Health insurance

Between the dream and the reality: social health insurance in South Africa

How can developing countries implement health systems that are both equitable and sustainable? Is social health insurance (SHI) a valid healthcare finance mechanism for these countries? This article examines the lessons that can be drawn from the South African experience of adapting and implementing SHI. Researchers have studied the implementation of SHI in South Africa. SHI has a long tradition in the developed world but was only revived as a potentially useful model for low and middle-income countries in the 1980s. This revival was because: * it was thought that SHI could increase the equity and efficiency of health resources * it was believed that SHI could generate resources at times when government funding in healthcare was in decline. These views were held by many policy-makers in South Africa in the late 1980s. Their stance was strengthened at the time by the existence of an unequal health system that spent its resources on a relatively small minority and did not provide care to those most in need. SHI was seen as the best funding model to deal with these problems. Its introduction was announced in the National Health Plan by ANC in 1994. The initial idea is that the state collects funds from different sources and uses them to buy health services that can then be distributed to the population according to need. It was estimated that at least half of the South African population would benefit from the scheme. In the event, only a limited version of this idea is now being proposed. Researchers found that: The introduction of SHI in South Africa in its currently proposed form would not address the challenges of equality of provision faced by the system. This was partly because only those above a certain income were asked to contribute to financing, and would benefit from, the system. * The model of SHI introduced only covered hospital services and not the entire range of healthcare services. * The system increased inequalities in access to healthcare, with the rich accessing services through private insurance and the state covering low-income and high-risk groups. The paper illustrates how SHI design can be affected by concessions that have to be made to key stakeholders and how these can affect the core objectives of SHI. Lessons for future policy development and implementation include: * The design of SHI has to be geared to achieving key policy objectives such as equality and sustainability. * In order to avoid inequalities of access and ensure the long-term sustainability of the system, it is necessary that the SHI and existing private insurers contribute to the same funding ‘pot’. * For SHI to work its implementation has to take place at the same time as organisational and other financial reforms. * Pre-determined objectives need to be stuck to in order to protect the integrity of the policy. * It is necessary to take into account that powerful actors such as private insurers or high-income groups can have a negative effect on the implementation of SHI. Contributor(s): Di McIntyre, Jane Doherty and Lucy Gilson Source(s): 'A tale of two visions: the changing fortunes of social health insurance in South Africa', Health Policy and Planning 18(1): 47-58, by D. McIntyre et al, 2003.( Source: 29 July, 2003).

Taking a new partner to bed should wake up the industry

Change of focus will provide cover for more employees Netcare is doing the smart thing by getting into bed with the doctors. Its deal with SA's largest doctor group, the SA Managed Care Co-operative (SAMCC), gives the country's biggest private hospital company preferred-supplier status to provide healthcare services to the new state medical aid scheme. The deal marks a change of strategy by Netcare, which has up to now focused on the provision of healthcare to the middle-to-high-end of the market. The new venture, called Netpartner Investments, will enable Netcare to tap into 480 000 civil servants who will for the first time become members of a medical scheme. Government plans to consolidate all civil servants with medical aid cover on to a new scheme. It will also provide cover for the first time to lower-ranking employees. The scheme is likely to be launched in January 2005. The new scheme is a precursor to the launch of a state-sponsored open medical scheme that will be a low-cost alternative to traditional schemes. Government aims to encourage private healthcare providers and funders to compete on the basis of price, or risk losing existing and new members to the government-sponsored scheme. Netcare CEO Jack Shevel says the new managed care company will position Netcare as the low-cost provider to the new state scheme. Netpartner Investments intends to drive down healthcare costs to the point where medical aid ecomes affordable to blue-collar workers. Shevel says private healthcare cannot be run as it used to be. Past practices have led to sharp increases in healthcare costs, a development that has increased the cost for employers to subsidise their employees' medical aid contributions. Hospital companies, on the other hand, have seen bed occupancies drop. They are also under increasing pressure from large funders to cut rates. One of Netpartner's first investments will be to acquire a stake in Medicross, Netcare's primary care subsidiary. Its capitated products will form the basis of Netpartner's offering. It will work like this: a medical scheme will contract Netpartner to provide the full continuum of care for its members, including GP visits, dental care, radiology, pathology, specialist care and tertiary hospital care. Netpartner providers will have incentives to keep patients well through risk-sharing reimbursement arrangements. For instance GPs, radiologists and pathologists will be capitated - paid a fixed fee per patient per month rather than a fee per consultation or investigation. Netpartner as a whole is likely to operate on a gain-share model where the entity agrees to service a scheme's patients for a certain budget. If actual costs exceed the budget, Netpartner takes the fall, but if it manages to cut costs then all Netpartner providers share in the upside. As doctors, dentists and specialists may also purchase shares in Netpartner, (the intention is to list it on the JSE), there will also be a financial incentive for providers to ensure that the company delivers affordable, quality care. However, it also creates an incentive for doctors to direct more patients to Netcare hospitals - away from other hospital groups. The SAMCC represents 3 200 doctors out of about 5 800 full-time practising GPs in SA. SAMCC national chairman Dennis Dyer says the venture has the potential to increase doctors' patient volumes, ensure that they are paid better, faster (many wait 90 days for schemes to pay claims) and with less administrative hassle while ensuring their clinical independence. Much back-slapping occurred at Netpartner's launch in Cape Town last week, with both Netcare and SAMCC executives touting the partnership as the solution to rising medical aid costs. It is too early to tell whether their good intentions will translate into cost-saving solutions for members, but the initial market reaction has been less cynical than is usually the case when the term managed healthcare is used. Despite the fact that capitated products and provider networks have failed to drive down the cost of health plans enough to attract the low end of the market, Alexander Forbes Healthcare Consultants deputy head Bernie Clark supports the move. Even administrators, such as Discovery Health, who could feel threatened by Netpartner, have tentatively welcomed the new initiative.( Source: The Financial Mail, 1 August, 2003).

