the main risk habits (smoking, alcohol and obesity).

Despite the good estimates among child and peritoneal mortality rates, it is also necessary the implementation of successful health policies in addressing the most significant causes of mortality and morbidity, mostly by continuity policies that extend the already verified goods results to the future generations.

Finally, the national policies should lead to the development of leadership and to the investment in capacity building for incorporating health in all policies and, in a second effect, strengthen mechanisms for inter-sectoral action focused on health gains.

The future of our health system belongs to the importance and the sense of commitment that we will attribute to it. A responsible and detailed study of the actual Portuguese heath standards is the first step to better understand the measures that should be implemented. If, for any reason, something deviates from the supposed North, the evolution of the indicators will reflect the adopted policies.

Guilherme GG

The German Health Insurance System

Currently, there is a dual health insurance system in Germany, comprising both a public and a private insurance. The insurants can choose to join a public insurance company (of which there are around 150 and which offer most medical goods and services) and – if they want to – insure special issues like teeth replacement with an additional (private) insurance. Alternatively, they can also handle their complete health insurance in the private sector.

Before discussing the system, I will shortly present some more facts about the system:

Starting in 2009, the government aimed to increase the competition between public insurance companies in order to slow down the increase of health expenditures. Therefore, a central authority called ‘Gesundheitsfonds’ was established which collects the insurance premiums from the insurants. Hence, insurants do not pay their contributions to their insurance company. Rather, the central authority distributes all premiums to the insurance companies in a way to equalize differences due to health characteristics of the insurants. It is to be noted that one common premium rate (currently 15,5% of income) was decided upon for all insurance companies. If an insurance company needs more money, it has to demand an additional premium. On the other hand (as is the case nowadays), companies can also reimburse parts of the premiums if they build up reserves. Thus, the competition between the insurance companies was intended to increase (as could be noticed by an increased number of mergers in this sector).

Unlike the public insurance system, private insurance companies demand premiums independent of the insurants’ income. Rather, premiums depend on a couple of factors like gender, health status, age at entry. As this system is not based on solidarity in the context of an intergenerational contract, parts of the premiums are dedicated to build up provisions for one’s retirement (where less income is generated by the insurants but the demand for health care increases).

In an international context, the German system is not unique. Rather, similar systems exist in the Netherlands, Belgium and Israel. However, this system has triggered a lot of critique centering around the development of a two-class society. Critics claim rich people get a preferred treatment (e.g. shorter waiting-time) and elude the general principle of solidarity with socially disadvantaged people on which the German welfare system usually is based. Questions of fairness and societal solidarity have been raised. Supporters of the private system, however, point out that for many years it was only the private system that worked well from a financial perspective and did not run up deficits.

From a technical perspective, there is a discussion about the appropriateness of the risk-adjustment schemes to distribute insurance premiums in the public system.


Sources:  (German Ministry of Health and Health Care)


analysis on the Honduran health system

Honduras is a latinamerican country, in Central America, which is unfortenately also one of the poorest and countries in the continent, despite a growing latinamerican union in past decade full of opportunities for growth in every sector.

One of the basic and probably most important matters (so is education) to have in a prosperous country, is having a good health system, a public one first of all, to ensure a good way of life to a population who can then start working for the welfare of their nation. 

 The honduran health system  is divided in a large public sector and a small private one. In the first one, there are two main institutions who are responsible for the public health services: the health secretariat (la Secretaria de Salud-SS) and the Honduran Insttute of Social Security (IHSS). The first one is the public organism in charge of covering the health necessities of the whole honduran people, with the government funds and the external and internal help. The second one, the IHSS, is the oorganism who covers the honduran workers in the legal economic activities, financed by the subscriptions of the workers and their chiefs. From an eonomic point of view, the system is the ame as in all the countrieswith a social security system, but what is frightening is to see that despite the fact that its a public service the subscriptions paid by the employers are of 5% of the wage, the workforce subscirbes only to 2.5% of their wage, and  the government brings barely 0.5% to finance the IHSS. On the other hand, the SS gets 76% fom the National  Treasure, some from donations, and 11% from external credits. This anlysis on the origin of the funds, shows a to big dependance from external help, and therefore increasing debt. And since the military push that occured in june 2009 in the country, the International help and credits have been stopped, leaving the SS with major financing problems to cover the population, because the governemnt decided  to make  some  cuts in their contribution to the health sector,because of the political crisis. Even do I assume that economics of health is a difficult science when it comes to ethic, it seems to me that Honduras should not call the health matter a public good, because if they really mean it, the health policies would prevail over the political & economic crisis the world knows since 2009. The expenses  in Health care in the GDP were 5.7% in 2008, much like most centralamerican countries. Economics of Health tell us that  the  more a population is insured and maybe even with co-insurance, people have tendency to increase their health expenses. In Honduras, poverty affects aproximatevily 64%, with 55.5% living in rural areas, which explains a lot why only 18% of the honduran people are covered by the Social Security; it’s not even half of the working population. A study made in 2008 shows  us  that the health comsumption (if it is viewed as a consumption good or service) was of 227$ per capita. However the conclusion of higher medecine prices over the time, proved in Economics of  Healths, are true but not because of a high number of users (as the figures show us), but more because of a shortage of supply of medecines, who are mostly imported from american farmaceutical firms, that only the people with private insurance (2.9%) can easily afford. 

