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Scarce resource allocation: The key to a successful National Health Insurance

01 August 2010 Anton Rijnen, Medihelp

South Africa has been contemplating a national health insurance system (NHI) for many years. The essential feature envisaged is universal coverage, which should ensure accessibility, equity and efficiency in the healthcare system for all South Africans.

“A national health insurance system will require significant cross-subsidisation between wealthy and poor South Africans,” says Anton Rijnen, Principal Officer and CEO of Medihelp, South Africa’s third largest open scheme.

The current situation

Research done by Stellenbosch-based economic research group Econex, shows the number of people in South Africa currently covered by medical insurance is limited to around eight million, or 16%. The rest of the population has to either pay for care or make use of the subsidised care provided by the public health sector.

“In a dual-system like this, scarce medical resources are allocated by price which results in an over-provision of healthcare to the richer sections of society and an under-provision of healthcare to the poorer sections. This means that the availability and level of care the majority of South African’s are expecting from a NHI, are not currently available. The allocation of healthcare resources in the face of this limited availability is thus a critical question in the NHI debate,” explains Rijnen.

Scarce healthcare resources

To develop a system that offers sufficient benefits while still being affordable and sustainable in the long run, various constraints will have to be taken into account including those concerning financial, political, staffing, facilities and training matters.

In South Africa, considerations should include the trade-off between providing a comprehensive benefits package to a smaller portion of the population, or providing basic cover to a larger portion or the entire population. The large proportion of individuals that are unemployed, the prevalence of poverty, the shortage of doctors and the relatively small tax base would be important considerations when implementing a NHI.

“That being said, the management of the provision of services remains a key factor. The anticipated increase in demand for medical services and the as yet lack of a clear and effective allocating strategy can easily result in greater delays in providing basic healthcare to all South African citizens. This prospect is of concern as it threatens the central vision of the NHI, namely of providing equitable access to high quality care,” says Rijnen.

The role of medical schemes

Healthcare insurance is a numbers game where cross-subsidisation and economies of scale always play a key role. South Africa in all probability has too many medical schemes, making it an ever-greater challenge for smaller schemes to remain competitive and viable.

“Clearly, the smaller schemes that fail to maintain the required 25% solvency level make net losses and lose members, have little choice but to amalgamate with other schemes in order to turn around their statistics. Amalgamations have become common practice and more and more amalgamations and consolidations are bound to occur. While it will not necessarily be a prerequisite for the implementation of NHI, larger medical schemes and administrators will, due to their experience of dealing with larger membership bases, probably have a bigger role to play and will be able to make a more significant contribution to a NHI system,” adds Rijnen.

“Because of their expertise and ability regarding amongst other things financial management, client service, IT and healthcare management, medical schemes and administrators can play a positive role in the management and administration of a NHI.”

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