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Turkey: Free Healthcare for All – All Who Can Pay

Below is the weekly guest column by Taylan Bilgic, which was published on Friday at Hurriyet Daily News. My comments are, as always, right below the column.

 

[The Turkish economy is periodically struck by balance-of-payments crises caused by the discrepancy between insufficient savings and a weak industrial base.

The ensuing current account gaps sooner or later get “corrected” through a destructive process which hits both supply and demand. As a new balance is established atop the ruins, the business cycle resets and we start all over again.

Today, we are at yet another threshold and at the mercy of “market forces” – financial stability depends on whether foreign capital inflows will continue at the needed pace. According to İş Investment forecasts, if the economy is lucky enough to receive $120.4 billion in foreign financing this year, it may post meager growth of just 1.7 percent. This is the dire result of an external financing-driven growth model.

The debate over whether the issue stems from “overspending” or “not saving enough” seems trivial, as both feed each other to form a typical vicious circle. One thing is clear: Turkey’s household savings rate, at 13 percent of GDP, is much lower than the rates seen in emerging market peers. The figure is over 20 percent in economies such as Hungary, Romania, Peru and Mexico, while it’s at or over 30 percent in Thailand, Indonesia and India. Furthermore, the trend is for the worse. The private savings rate started to decline in 2001 from an all-time high of 25 percent and has been falling since, according to Central Bank data.

Despite the official rhetoric on how the government has boosted per capita income levels, there is a close link between low savings rates and poverty. If a household is impoverished, most of the income goes to basic consumption, resulting in minimal savings. The lack of a social safety net, resulting in poor healthcare and poor education, is a top contributor. As citizens struggle to handle most basic expenses, they inevitably fall behind in savings.

In this respect, the General Health Insurance (GSS) scheme, which came into effect Jan. 1, is a huge step backwards. Social security expert Ali Tezel noted in a recent interview that this scheme aims to “extract money” from sick citizens instead of preventing them becoming ill in the first place.

“As public clinics get shut down and family physicians take over, preventive healthcare will come to an end,” […] Family physicians receive money per patient [...] Thus, the system tells [them] not to prevent [illness] and let citizens fall sick.” The real aim is to end public healthcare as we know it by the end of this year, he claimed.

The first victims are those who owned “green cards” that provided free healthcare. With the help of the media, which focused on abusers instead of offering a balanced view, the scheme came to an abrupt end. Millions living in abject poverty have been left to their fate.

GSS stipulates that only those who earn “less than one third of the minimum wage” are free not to pay healthcare premiums. Those who earn “between one third of the minimum wage and the minimum wage” will have to pay 33 liras per month. We are talking about a monthly salary of $382 here: One who earns just one-third of that ($127) will be forced to pay $18 per month if one wishes to “enjoy” the “privilege” of free healthcare. When we talk of salaries higher than the minimum wage, the payment reaches 100 liras ($55). Furthermore, there are still “contributions” to be made under this “free” scheme.

As far as I can understand, we have a “social security net” here in which an individual earning $400 per month is forced to give a quarter of that to get free healthcare, which should have been a universal right by law. This looks like an insult to injury in a country which suffers from chronic inequality problems.]

 

I won’t make this long, as I am not particularly knowledgeable about the details of the Turkish health insurance system, but I just have a small point on the relationship between personal savings rate and disposable income: That it is anything but a simple linear relationship. But at very low levels of income, the mechanism Taylan is talking about may be at work. And if you are interested in the determinants of Turkish private savings rate, here’ s a useful paper… And a useful column from your friendly neighborhood economist…

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Emre Deliveli The Kapali Carsi

Emre Deliveli is a freelance consultant, part-time lecturer in economics and columnist. Previously, Emre worked as economist for Citi Istanbul, covering Turkey and the Balkans. He was previously Director of Economic Studies at the Economic Policy Research Foundation of Turkey in Ankara and has has also worked at the World Bank, OECD, McKinsey and the Central Bank of Turkey. Emre holds a B.A., summa cum laude, from Yale University and undertook his PhD studies at Harvard University, in Economics.

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