Is there a case for social insurance?

insurance is an increasingly popular policy reform in developing countries. Thailand and Vietnam have long-standing efforts to achieve universal coverage through social insurance. Kenya is currently implementing such a reform. Caribbean countries have been debating the merits of 'National Health Insurance' since the mid-1990s; and many other countries in Asia and Africa are following suit. It is variously championed as providing a 'new source' of funding for health, of 'protecting' the poor against risk of major illness, and of reinvigorating public health services. However, social insurance as it is being debated and implemented is probably a bad idea for most countries because it is likely to raise costs and increase inequities. It is notable that the one region of the world with little movement on introducing social insurance is Latin America, where such programmes have a history of more than 50 years and where promises of universal and equitable access remain out of reach (with the notable exceptions of the region's costliest systems – Costa Rica, Uruguay and Chile). One of the difficulties in assessing social insurance is that it means so many different things to different people. For some, it includes any insurance that is not for profit. For others, it refers exclusively to social security systems like the one that developed in Germany. However, the most typical social health insurance proposals are national programmes that aim to finance a basic package of services through a dedicated payroll tax. Often the proposals envision creating an independent agency for managing the health insurance fund and separating the financing of care from its provision. Each of these elements – payroll taxes, basic packages, and separate financing and provision – can be beneficial in a well-governed health system and will probably lead to greater inequities and costs in a poorly-governed one. The risk in most developing countries is that the fundamental political problems of governing the health system will not be changed by introducing social insurance, only exacerbated. Here are some of the reasons why. Social insurance proposals generally include a payroll tax with the justification that they: are easier to collect than general taxes or voluntary premiums; increase accountability by giving workers a 'stake' in the health insurance system; force employers to contribute to the cost of health care; and are more stable than allocations from the general budget. Yet the ease of collecting payroll taxes is almost exclusively a consequence …