Important role in the Saudi economy, particularly in the oil and service sectors; at the same time, however, Riyadh is struggling to reduce unemployment among its own nationals. Saudi officials are particularly focused on employing its large youth population. In 2017, the Kingdom incurred a budget deficit estimated at 8.3% of GDP, which was financed by bond sales and drawing down reserves.
In January 2016, Crown Prince and Deputy Prime Minister MUHAMMAD BIN SALMAN announced that Saudi Arabia intends to list shares of its state-owned petroleum company, ARAMCO - another move to increase revenue and outside investment. The government has also looked at privatization and diversification of the economy more closely in the wake of a diminished oil market. Historically, Saudi Arabia has focused diversification efforts on power generation, telecommunications, natural gas exploration, and petrochemical sectors.
More recently, the government has approached investors about expanding the role of the private sector in the health care, education and tourism industries. While Saudi Arabia has emphasized their goals of diversification for some time, current low oil prices may force the government to make more drastic changes ahead of their long-run timeline. The first two five-year plans (1970–75 and 1976–80) established most of the country's basic transport and communications facilities. Subsequent plans sought to diversify the economy; to increase domestic food production; to improve education, vocational training, and health services; and to further improve communications routes between the different regions of the country. As world oil prices stagnated in the 1990s, government policies encouraging larger families led to a marked increase in population. GDP per capita actually began to fall in real terms, and the kingdom's young, highly educated workforce began to face high rates of unemployment and underemployment for the first time.
In addition, five-year plans were directed toward increasing the share of private enterprise in the economy in an effort to move away from dependence on oil exports and to generate jobs. The transition to a national health insurance program is expected to reduce the government's share of healthcare expenditures by beginning wage-based contributions toward healthcare premiums. The third phase was implemented in 2005 and expatriates, making up about 25% of the population, have been required to have health insurance coverage. Requiring insurance will have the direct effect of allowing the risk of annual healthcare expenditures to be shifted from the government to an insurance company.
This will permit the government to better project the annual healthcare expenditures, and potentially, reduce costs if insurance companies introduce co-payments, deductibles, and utilization review mechanisms. The introduction of health insurance is intended to free the Kingdom from some of the financial burden of providing free medical care to all nationals and some foreign workers in the country. Furthermore, this will ensure that expatriates have medical care coverage and allow greater freedom of choice. The Saudi MOH has served the traditional role of the chief governmental health coordinator. These include regulating health products and quality of services, and setting prices.
It also allocates global budgets for each hospital through each regional health directorate. However, one significant difference is the lack of comprehensive authority. Unlike many countries where the healthcare ministry exercises authority over all segments of their healthcare systems, the Saudi MOH lacks authority over two important public sector health systems.
The university teaching hospitals and the military hospitals fall outside of their purview. Also, the MOH exerts only indirect control over the growing private sector. Healthcare in Saudi Arabia currently is provided free of charge to all Saudi citizens and expatriates working in the public sector, primarily through the Ministry of Health and augmented by other governmental health facilities. The government requires that expatriates working in the private sectors have some level of healthcare coverage paid by their employers.
Healthcare in Saudi Arabia has been funded primarily by public (75%) or out-of-pocket expenditures (about 25%). What has been distinctive has been the low level of private insurance involved in the provision of healthcare. Almost all of the private expenditures have been out-of-pocket payments for services in private hospitals and clinics.
Governmental funding is allocated through annual budgets to individual ministries and programs. Royal decrees may be issued for allocations of additional funding for special health programs and projects. Many countries across the world are struggling to improve healthcare quality, contain or control costs, and provide access to healthcare for their citizens. Much has been written about United States and European struggles to balance quality, cost, and access to healthcare. The situation in the Kingdom of Saudi Arabia is less well known, but is distinctly unique, with fascinating reforms taking place that will radically change the way healthcare is provided.
Tourism is a key element of Vision 2030, an economic-reform plan meant to wean the kingdom off oil that was unveiled five years ago by Muhammad bin Salman, the crown prince. The government expects tourism to be the largest source of new jobs in the private sector, accounting for 10% of both GDP and employment within a decade. "The industry is at the top of our 2030 agenda," says Ahmed al-Khateeb, the tourism minister, who hopes to see 100m local and foreign tourists in ten years' time.
Its biggest holdings are still in local businesses such as Saudi National Bank, Saudi Telecom Co. and national projects like Neom, a $500-billion city-state that would run entirely on renewable power and export green energy. Since 2016, when it committed $45 billion to SoftBank Group Corp.'s technology-focused Vision Fund, PIF's foreign interests have mushroomed. A 2018 investment in electric carmaker Lucid Motors Inc. has soared in value to almost $40 billion. It also has stakes in video game makers Activision Blizzard Inc. and Electronic Arts Inc. and the digital services and retail businesses of Indian billionaire Mukesh Ambani. In February, the government transferred an $80 billion stake in Saudi state oil giant Aramco to PIF to boost its assets as the fund prepared to tap the international bond market for the first time. The implementation of private healthcare insurance for all Saudi citizens and expatriates is now taking place.
