The great health insurance debate

2009-06-15 00:00

HEALTHCARE CONFERENCE: Government health plan a ‘disaster’

The government’s proposed National Health Insurance (NHI) scheme was strongly criticised at a recent healthcare conference in Durban.

A leading health economist called the proposal “a disaster” and a business representative warned against “reckless and premature” implementation of the plan. They were both speakers at the three-day annual Hospital Association of SA (Hasa) conference held at the Elangeni Hotel.

Economist Alex van den Heever dismissed the NHI proposal as a “completely unworkable, unaffordable solution that won’t improve health services despite massive increases in expenditure”.

He said there had not been any public discussion or proper debate around the proposal which had been kept confidential, and “there seems to be an attempt to avoid debate on this issue. The documents have been produced, but have not been subjected to external peer review or technical analysis.”

Van den Heever said the proposal envisages a “big bang” approach to implementing NHI rather than a phased-in approach.

Scathing in his attack, he said the legislation is being driven by private interests and “implies huge institutional changes that have not been rationally motivated or subjected to sufficient scrutiny”.

He said the proposed system would duplicate the current public system. “The problem with our health system is clearly not only about how much, but rather how well the public funds are spent.”

The proposals focused on describing the institution necessary to implement the new scheme, rather than practically demonstrating how it would solve the main problems in the health system. “The assumption is that you just need to create this institution and everything will fall into place,” he said.

Van den Heever said the proposal makes general practitioners frontline service providers and all doctors would have to move into accredited group practices. “Despite the fact that the committee accepts that South African doctors may leave the country if it introduces its proposals, its response has been that doctors will be imported from Cuba and the Philippines,” he said.

He criticised the plan’s call for all South Africans to register and carry an ID card, as this would create a massive bureaucracy that would need to be kept updated and be made fraud proof. The proposals would also see provinces operating as medical schemes and provincial authorities would have to process claims for providers and suggests this could be achieved within 60 days.

He said the proposed changes would introduce a complexity into the health system that would outweigh any benefits. Far from reducing costs, he said, it is more likely to increase them significantly.

CEO of Business Unity South Africa (BUSA), Jerry Vilikazi, said business recognised the NHI scheme as “a noble objective” and a commitment from the new administration to eradicate inequities in the health-care system. “However, we would like to caution that a reckless and prematurely implemented NHI may delay the achievement of access to quality health care. The successful implementation of NHI depends on the state of readiness of delivery in the public sector and a viable funding model.”

Vilikazi recognised the importance of the healthcare system saying that South Africa needs a healthy workforce to be globally competitive.

He urged the government to provide for sufficient public discussion and to engage with all stakeholders on the plan. He called on the private sector to “engage constructively” with the government on the issue. “It will not be in anyone’s interest to rush through such a critical policy, as it needs to be premised on a sustainable funding model,” Vilikazi said.

Facts: What is the NHI?

A CONFIDENTIAL proposal paper drafted by an ANC task team led by Olive Shisana, CEO of the Human Sciences Research Council (HSRC), proposes setting up a National Health Insurance Authority (NHIA) within a year to oversee health care in both the private and public sectors. It proposes increasing the health budget by R100 billion and introducing an earmarked tax on all employed South Africans to create universal access to health care.

All South Africans would be registered on a unified national health-care register and would need to be issued with an identity card. People would not be able to opt out. Costs would be shared between employers and employees.

Under the proposal, medical scheme members would pay 85% of their contributions, irrespective of the option they were on, to a global fund which would pay both public and private sector providers. Non-medical scheme members would have to pay five percent of their income to the fund. Medical schemes would only be able to cover benefits that are not covered by the NHI.

The document is still at task-team level, from where it will go to the National Executive Committee for drafting into legislation.

The Deputy Minister of Health, Dr Molefi Sefularo, said the Department of Health (DOH) will release papers outlining its NHI plans by the end of June. It will then consult with stakeholders before releasing a White Paper on the NHI. He said DOH has “noted the concerns of the private sector about the prolonged silence [from the Department of Health] on NHI and lack of certainty about what is contained in our plans.” He said the plan would not be sprung on the health care sector by surprise and there would be “ample opportunity for debate and contribution.”