Also one of the main issues in the huge lack of health care being provided to the  population, is that more than half the population live of agricuture or live in the rural  areas, whereas most of the public hospitals  nad clinics are in the two main honduran cities, and in some of the provincial capitals. I understand why Grossman integrates  the distance variable in  his model. These farmers don’t have the necessary means  of transport to go to  the cities, and if they do it is tirying, they have no insurance  for mosr of them, so they will only go if it is  urgent. An astonishing data is that in Honduras, in 2006-2008, there were a little more than 20 000 persons working in the public sector, in which there was 2 794 doctors and 1 242 nurses  working, in a population of neraly 8 million people, which leaves the country with a ratio of about 1 doctor for every 1000 persons, and 1.1 profesional nurses for 1000 persons too. 

There are many more reasons that explain the incompetent system of the honduran  health care, such as  the only union of doctors in the country who only ask for higher wages, and follow personal and political interests. By doing so, they spend most of the year on strikes, paralyzing the public hospitals (a little more than 30 in the country) and forcing the people to go to the private clinics and hospitals (about 60 in the country) where they will pay much more, or simply  won’t be cured or treated because of no insurance. 

In addition  to  all this, it is way too bureaucratic, and the ministers of health and everything related to it are just some people put their who know nothing about the health crisis, or optimizing the ressources, finding new funds, implementing active and more social policies; because they are some “friends” of the president and  deputees, and congressmen. I believe Economics of health might help me to understand what is the optimum to achieve in a determined context, but applying is much harder because politics and that idiosyncracy particular to politics who live n another planet.

Jean-Marc David


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On the debate over health care in America

The health care system in the United States of America has long been cause for debate. In recent months though, this discussion has had particular significance because of the U.S. Supreme Court’s ruling over the Healthcare Bill passed by the Obama administration and for being an unavoidable and even determining topic in the upcoming presidential election.

Let us face the facts: total per capita expenditure on health has steadily increased in the U.S.A. since (at least) the sixties. Not only that, the United States have devoted an ever-higher share of GDP to health – almost 18% of GDP, up from 5% of GDP in 1960 – perhaps explaining part of the health sector’s increasing public opinion scrutiny.

Though in tune with the EU-15 trend regarding the same subjects, the U.S.A. differ in the degree of public intervention in the health sector – only about 6% of all health expenditure originates from the Government, while approximately 35% is financed by private insurance companies and 43% by social security funds. This represents fundamental differences to the Europeans’ health systems, that better spread the risk associated with illness across society, and many advocate a more socialist system would in fact benefit the country.

I would like now to present a particular case of Government intervention in the health sector – that of Medicaid, the health insurance program for the poor in the United States of America. On one hand, some argue that those who get access to this program fare better than those who don’t. On the other, some say there is already a safety net for the poor and the uninsured, and that Medicaid’s reimbursement rates are so low that most doctors don’t see Medicaid patients anyway.

A few years ago, in order to solve this argument, and since one cannot plainly compare people within the program and outside the program, there was a need for a randomized controlled trial. The only problem: it would be deeply unethical to randomly assign people to health care. But by twist of fate that problem was solved in 2008 in the state of Oregon when a group of uninsured low-income adults was selected by lottery to be given the chance to apply for Medicaid, as only 10,000 slots were available at the time and there were too many applicants. When comparing outcomes after a year, researchers from Harvard found significant improvements on people’s wellbeing: from increases in the use of preventive care (mammograms and cholesterol monitoring) to better self-reported health, to having less bills sent to collection. Nevertheless Medicaid’s effectiveness did not translate into cost savings as some advocated, but rather the reverse.

This leaves us where?

These results leave policymakers in the tough position to weight costs against substantial benefits and to think about what are the alternative uses for the budget available. Ultimately, how do Americans value wellbeing? What is the opportunity cost of spending money on healthcare? We will see.

Helena Afonso