Medical aids urged to back central fund

The department of health has urged the medical aid sector to explore ways of ensuring that the risk-equalisation fund becomes an important instrument for sustaining members' contributions. In terms of the risk-equalisation system, a central fund will receive contributions from schemes with below-average risk, thus creating a much larger risk pool. Instead of schemes competing on the basis of risk selection, they would compete on the basis of cost and the quality of healthcare services purchased. Ayanda Ntsaluba, the Department of Health's director-general, told a media briefing yesterday: The international literature we have examined suggests risk-equalisation is a complex exercise to undertake. He said the department believed social health insurance contributions should be based on income, to ensure that income cross-subsidies were entrenched. The tax subsidy on medical schemes contribution, currently estimated at R7.8 billion, is an important reflection of government commitment to encourage people to provide for their own healthcare, Ntsaluba said. We need to ask uncomfortable questions about whether it is appropriate for the government to allocate more than R1 000 per capita on medical scheme beneficiaries who spend R5 000 per year on healthcare, while only allocating R800 per capita on public sector users. Brenda Khunoane, social health insurance director, said R2 billion had been invested so far in a programme aimed at improving the planning, management and physical state of our public hospitals. (Source: Business Report, 10 July, 2003).

Healthcare system needs more than just a Band-Aid

We all know where the government is headed with health care. The question that begs answering is: where is the private sector going? Right now the private medical sector is merely responding reactively to initiatives by the state. Besides the implementation of managed healthcare in the 1990s, the private sector has taken few new initiatives. The ad-hoc manner in which managed healthcare was implemented in the fee-for-service environment resulted in such care failing to deliver the expected result - making services cheaper and more accessible. The state is determined to bring about a social health insurance environment. The response in the private sector has been a scurrying by medical scheme administrators to ensure they secure state contracts. Much energy goes into this, while not enough is put into cutting costs for the members of private medical schemes. The state's goal with social health insurance is to put a safety net of affordable medical care within the reach of all South Africans. The effect of this poses a large risk to the survival of private sector health care. In its attempt to provide cheaper medical care, the state is positioning itself as a service provider in direct competition with the private sector. The problem therefore is two-pronged. On the one hand, by regulating enthusiastically the state sometimes brings about results that contradict its own intentions. For example, there is open enrolment and community rating without introducing compulsory membership of a medical scheme. This led to anti-selection, which resulted in there being no cross-subsidisation between young and old, healthy and ill. On the other hand, the private sector is slowly killing itself through the different role-players' shortsighted protection of their own interests. There is nothing new in the private sector. It is still merely a fee-for-service environment because there are too many vested interests. Doctors and hospitals protect their income and profits. Nowhere is there a joint initiative that brings together doctors, hospitals, medical schemes and administrators to create a system that is affordable. The profitability of a service provider or group of service providers is directly influenced by the profit on medication and consumables. In the fee-for-service environment there is no incentive for the service provider to pursue cost-effectiveness to the benefit of the member. The more expensive the item, the greater the profit. The state's answer to the health industry's inability to limit costs is firstly to use its buying power by means of a central state medical fund and secondly to make available its infrastructure as a service provider for the delivery of health care to the private sector. Furthermore, it is the legislator's intention to prescribe