Govt response: Matsoaledi defends NHI

Debate on the president’s State of the Nation address by Dr Aaron Motsoaledi MP, National Assembly, Parliament ...

FIRSTLY, we have not yet, as government, released any official policy document for public engagement on National Health Insurance (NHI). We are still going to do so, and very soon we will.

What has so far happened are intentions in our election manifesto and the announcement by the president on the campaign trail about the desire of the African National Congress to implement the NHI.

We know what is at play here. Certain people, who are benefiting hugely from the current inequitable health system, are already trying to transform their own fears and personal concerns into public fears and concerns. There is nothing ideological about NHI.

One of the most glaring and obvious reasons why the public sector is not doing well, is what the people who have started engaging are trying their best to hide. This is the manner in which the 8,5% [what the country spends on health] of the GDP is distributed among the population of our country:

)Five percent goes to 14% of the population

) The remaining 3,5% goes to the 86% of the population.

If it is ideological to resolve this state of affairs, then I fully subscribe to such an ideology.

It is said that NHI will destroy medical aids and damage the already well-functioning privileged health-care system in our country, which is ranked as one of the best in the world. We have absolutely no intention of destroying anything at all. What the NHI will obviously and unapologetically destroy is the current inhumane scenario.


Anti-national health insurance: It’s inappropriate, writes Alex van den Heever

THE institutional consequences of an insurance approach for national health are substantial, as the systems requirements are very different. A medical scheme operates very differently from a provincial health department. Insurance-funding approaches cost significantly more than conventional public sector budgeting and planning approaches.

) Some might argue that NHI is defined by the existence of a “single purchaser” of health services. However, all public systems are by definition single purchasers, with the existing South African system no exception.

) No research has been produced in South Africa which has identified the need for an insurance funding approach for the public health sector as the central systemic problem requiring correction. By contrast there is a substantial body of literature identifying correctable systemic failures of the public system, none of which involve changing the funding approach to that of insurance.

) It might be argued that proposals to introduce NHI mainly focus on improving the effectiveness of the public health system. However, a proposal emanating from an ANC discussion paper, recommends that the public sector be entirely replaced with an insurance-based approach.

) The report further recommends the implementation of a substantial progressive earmarked tax, sufficient to raise an additional R100 billion per annum immediately. The proposal involves an earmarked tax that would need to raise additional funds primarily from high-income groups.

) The proposed scheme will not be possible to fund a benefit equivalent to what medical scheme members currently purchase from their own income. Consequently, the additional tax will generate no offset in the demand for private services and will amount to a substantial increase in the tax burden and to the perceived general cost of labour (the earmarked tax will be applied to all income earners in addition to existing taxes, medical scheme or other health insurance contributions).

) There will be significant contingent financial risks for the government and the country. This arises from the need to contract with all private providers, when the capacity to enter into coherent contracts without substantial fraud and inefficiency is unlikely to exist.

) The insurance-based approach appears, illogically, to be motivated on the grounds of enhancing equity. However, insurance-based approaches are not superior to conventional public sector planning and budgeting in achieving equitable outcomes.

) The report appears in part to motivate its changes on the improbable grounds that it can improve on private sector inefficiencies. However, there is no examination of the real risk that the proposals could deepen the service delivery crisis in the public system.

) An unusual proposal is to require that medical scheme members pay 85% of their contributions into the NHI, for which they will receive only public cover in return. If the public sector services are inadequate, no one will be permitted to insure themselves for any benefits covered by the NHI.

) Aside from the punitive tax and benefit provisions, there is no certainty that the actual authority will operate efficiently.

) In substance this proposal comes across merely as an attack on income earners and businesses. It has been conceived within a questionable process designed to avoid the standard reality checks associated with complex policy development.

• Alex van den Heever is a specialist economist in public policy, health and social security. This article, written in his personal capacity, is an edited version of a longer article that can be read at

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