How Many States Does Saudi Arabia Has In reality, all Saudi citizens currently have national health insurance. The major change for Saudis will be to allow them to opt out of the traditional governmental facilities. Adding private health insurance will probably not change the healthcare utilization substantially, unless concurrent changes are made to the provider payment systems and/or the addition of patient deductibles, coinsurances, and utilization review. If these changes are made, the effect upon the market structure, patients, and providers will be significant. If these changes are made and a more competitive market ensues, the existing private hospitals in Saudi Arabia may be best prepared to act and benefit by taking sizable volumes of patients from the market. Initially the loss of patients may be welcomed by the public facilities, as waiting lists would be reduced.
However, when the demand drops below capacity levels and vacant beds ensue, public healthcare facilities will then become concerned. For years, as the public hospitals received global budgets, they perceived the growth of the private hospitals near them to be beneficial. Since MOH hospitals were constrained by a total amount of money per annum in their global budgets, any services that could be performed outside their facilities directly benefited their budgeted expenses. However, public hospitals today are being allowed to generate outside income and private facilities have now become direct competitors. Loss of paying patients to the private hospitals now directly takes revenues from the public facilities.
To attract paying customers many hospitals have opened what they term "business centers." These are clinics from primary to tertiary care services, established to serve paying patients, both Saudis and non-Saudis. Some of the larger governmental hospitals now generate million of dollars of revenues per month from their business centers. The Saudi economy has witnessed a growth in a large number of sectors, taking advantage of the natural resources in the Kingdom and its geographical and cultural position between three continents.
This growth resulted in building a solid economic base, becoming one of the twenty largest global economies and an active member of the G20. Saudi Arabia is one of the main players in the global economy and global oil markets, supported by a strong financial system, an effective banking sector, and giant government companies based on highly qualified Saudi talents. On the other hand, these changes may actually diminish the quality of care as insurance companies and private hospitals drive down costs. Given the difficulty in measuring quality, privatized hospitals may substitute lower-cost services, such as hiring foreign physicians. Saudi physicians are much more expensive and almost impossible to terminate.
Those facilities with fewer existing Saudi physicians may have economic advantages going forward. The plans to privatize hospitals and introduce private insurance will have significant effects on the Saudi healthcare system. The plans will have different effects on the overall healthcare system. Selling healthcare providers to private interests will dramatically change the motivations and incentives of providers. Positive effects would include additional state revenues from the sale of hospitals, the increased motivation to provide more efficient healthcare, and the transference of the liability for the operation of providers from the government to private groups.
Privatization will probably create a more efficient system, employing fewer employees and, from the government's budget perspective, drastically reduce the amount expended for healthcare. However, without adequate controls private hospitals may raise charges and total governmental healthcare payments may remain the same or actually rise, as a result of higher prices to pay for profits and marketing. The private healthcare sector has grown rapidly since the advent of interest free loans from the government to construct private facilities. The private sector grew rapidly over the past several years and expanded its services, especially in large cities. In 1971 there were only 18 private hospitals, but this number had grown to 75 by 1996 and to 113 by 2005, accounting for approximately 21% of all hospital beds.3 The private sector has been the primary service for foreign workers.
Foreign workers, until recently, have not been allowed to use MOH facilities, except for emergencies. In 1995 approximately 80% of all private healthcare services provided were given to Saudi citizens, who were eligible for free services through the MOH. The conservative capital city of Saudi Arabia is one of the world's wealthiest cities, combining traditional ideals and cultural values with modern developments in trade, business, architecture and tourism. Dedicated to upholding traditional Islamic values yet undergoing significant change following growing economic prosperity and innovation, Riyadh is a city full of contradictions. This makes it both intriguing and confusing for many foreigners, though there's also plenty to ensure visitors are comfortable – including swanky hotels overlooking the surrounding desert, and the fact that almost everyone speaks business English.
King Saud University, the second-ranked university in Saudi Arabia, is located here. University hospitals are directly under the Ministry of Higher Education and receive direct financial allocations from the Ministry of Finance. The military hospitals, the National Guard, Armed Forces, and Interior hospitals are directly governed and funded through their respective ministry budgets and can be seen as competitors for healthcare budget allocations to the MOH. This allows for wide variation in funding levels and personnel policies. For example, the funds allocated per bed are significantly higher in the non-MOH hospitals and physicians who work for the National Guard Hospital may earn two to three times the amount that physicians working for the MOH make. These facts create the perception that service quality, ease of access, and technology is much higher in non-MOH hospitals.