by means of regulations what the benefit structure of a medical fund should look like and what the administrator should charge for its services. Healthy competition between private medical schemes on the basis of service and benefits is therefore thwarted. The state also plans to rectify inequalities in terms of the risk profile of schemes by means of a risk equalisation fund. A good medical scheme with good risk management will get less benefit from the fund, while the one with poor risk management will be able to get more money from the equalisation fund. The accountability of trustees will come under fire and there will no longer be an incentive to manage risks. The intended introduction of a single scheme for public servants and possibly also local authorities means administrators are currently scurrying to secure state contracts. Because state schemes could be opened to private members, this could lead to further shrinking of private medical schemes. To try to make health care more affordable it can be expected that private hospitals will increasingly take doctors into their service. The state's intention to introduce a statutory tariff for doctors and their being forced into networks of preferred service providers poses the threat of even more doctors leaving the country for greener pastures elsewhere. The private sector will have to get its house in order and not merely be reactive in response to actions by the state. It will have to create a delivery system that ensures there is room for the doctor. By changing its delivery systems and forming partnerships, the private sector can assure its survival and aid the state to provide poorer people with accessible health care. (Source: Herc Hoffman, Sunday Times, 29/06/2003) Hoffman is chief executive manager of Multimed

Intergovernmental Fiscal Review 2003

Introduction - Chapter 5: Health South Africa’s public and private health care system contributes approximately 8 per cent of South Africa’s GDP. Two of the largest components are medical aid scheme contributions of about R41 billion, and expenditure by provincial health departments of around R33,2 billion in 002/03. Close to 7 million South Africans are covered by medical aid schemes. The majority are predominantly covered by public health services, which comprise 13,3 per cent of consolidated national and provincial non-interest expenditure. Private medical aid scheme contributions were approximately R5 900 per beneficiary in 2002 (R490 per month), approximately six times provincial health expenditure of R911 per uninsured person. Each of the three spheres of Government plays a role in the delivery of health services. The national Department of Health focuses mainly on policy, legislation, national programmes and international liaison. The major delivery responsibility rests with provinces with combined budgeted health expenditure amounting to R36,9 billion in 2003/04, including conditional grants. Of this, about R6,0 billion is budgeted for out-of-hospital primary health care. Local Government also plays a role in relation to environmental health and clinic based primary health care services. Combined budgeted spending of the six largest municipalities, or metros, amounts to R1,1 billion in 2002-03 1. Provincial health budgets rise significantly in 2003/04, in keeping with the expansionary fiscal stance of the 2003 Budget. This is also in order to strengthen the health sector in particular and to intensify a range of specific programmes. Key features of the provincial health budgets are: -Substantial funding increases especially for health services in previously disadvantaged provinces -Large increases in the Hospital Revitalisation Programme -Increases for the Integrated Nutrition Programme -Further strengthening of the Enhanced Response to HIV/Aids Strategy -R500 million rising to R1 billion additional funding annually for a new system of rural incentives and a scarce-skills strategy for the health sector. Significant reforms introduced in this year’s budgets include a new standardised budget programme structure for health and, improved uniform formats for the nine provincial strategic plans. The new framework for tertiary health services funding is now operational and is being strengthened by the Modernisation of Tertiary Services project.

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Competitive voucher schemes: can they improve healthcare for the poor?

