Is Thailand's new welfare state financially sustainable?

Greying Thailand is taking better care of its people but costs are rising & sustainability is becoming a bigger issue.

WELFARE STATE & UNIVERSAL HEALTHCARE

Thailand's new welfare state: Achieving financial sustainability

29/06/2017
Wichit Chantanusornsiri

Any government would be insane to end Thailand's revolutionary Universal Healthcare Coverage (UC) scheme or cut the benefits it provides to about 49 million Thais.

Even proposing a co-payment scheme as feared by health advocates could effectively translate into political suicide.

Over the 15 years of its existence, the universal healthcare scheme has balooned in size. In 2003 spending stood at 55.3 billion baht. It is currently 165 billion baht for fiscal 2017.

Another 50 billion baht welfare program for the poor is being launched and with Thailand's greying population welfare spending for senior citizens over age 60 is estimated to rise to 680 billion by 2024. 

Whether one is for against these entitlement programs (government programs that guarantee certain benefits to a particular group or segment of the population), their financial sustainability is something for everyone to be concerned about.

ORIGINS OF THAILAND'S UNIVERSAL COVERAGE HEALTHCARE 

The Thai Rak Thai administrations of former leader Thaksin Shinawatra and the Pheu Thai government of his sister Yingluck gained much from the free medical care scheme, as shown by their landslide victories in previous elections.

The UC scheme was initiated by the late Dr Sa-nguan Nitayarumphong, then secretary-general of the National Health Security Office (NHSO) and former president of the Rural Doctors Society.

Dr. Sa-nguan proposed the idea to political parties before general elections in 2001. 

The conservative minded Democrat Party rejected it but the now dissolved Thai Rak Thai made it a central campaign pledge in general elections, resulting in a landslide victory that enabled the party to form a majority government.

HOW TO MAKE UNIVERSAL HEALTHCARE FINANCIALLY SUSTAINABLE?

The bigger question that no one can avoid is how to make Thailand's universal health care financially sustainable while maintaining the current level of quality.

The state budget for th UC scheme has more than trebled over the last 15 years. In 2003 it stood at 55.3 billion baht. It has since risen to 165 billion baht for fiscal 2017.

The burden of huge numbers of patients receiving low-cost treatment on the healthcare system means that  many hospitals: 1. still offer substandard medical services, while 2. others face or have faced serious liquidity problems due to their increasing expenditures as required by the scheme.

Prime Minister Prayut Chan-o-cha recently approved a 5-billion-baht emergency budget to rescue five hospitals facing low liquidity. However, many others are still struggling.

WITH AGEING THAILAND, THE WORST IS YET TO COME

Another pressing issue is to ensure the UC scheme is financially sustainable.

In the future, the level of overall public health expenditure shouldered by the state is expected to rise much faster than in the past.

As Thai society ages, healthcare support for the elderly will also become more of a financial burden.

In 2016, those aged 60 and older still only accounted for 14% of the population. By 2025, this bracket is tipped to make up one quarter of the population.

WELFARE FOR SENIOR CITIZENS: 680 BILLION BAHT BY 2024

In addition to the fiscal burden of the UC scheme, the cost of welfare for senior citizens (the elderly) has increased year-on-year.

In 2014, the elderly welfare budget -- which covers the old civil servant pension scheme, living allowances for the elderly and the government's contributions to the Government Pension Fund, the Social Security Fund and the National Savings Fund -- amounted to 270 billion baht, or 2.1% of GDP.

The budget is expected to jump to 680 billion baht by 2024, which by that time would be 3% of anticipated GDP.

ANOTHER 50 MILLION BAHT FOR RECENT WELFARE SCHEME FOR THE POOR

Meanwhile, the cost of the latest welfare scheme for the poor is also great.

To-date 14 million people have registered for the program which grants them access to state subsidies for transportation and other costs.

This currently costs the government 50 billion baht a year.

By October, the Finance Ministry will hand out electronic cards to registrants, who can use them to buy goods or receive discounts on bus and metro fares.

The state hopes this registration process will ensure the benefits go where they are supposed to, eliminate false claims, reduce spending and make the scheme sustainable.

ECONOMIC UPGRADE TO ESCAPE MIDDLE-INCOME-TRAP ESSENTIAL

Having transformed itself into a partial welfare state, there is no going back for Thailand -- even though a combination of budgetary shortfalls and fiscal deficits pose a big challenge going forward.

To ensure the sustainability of such welfare schemes, the Thai economy must be upgraded to help it escape the so-called middle-income trap. Thailand cannot afford to remain stuck in a rut with its current GDP growth of 3% a year. Unless an answer is found in time, the fiscal burden of all these combined welfare schemes will shape up as a ticking time bomb just waiting to sabotage the nation's future.

Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.

http://www.bangkokpost.com/opinion/opinion/1277655/unsustainable-welfare-a-time-bomb

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