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SUB CATEGORIES General  |  HIV |  Medical Schemes | 

The impact of social health insurance

03 April 2004 Angelo Coppola

The quality, affordability and access issues of our healthcare system are so complex, that few can agree even on the causes, let alone the solutions, says Andre Meyer CEO of Medscheme.

On top of rising medical aid premiums is the spectre of HIV/AIDS treatment for those not covered, and the rumours of Social Health Insurance (SHI).

So what does it hold?

Only the well-informed would have worked through all 158 pages of the Report of the Committee of Inquiry into a Comprehensive Social Security System for SA. Known as the Taylor Committee after its chair, a group of 20 cabinet appointees formulated this policy between 2000 and 2002, which was substantially accepted by cabinet last year.

The healthcare elements of the report envisage a four-phased rollout between 2003 and 2009.

While its opponents are voicing objections relating to non-consultation and inadequate research, history has shown that few challenges to state healthcare policy survive the will of our policymakers.

The SHI is therefore to be taken seriously, and its impact assessed by the companies and employees affected. A deputy-director for SHI is already in place at the Department of Health, and Phase 1 is already being implemented.

Firstly, this is not UK-style National Health, whereby the state pretty much funds and treats all citizens through central tax. SHI is a funding mechanism which benefits only contributors and their dependants.

The policy objectives of improved access for lower income groups to quality healthcare cannot be contested. Most would also support the stabilizing of risk pools.

The third objective, namely to channel private sector funding and treatment into public sector hospitals is somewhat controversial. The Big 3 private hospital groups are successful, listed, worldclass quality providers who do not like having to compete against a VAT-exempt public sector which they see as unfair competition.

“Who cares”, says the cost-strapped consumer who hears accusations of cartel behaviour against these hospitals. The likelihood will be a combination of public and private sector resources.

So what will SHI in SA entail?

1. Mandatory cover for all in formal employment.

2. A risk equalization fund between medical aids.

3. Tax subsidy reforms and cross-subsidisation

Mandatory medical aid cover will probably have the biggest impact for employers and employees. Employers who have already gone the cost-to-company remuneration route might think that they can avoid legal liability, but there will be considerable pressure for at least 50% subsidy of the premiums for those not presently on medical aid.

A guaranteed demand on the Union bargaining table, although rollout would start at high income earners, then to middle income earners, while blue collar workers would still retain the choice for the time being. For medical schemes, this move would probably bring in a welcome number of low risk members who are currently going it alone.

The Risk Equalisation Fund would essentially turn the whole medical aid industry into one great big risk pool. Good news for schemes with a high pensioner ratio, and disappointing to those who seek only to attract the young and healthy.

This still means that schemes can differentiate and compete, but they will need to use managed healthcare programmes to contain costs, not marketing or underwriting – just what the Department of Health has been wanting.

The Tax Subsidy Reforms could be an interesting issue. Very rough calculations estimate that the fiscus is ‘sacrificing’ R7,8 billion p.a. by allowing the medical aid premium as a pre-tax deduction.

The plan is to disallow the deduction and re-route this money as a direct subsidy to the medical schemes themselves. In theory, this would reduce premiums by 20% overnight, but the current recipients of the tax subsidy might have other views.

Another spate of remuneration restructuring is bound to ensue, but will Trevor Manuel allow other departments to change his tax policy?

A wild card in the equation is the proposed Public Sector Medical Aid Scheme, scheduled to commence in 2005 or probably 2006. The impact on the private sector would be the addition of 350,000 not yet insured civil servants into the medical aid market.

If it turns out to be the panacea for affordable quality care, as is hoped – could be converted into an open market “state-sponsored” medical scheme to attract private sector patients.

The impact of this scheme on intermediaries will be to totally eliminate commission payments in respect of public sector members.

Most private sector stakeholders reel in principle at the prospect of state intervention, but the private health sector cannot claim to be healthy. Nor, for that matter, can the public sector, whose ailments are much more than just underfunding.

Bold remedies must be taken, and we have a government eager to write the prescription.

At the end of the day, any healthcare system draws its funding from working citizens and trading employers, be it through monthly premiums, tax or a combination of both.

Getting that mix right is something that most countries battle with, in the face of worldwide healthcare inflation.

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