Competitive voucher schemes are a relatively new way of organising healthcare provision. However, they may well help solve some of the difficult problems faced by conventional health programmes. Vouchers allow governments and donors to: * target and reach the poor * subsidise only cost-effective interventions (i.e. based on evidence and best practice) * involve both private and public sector healthcare providers * use competition to minimise costs, and maximise quality * broaden poor peoples’ choices for health care. The Central American Health Institute (ICAS) has been experimenting with voucher schemes for almost 10 years. It has applied the concept to HIV/AIDS prevention, adolescent health, and cervical cancer screening. ICAS contracts healthcare providers through competitive tenders and distributes vouchers to target populations. Patients then choose a provider whose services are paid for by the voucher agency at a contracted fixed fee per voucher received. Quality is monitored and the best providers are retained in the schemes. The results have been encouraging. ICAS has demonstrated that these schemes can reach groups that are otherwise almost impossible to reach, whilst producing significant health benefits, greater equity and efficiency. However, many governments and donors are reluctant to implement voucher schemes. Reasons why policy-makers might be reluctant to implement competitive voucher schemes or other public-private partnerships (PPPs) in health, include: * A lack of best practice guidance or evidence on competitive voucher schemes. In the majority of both developed and developing countries this type of scheme is unheard of. * An ideological objection to working with the private sector. Some policy-makers are concerned that taxpayers' money should be invested in public health services and not distributed to the private sector. * Concern that private sector services will cost more than publicly provided services. * The failure of some Ministry of Health (MOH) officials (and even some donors) to see their role as going beyond the day to day running of government hospitals and clinics. To support voucher schemes they must consider the whole health system within which their role is to sustain and improve peoples' health, regardless of who provides the services. * Government owned clinics tend to be short of many things (drugs, staff, equipment etc). It is therefore easy to make prioritise their rehabilitation before purchasing services from private providers. * Political issues may be important. Voucher schemes can result in poor and underprivileged groups (such as sex workers) receiving better quality services than the general population. This can be difficult to justify to a powerful middle class electorate. * Donors are more likely to query the sustainability of voucher schemes. Many believe that the resources they put into MOH activities will be ‘picked up’ by governments once their project funding ends. However, to ensure sustainability all donor-funded activities, including voucher schemes, require financial commitments to be eventually assumed by governments, social security funds, or the beneficiaries themselves. Without sustained economic growth, the prospect for this is poor. * Concerns that schemes are susceptible to abuse. Black markets, collusion between healthcare providers and distributors, and counterfeiting are some obvious examples. Even if these abuses are rare, an isolated instance of abuse can undermine a programme’s legitimacy in the view of many policy-makers. In extreme circumstances, it may even be in the interest of some to preserve existing abuses if, as is sometimes the case, it is organised corruption of direct benefit to them. (Source: id21 Research Highlight 26 March, 2003).

State employees to be put on medical aid

Private health insurers prepare for a shake-up as government looks to improve efficiency Government's ambitious plan to place all public servants on a single medical scheme by the start of next year heralds a major shake-up for the private healthcare industry. Industry observers are predicting a better deal for consumers, a stronger public healthcare system and more effective administration for government. But for medical schemes and administrators the picture might not be so rosy, with several of the smaller players likely to hit hard times. At present, public servants can choose from any of the 40plus open medical schemes registered under the Medical Schemes Act. Government subsidises two-thirds of their monthly contributions, up to a ceiling of R1014. Last year this created an estimated bill of R4,5bn, despite leaving half the state's employees out of the loop; just more than 450000 of government's 890500 plus employees are members of medical schemes. The current scenario is clearly fraught with difficulties for government. Many of their employees simply cannot afford private medical insurance, and those that can are subject to a varying basket of care across the many schemes. In addition, managing payments to a plethora of schemes and administrators is a nightmare, and does not enable government to use its purchasing power to negotiate a better deal for its employees. There are also concerns about the fees paid to brokers, who garner up to 3% of a member's annual contribution, as there is considerable movement of members between schemes. The single medical scheme should also enable government to use its purchasing power to negotiate better rates from providers such as hospitals and doctors, helping to curb medical inflation, says NMG Levy actuary Sarah Bennett. The tender documents point towards a scheme with a medical savings account,and industry sources say there are likely to be up to five benefit options. The basic package, which will be available to all public servants (those who can afford it will be able to buy up), will provide chronic medication, a disease management programme inclusive of HIV/AIDS and unlimited hospital cover, based on public-private partnerships. These partnerships effectively result in a two-tier service in public hospitals private wards for patients who are members of medical schemes, and the public wards for those who are not. The intention is for government to reduce the costs of hospital cover for its employees on the mandatory scheme (public facilities generally claim they can undercut their private sector competitors by between 20% and 30%) while at the same time bringing much needed revenue to the overstretched public healthcare system. Brokers specialising in public service employees will be hard hit, and industry sources warn that the smaller medical schemes, and those with a high proportion of government employees on their books, also face uncertain future. Even a scheme as large as Discovery, which covers 1,25 million lives, will feel the bite, as 60000 of its members move elsewhere. However, losing members may be offset by gains on the administrative side of the business. The tender for administering the proposed medical scheme is expected to be published shortly. (Source:Business Day, 19 March 2003)

