Implement now, and fight for your survival later?
What a difference a day makes. A while back, this writer swears he saw a headline on Moneyweb.co.za that screamed ‘Discovery CEO calls for section 33 of the NHI Bill to be scrapped’ but upon revisiting the website a day or so later, a more conciliatory ‘Ease up on section 33 of the NHI Bill, Discovery boss says’ appeared on his screen. Lucky for you, dear reader, this writer attended the PSG Consult ‘Think Big” webinar during which the contentious, or not so contentious, sentiment was expressed. So, let us dive in and find out what went down.
The staged-implementation dilemma
The 30-minute webinar, moderated by broadcast and financial journalist Alishia Seckam, set out to clear up some of the confusion around the implementation of South Africa’s National Health Insurance (NHI) scheme, from a medical scheme perspective. “The full implementation of NHI may be a while off, but the passing of the Bill earlier this year marks a step towards getting the country closer to its vision of achieving universal access to quality healthcare,” Seckam said. She also, rather cheekily, presupposed that CEO of Discovery, Adrian Gore, would share her view that universal healthcare coverage was crucial, and something that SA had to achieve.
Gore agreed that the healthcare provisioning ‘status quo’ was unsustainable, adding that Discovery fully and unequivocally supported the ‘universal healthcare coverage for all South Africans’ construct. As for how this coverage should be achieved, the CEO of a group that boasts the largest open medical scheme domestically noted: “The policy direction is for an NHI, I think that is the direction we are going, and we have to make it work”. He added that the architecture for the solution was now enshrined in law. From this writer’s POV, the scheme’s fait accompli posturing around the NHI architecture seemed odd given its clear unworkability, and the many health sector stakeholders that have hinted at constitutional challenges if the Bill goes ahead in its current form.
Threat to medical schemes’ sustainability
“The key issue of discussion and debate is that the NHI is not workable without private sector collaboration,” said Gore. This, he added, was Discovery’s ‘unequivocal point’ on the subject. But Seckam countered with an argument that has received a great deal of attention in the mainstream media of late, namely that the NHI Bill poses a real threat to the sustainability of medical schemes, and that once implemented, these schemes stand to lose customers at the bottom- and low-margin end. PS, this writer reckons schemes will lose a significant chunk of their customer bases across the board on account of the affordability issues raised later in the discussion.
Gore’s response to the threat posed by the NHI Bill to medical schemes reminded this writer of the oft-used ‘frog in a pot of water’ analogy. The argument goes that you can prevent a frog from jumping out of a pot by gradually increasing the temperature, or put another way, you can trick the frog into accepting an environment that is toxic to it by making small, incremental changes. Commenting specifically on the possibly of ‘bleeding’ medical scheme members, Gore said: “This is not the debate at this stage, because bear in mind, this is an intergenerational process; this is going to take over two decades to roll out; [today’s discussion] is more about having a Bill with an architecture that is problematic”. The affordability conundrum was next up for interrogation, with Gore contending that the costs of an NHI implementation would make it unworkable “without the private sector”.
It is difficult to discredit Gore’s desire for a workable NHI architecture; but it seems disingenuous to take the position that since the NHI implementation will span two-decades or longer, key stakeholders in the healthcare sector can somehow negotiate their continued existence over that time. Bear in mind, dear reader, that Section 33 of the NHI Bill prevents medical schemes from covering procedures that are covered by the NHI. So, if the state covers an appendectomy, your medical scheme will not be able to chip in a cent towards the procedure. To play devil’s advocate, under a successful single-funder NHI, we could be left with a handful of medical schemes covering members for elective cosmetic-type surgeries only.
Paying 30% more for 70% less cover
“Where does the NHI Bill fall short, and what needs to change so that we can leverage its strengths and its merits?” Seckam asked. According to Gore, the key shortfall stems from the solution’s affordability. He pointed out that government spends approximately R465 per person per month on public healthcare services at present, and that by raising another R200 to R300 billion per annum, this spend would only increase to around R680 per person per month under the NHI, given its intended coverage of all citizens. This compares to the approximately R2 400 per beneficiary per month spent across the country’s current medical scheme membership.
Discovery Health has run some numbers that suggest National Treasury would have to raise income tax by 30% or raise VAT from 15% to 22% to raise the extra R200 billion it needs for NHI. “What you would see happening, if you [funded NHI through income tax], is that you would raise taxes for people that are employed by 30%, and lower the [spend on their] healthcare by 70%,” Gore said. “I do not think people would bear paying 30% more taxes and having 70% less healthcare”. He argued that by funding the NHI in this manner, government would “create a real problem in the economy”. Furthermore, in the context of the affordability crisis, the only way NHI works is by keeping the private sector in place.
The call was for ‘freeing up’ not ‘scrapping’
And this was where the section 33 headline grabber popped onto the radar. “Under today’s economics, you can see that NHI is not workable; and so, we are already advocating for simply freeing up section 33 … once the NHI Bill is fully implemented, let us then work out the role of the private sector, medical schemes etc,” Gore said. He later added, that “Discovery’s suggestions on changing the Bill around section 33 did not in any way stymie the NHI, in fact it liberated it to actually work”. So, it turns out he did not call for section 33 to be scrapped, after all.
Pushed further on workable solutions, he noted that a multi-funder model was needed, with medical schemes part of the funding pool. The bottom line, per the writer, is that SA does not have the financial or human resources for the ‘grand design’ being pushed through the legislative processes. There are countless public opinions around the NHI debate, with one of the popular ones being that South Africa should emulate the UK-based National Health System (NHS). Gore shot this dream down in flames by pointing out that the UK spends around USD3 000 per person per year on healthcare, and that the UK market anyway has a dual public and private health funding model, as evidenced by the success of Discovery’s UK health insurance business.
Another major complaint from the South African public is that the money being spent in the domestic public healthcare infrastructure is atrociously poorly managed, with shocking outcomes. “The NHI structure does not address, necessarily, the management of the healthcare system, which has to improve for us to actually get a return on the money being spent,” conceded Gore. Stakeholders in the private healthcare sector know all too well that successful outcomes depend on a healthy and well-managed risk pool, and that any mistakes in the complex process of balancing and controlling this pool can result in the entire system falling apart.
Although the discussion covered many angles, little was said about the regulatory impact on existing medical schemes businesses, over decades. A glaring issue is that decades-long dithering by the Department of Health and Council for Medical Schemes (CMS) has seriously constrained medical schemes’ abilities to play in the low-cost medical benefits space, with many stakeholders arguing that such solutions could have rendered NHI unnecessary.
You can stand on your head; it will not work…
Discovery’s CEO took an optimistic approach throughout; but he was not totally naïve: “when you look at the numbers, you cannot [implement NHI] as proposed … you can stand on your head; but we simply do not have the funding”. And even over the next two decades, without considerable above medical inflation growth, South Africa will not be able to fund a viable healthcare system through one funder either.
In this case, the plus one for government is likely to come from the medical schemes industry alongside other private healthcare funders. “Do not underestimate the quality of our private system, it is remarkably good; preserve it, build on it and make it a national asset that is used in this NHI tapestry,” Gore concluded.
Writer’s thoughts:
You could be excused for viewing the call for section 33 of the NHI Bill to be ‘reworked’ as a bit of a moot point, given the major questions around its affordability. Are you in the ‘NHI at any cost’ camp, or would you prefer the proposal to be shelved and an alternative found? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].
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