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The path to universal health coverage in South Africa

09 October 2009 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

National Health Insurance (NHI) is not a new idea. The concept of universal health benefits for all South Africans is evident in government health policy documents dating back to 1994. But when an ANC task team policy document on healthcare solutions for

Broomberg set the ground rules for his presentation early on. He reminded the audience that the ANC task team document he was referring to was not official government policy. He also said that while the questions he would pose during the presentation were tough, “Discovery as an organisation strongly supported both the need for reform of the healthcare system and some of the basic concepts [proposed] in the NHI reform.”

The “roadmap” to universal health coverage has changed

“The ANC has always been committed to the idea that everyone in this country should get access to a uniform set of health benefits regardless of whether they are able to contribute or not,” said Broomberg. In 1994 they thought this could be achieved through the systematic expansion of medical schemes coverage to the entire population. There are a number of techniques a country can employ to achieve this goal. Broomberg mentioned the provision of subsidies to low income employees, the introduction of special schemes for low income employees with lower benefits (the so-called LIMS schemes), more affordable options under existing medical schemes and eventually, a move to some form of mandatory cover. A recent snapshot of South Africa’s healthcare coverage shows that just 16% of the population belong to private medical schemes with the balance dependent on the public healthcare sector. Clearly the first attempt at expanding medical schemes coverage over time has failed.

The roadmap changed after an ANC resolution (to implement NHI) was taken at the Polokwane conference in December 2007. The two-line resolution was subsequently fleshed out by an ANC task team which handed a policy document to the Department of Health (DoH) some 18-months later. “It is very important to realise that the document is not public – nor is it an official policy statement of the government or the DoH,” said Broomberg. What did the ANC task team propose? Unhappy with the slow pace of reforms and the inequity in the existing healthcare environment the task team suggested doing away with medical schemes and replacing them with a single NHI fund administered by an NHI Authority. The NHI fund would receive general tax (from Treasury) and collect an additional payroll tax from all employed citizens. Funds would be distributed to provincial authorities – from there to district authorities – and finally to service providers (including public hospitals and clinics, private hospitals and private doctors and specialists).

There’s nothing wrong with this model, said Broomberg, adding that it was currently employed in Canada. But “it is a first world ‘ideal’ model that ignores some of the realities of our country!” He warned that to build an effective NHI South Africa needed time and consistent long-term economic growth. It would be unwise to “leapfrog” these building blocks!

Four questions that must be answered

What has to happen prior to an NHI implementation? According to Broomberg “there are some critical questions that need to be answered.” He added that “these were real questions that all responsible companies, organisations and citizens should ask!” Broomberg’s four questions include:

Q1: What benefit package is affordable on NHI?

The first question deals with the balance of income and expenditure in the proposed model. An independent cost analysis shows that a prescribed minimum benefit (PMB) would set taxpayers back approximately R146bn per annum. To extend a basic comprehensive benefit package to all South Africans would require R249bn, while extending the average comprehensive package (as offered by private medical schemes today) to the entire population would cost a staggering R325bn. That’s the equivalent of 14% of the country’s GDP. At present government spends approximately R80bn on health. Even if we reach government’s target of 15% of total government expenditure on healthcare we would only have R108bn to play with.

Broomberg questioned the task team’s assumption that a government administered NHI Fund would be able to negotiate 30% cost savings across the supplier base. “We believe that Discovery is pretty efficient at negotiating costs with hospitals and doctors – we’ve got the best price in the market by a long way,” observed Broomberg. An across the board reduction of this magnitude could lead to the collapse of the entire private healthcare sector. Another major cost concern is the focus on residency instead of citizenship. The numbers are being worked out based on an estimated 48.7m lives; but immigrants (legal or illegal) have access to services too. A very basic assessment of the numbers required to make NHI work reveals that “the promises that are being made are absolutely unrealistic!”

Q2: What level of additional tax revenue will be required for NHI?


The task team document doesn’t say much about funding the NHI model. Analysts suggest the comprehensive cover would require a 20% payroll tax! This illustrates the simple truth, said Broomberg, that “in order to provide universal cover you need a high proportion of your members in employment.” A major argument led by the ANC task team in this regard is that 16% of the population absorbs 45% of all healthcare expenditure. But they ignore the funding side of the picture. The reality is 16% of the population is providing 78% of all funds available for healthcare (private and public) and consuming just 45%! In this regard the “progressive tax system” is already working, with the well-to-do funding the have-nots. “It is not fair to say to individuals who are paying 78% (and consuming 45) that they must pay another huge tax and suffer deterioration in the quality of service they receive,” said Broomberg.

Q3: Does South Africa possess the resources for a successful NHI implementation?

The ANC task team hasn’t addressed where it will find the resources to service its NHI model either. A few simply calculations show that extending current private sector healthcare service to the entire population would require 70 000 additional hospital beds, 140 000 new general practitioners and 410 000 extra nurses! Even if government doubles efficiencies by cutting out “unnecessary” procedures and medication it is going to fall way short of the mark!

Q4: What role will private healthcare play in the NHI system?

What principles would Discovery bring to the debate? “Discovery believes that full, rigorous and honest public debate is very important, that it’s critical that healthcare funding be increased, that an NHI reform should be implemented slowly and incrementally and not with a ‘big bang’, that there should be a strong focus on governance and management of the public hospital system, that private providers (doctors and hospitals) must have the choice of contracting with the NHI or with private medical schemes and that citizens should have a choice of NHI coverage or medical schemes coverage.” Broomberg hoped that a set of sensible proposals would emerge from the discussion process.

Editor’s thoughts: You cannot implement a business plan without the required human and capital resources. Extending healthcare services to all South African citizens is a fairly simple numbers game. We don’t have enough money, human resources or medical infrastructure to implement even a scaled-down version of the ANC task team proposal. Why is government hell bent on implementing NHI when the ‘numbers’ don’t make sense? Add your comments below, or send them to gareth@fanews.co.za

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