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Chart 55: The MoH has been allocated SAR23bn over five years under NTP 20% 26% m Primary healthcare reform = Electronic health records m Develop ER and intensive care m Public health m Building standards of public facilities = Health insurance scheme Other Source: BofA Merrill Lynch Global Research, NTP Government currently payor and provider The government currently directly funds public hospitals, which provide free healthcare for citizens. The typical flaw with a unified system is that increased efficiency is not necessarily sought or rewarded. Employer-provided healthcare insurance is mandatory for both Saudis and expats working in the private sector, as well as their dependents. Significant scope for increase in insurance coverage from 10.5m to 31m people Saudi currently has a population of 31m, of which 10.5m have health insurance, a 34% penetration rate. Bupa Arabia believes another 2.5m Saudis who work in the private sector (including dependents) don’t have health insurance but should have. Assuming the government increases enforcement, near-term penetration could increase to 42% of the population even with extra reforms. Strain in relations between government/private sector The government has not paid private providers who have treated government patients for a year, which is hardly going to encourage the private sector's further involvement, particularly those companies that have seen the biggest increase in their receivables (Al Hammadi and Dallah). However, the government can still put considerable pressure to bear on the sector to achieve its aims if it so wishes. Increased Saudisation could be used as a policy The easiest way for the government to increase private financing of healthcare to 35% from 25% would be to raise Saudisation requirements. Under Saudisation, the government sets a minimum proportion of a company’s staff that must be Saudi citizens, which differs by industry sector. Increased Saudi employment in the private sector short-term would put the onus of financing healthcare onto employers. However, such a move would likely pressure private sector margins. Increase pressure on employers to trade down on insurance The impact of Saudisation as a mechanism would likely be negative for pricing although positive for volumes, assuming the hospital has the capacity to accept more patients. Employers would likely seek to trade down in terms of the insurance schemes they offer in a bid to reduce their involuntarily raised expenditure. Insurers would seek better deals with hospitals as a result and could seek restricted network arrangements to curtail 2S Merrill Lynch GEMs Paper #26 | 30 June 2016 53 HOUSE_OVERSIGHT_016163