Though oil prices are high at the moment, demand for fossil fuels is declining around the world as people and governments look to cleaner forms of renewable energy. Crown Prince Mohammed bin Salman is particularly interested in diversifying the economy towards new technologies via his Vision 2030 initiative. Reimbursing private health services on a fee-for-service basis without quality or consumptive controls has also escalated the costs of medical care. At present, governmental controls do not exist to monitor the appropriateness of care in the private sector.
The use of global budgets in Ministry of Health hospitals made the construction of private hospitals a positive event for the public hospitals, as patients obtaining care outside of MOH hospitals preserved more of their global budgeted funds. Initially the private hospitals were small, generally physician-owned facilities funded primarily by out-of-pocket and expatriate payments. However, the move to provide insurance coverage has recently encouraged the entrance of multi-hospital systems into the market. Saudi Aramco, also known as Saudi Arabian Oil Company, is the world's biggest oil producer. Over the past 80 years it became the world's leader in hydrocarbons exploration, production, refining, distribution, and marketing.
Saudi Aramco's oil and gas production infrastructure leads the industry in production scale, operational reliability, and technical advances. Today, it is the most profitable company worldwide, surpassing the world's biggest companies such as Google and Apple with a net income which exceeded 88 billion U.S. dollars in 2019. It manages proven conventional crude oil and condensate reserves of 261.1 billion barrels, and its average daily crude oil production is 10.2 million barrels.
Saudi Vision 2030 aims to enhance local content in various sectors, through localizing the production of goods and services to raise their competitiveness and create sustainable job opportunities. A number of initiatives were launched to increase the rate of localization and support national products as well as expanding the industrial base in the Kingdom to include the production of new products. Prince Mohammed bin Salman, the deputy crown prince and son of the king, has recently consolidated power over financial decision making. However, Fitch Ratings recently warned it's unclear how much support the deputy crown prince has within the royal family and the power grab has "reduced the predictability of decision-making."
The struggle to provide quality healthcare for a nation's population at an affordable cost is a challenge for any nation. The Kingdom of Saudi Arabia, as with many nations, is seeking to reconfigure its existing healthcare system to improve the quality of care its citizens receive and control the burdensome, escalating costs. To do such they are embarking on a free market strategy to achieve these changes by introducing healthcare insurance and privatizing public hospitals. The rapidly growing population, increasing at the rate of 3.6% annually, has been a key factor in the rise of health expenditures. Another contributing factor to escalating costs has been free services for all Saudis.
Free services without a deductible or co-insurance payment, coupled with virtually no economic constraints on the provider, combine to greatly inflate the volume and intensity of services used. At the same time there has been a growing awareness of the availability and a growing consumer demand for specialty care and high technology. As in most industrialized societies, the media and internet have sparked sharing of information and increased demand for specialty care. Consumers, without any economic consequence, demand the highest level of care possible, which increases cost. Many retail banks in Saudi Arabia offer a range of different investments, including funds, bonds, shares, and insurance-linked pension plans.
There is also a range of investment banks in Saudi Arabia that are governed by the Capital Markets Authority, including BNP Paribas, Credit Suisse, Goldman Sachs, JP Morgan, KKR, Société Générale, and UBS. In 2018, the Saudi Arabian oil and gas sector made up around 50 percent of the country's GDP and 70 percent of its export income. The country's oil industry alone makes up 17 percent of the world's reserves. Saudi Arabia has the second largest oil reserve in the world, which measured more than 40 billion metric tons in 2019. The huge quantity of petroleum and the ease of extraction gave the country an edge over other oil producers, making them more cost effective.
On June 27, Saudi authorities opened a separate trial of prominent human rights activists Nassima al-Sadah and Samar Badawi before the Specialized Criminal Court in Riyadh, but by November the charges against them were not public. Facilities at the leading universities in Saudi Arabia are second to none, thanks to the nation's ongoing and significant investment in higher education. More equitable and less varied care may also result from the proposed changes.
If all Saudis have healthcare insurance and can, therefore, access any hospital in their insurance network, hospitals will have to improve their quality and reputation to prosper. As described above, currently the different segments of healthcare are perceived to offer different levels of quality and the proposed changes may pressure poorer quality providers to either improve or go out of business. To assist in the equalization of care the MOH is developing a national accreditation body and plan to require all hospitals being reimbursed by insurance to be accredited.
Few systematic efforts have been used to curb the rapidly expanding healthcare costs in Saudi Arabia. A few public and specialist hospitals charge nominal fees for varying types of service. Likewise, some hospitals have begun to charge a portion or full charge for services for self-referral patients.
However, national efforts have not directly sought to restrain costs, with the exception of waiting lines created by restricted capacity. Thanks to relationships with correspondent banks, a range of banking providers in Saudi Arabia offer easy money transfer services between different countries. Some banks, such as Arab Bank, allow customers to send money abroad from ATMs. Established as the Kingdom's central bank in 1952, SAMA's role is to supervise banks and financial institutions, manage monetary policy, oversee the financial and insurance systems, and to maintain soundness within the banking system.
