Progress by Small Steps

Tuesday, June 19, 2007

Democritus touted the goal of good health in the fifth century bc, writing that “without health, nothing is of any use, not money or anything else.” Descartes wrote in 1637 that “the preservation of health is . . . without doubt the first good and the foundation of all the other goods of this life.”

The benefits of wealth on a nation’s health, whether direct or indirect, have long been presumed. Recent evidence also suggests that good health is a major driver of economic development and a necessity for the poorest nations’ climb out of poverty.

The newest excitement in fighting poverty is the spectacular success of innovative microcredit experiments championed by Nobel peace laureate Muhammad Yunus, a Bangladeshi economist. Against the advice of banks and government, Yunus introduced microloans to the extremely poor without any collateral, any legal structure, or any group guarantee or borrower liability. The results of that lending show a dramatic escape from poverty brought about not by a traditional top-down, bureaucratic, government-run charity program but by a private-sector, bottom-up bet that the individual could succeed as an entrepreneur.

As of May 2006, loans by the private Grameen Bank founded by Yunus had reached more than 6.61 million borrowers, 97 percent of them women. More than 33 million people in Bangladesh have benefited from the 2,200 branches of Grameen Bank in villages throughout the country.

An astounding 98 percent of loans have been repaid, a far lower default rate than any other known lending program. Returns from Grameen Bank in 2000 from microfinance were a remarkable 4.3 percent. More than 50 percent of the people in the program have already moved out of poverty.

How is microfinance related to health and medical insurance? It turns out that microcredit did not always succeed in bringing people out of poverty, the major reason being the burden of out-of-pocket health-care payments. In the absence of health insurance, family illness was consuming any money earned. The way health costs were undercutting microloans was also noticed by the Jamii Bora Trust in Nairobi, Kenya, which started a 50-person microloan program there in 1999 that now serves some 120,000 clients. Partnering with a local hospital, Jamii Bora offered clients health insurance for $15 a year to cover the borrower and up to four children. Grameen in Bangladesh responded by creating a separate, inexpensive health insurance program. A Grameen family pays $3 a year for health insurance.

Other examples of small-payment, consumer-based health insurance include prepaid “health-care subscriptions” with no links to health status or care usage, community-based risk pools, availability of micro–health loans, and health education lessons at microloan payment meetings.

This is microinsurance at work: a small personal payment purchases private health insurance to reduce the risk of future sickness. Individuals are empowered with personal financial investment and access to information; financial devastation due to medical expenses is avoided; and it all happens without the deleterious effect of a third party footing the bill. Admittedly, medical insurance and health care in these countries are still in their nascent stages; additionally, creative hybrid partnerships with medical clinics, physicians, and volunteers are part of the equation. (Early health insurance had similar beginnings in the United States.) So although this may be only a start, the preliminary results look compelling.

Against the advice of banks and government, Muhammad Yunus introduced microloans to the extremely poor. Those loans are helping a dramatic escape from poverty.

According to recent World Health Organization estimates, 25 million households every year (more than 100 million people) are forced into poverty by illness and the struggle to pay for health care.

The case for health insurance is overwhelming, yet the vast majority of citizens in many of the world’s emerging nations have none. Why? Although many reasons can be listed, no recipient is worthier of blame than the misguided insistence on government-funded health insurance. Government insurance systems historically entail massive administrative costs due to bureaucratic forces, overregulation, lack of transparency, and long lists of politically motivated mandates. Privately run health insurance products can be rapidly employed in flexible, consumer-oriented ways and can even generate a reasonable profit. The results speak for themselves even in the poorest circumstances.

It is clear that societal health helps drive national economic progress. Moreover, governments owe their populations the power and freedom to control their own lives and health. Expanding the sort of creative collaboration between individuals and the private sector seen in Bangladesh and Kenya would be powerful. And such a collaboration would have an impact beyond economic development and prosperity. People’s lives depend on it.