Contradictions in medical legislation will impede success of NHI

01 November 2013 Mark Arnold, Resolution Health

One of the many challenges to the successful implementation of National Health Insurance (NHI) is the inherent contradictions contained in the way the South African private healthcare industry is legislated. This is a major contributor towards the rampant escalation in healthcare costs of this sector.

This is according to Mark Arnold, Principal Officer of Resolution Health Medical Scheme, at Resolution Health. He notes that while funding administrative capacity of the public sector and an acute skills shortage are major obstacles, an issue that fails to be debated is the clear contradictions regarding how the healthcare industry has been legislated.

Still unregulated

"While private healthcare funders are not left to their own devices in a free market and are subject to significant regulatory monitoring, the tariffs of medical service providers remain unregulated.”

According to Arnold, Government has recognised healthcare as a social imperative with the proposed NHI system, and its predecessor the Social Health Insurance (SHI), based on principles of social equability.

Medical schemes have been legislated on this basis for more than a decade. "On average, only 15% of funds are allocated to service delivery such as administrators, managed care organisations, brokers and scheme expenses. Government has implemented extensive regulation to govern medical schemes and their non-healthcare cost expenditure, resulting in a steady decline in real terms over the last few years.”

However, says Arnold, the other half of the industry which consumes 85% of the spend, has remained open to the free market and, as a result, doctors and medical specialists are often able to charge exceptionally high fees for their services while remaining largely unregulated.

Free market principles

"On the one hand you have the funders of healthcare services, the medical schemes, who are obliged to operate within social equability constraints, such as open enrolment, community rating and Prescribed Minimum Benefits (PMBs). On the other hand, the healthcare service providers operate on free market principals such as supply and demand,” Arnold says.

The implementation of PMBs and subsequent scrapping of the National Health Reference Price List (NHRPL) by the High Court in 2010, further exacerbates the problem. "As a result, medical schemes are forced to negotiate with service providers on an individual basis, a scenario that significantly prejudices smaller schemes that do not have the bargaining power of critical mass. They become price takers rather than price negotiators,” says Arnold.

As a result, he says, there needs to be some form of intervention in terms of the pricing of healthcare. "For example, establishing a framework within which funders, as an industry, may negotiate and agree on tariff structures with health service providers would be a way to control rising costs. If medical schemes need to pay for all PMB treatments and medications, it is important to be able to determine the cost of this by agreeing to an upfront Reference Price List (RPL) with hospital groups or doctors.”

Quite a few challenges

The compulsory nature of PMBs and overriding goals of NHI represents an additional contradiction. PMBs are primarily aimed at a curative approach at a tertiary care level, whereas NHI seeks to encourage a preventative approach at primary care level. He says, however, it is important to have a change of approach in terms of how the healthcare system is run. "Many studies have shown that the preventative healthcare approach is far more cost effective in the long run, particularly for the economy as it can not only help to prevent and limit disease, but also prevents the number of working hours that are lost by employees.”

Arnold notes that there are a number of challenges facing the implementation of NHI, such as how the business model will be funded, the current administrative capacity of the public sector, as well as the acute skills shortage of qualified doctors, nurses and other medical professionals.

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