Controversial health plan 'still open for input'

The Western Cape's health boss has moved to allay fears among staff over radical changes being predicted under a new health plan envisaged for the province. Far from being cast in stone, it is a model - and staff and other interest groups should add their input now to ensure the final plan is acceptable to as many people as possible, Dr Craig Househam said. Interested parties have until the end of the month to have their say. The plan will be fine-tuned in March before final presentation to the provincial cabinet. Househam's comments follow serious concerns that one of the city's two teaching hospitals, Groote Schuur and Tygerberg, could be downgraded to a secondary hospital to cut down on duplication. At this stage the plan foresees a shift in both patient care and the present tertiary-level teaching platform, in line with essential restructuring as a result of financial constraints. He pointed out that the principles of the health plan were fixed: We assume that 90% of patients will have their first point of entry into the health system at primary healthcare clinics. Eight percent would need something extra and would be referred to a secondary hospital for treatment by a general specialist. The 2% left would need to see a super-specialist like those based at a tertiary hospital. It is these statistics that have led to predictions that either Groote Schuur or Tygerberg will have to go, not necessarily literally but almost certainly downgraded. Responding to claims that beds were already being closed in the city, Househam said this was a response to current budget constraints ahead of the next financial year, and had nothing to do with the plan. He said the plan envisaged minimal changes in the total number of beds in the province, but rather addressed the way they were distributed.(Source: Di Caelers, The Cape Argus, 10 February 2003)

Staying alive in SA is a costly business

Every year medical scheme members grimace and dig a little deeper into their pockets for their annual health insurance contributions. These increases have outstripped headline inflation by at least five percentage points for the past two decades, and this year will be no exception. Increases will range from 12% to 18%, according to the Board of Healthcare Funders, which represents medical schemes. Yes, patients are paying more, says Roseanne da Silva, who chairs the actuarial society's health committee. And by and large they are getting less. Industry players say health care takes an everincreasing slice of household budgets because medical costs are rising at a rate of between 14% and 17%, far in excess of headline inflation (projected to be 7% to 7,5% this year) and annual salary increases. But do not forget, says Da Silva, that SA offers some of the best medical technology in the world. So in some ways, they are getting more now than 10 years ago. Hardly anyone in the health-care industry disputes that imported inflation, overservicing, fraud, salary bills, kickbacks to providers, and the legal requirement to retain a proportion of contributions as cash reserves all serve to drive up costs. More controversial, however, is the level of fees charged by scheme administrators. The Council for Medical Schemes, the statutory body charged with overseeing the industry, said last year that the nonhealthcare expenditure of schemes, mostly administration fees paid for servicing medical claims, was far too high, rising 41% during 2001 to R3,5bn. The Board of Healthcare Funders denies administration fees are that high. Funders (medical schemes), administrators, and service providers (doctors, hospitals, and the manufacturers of medical supplies) accuse each other of pushing up prices by raking in unreasonable profits. Norman Weltman, the executive director of Netcare, one of SA's three listed private hospital groups, says about 10% of the group's hospital admissions are now uninsured, up from just 4% in the mid-1990s. Alex van den Heever, an adviser to the Council for Medical Schemes, points out that it is precisely because medical insurance is so complicated that the industry requires the watchdog council. With a membership base hovering at the 7-million mark for several years, and getting older and more expensive to insure, observers such as Van den Heever warn that the private health-care industry is not sustainable in its present form. (Source: Business Day, Jan 14 2003)

Trust seeks equity in access to public, private health care

Cape Town A social health insurance system designed to close the gap between private and public health care should be considered in the face of a stalled drive for equity in access to health care. Private sector spending per person was five times more than the public sector's, Parliament's health committee heard yesterday. Antoinette Ntuli of the Health Systems Trust said less than one in five South Africans were covered by medial aid and that while 70% of whites were covered only 10% of Africans enjoyed access to medical aid. She said in recent years there had been a decline in spending on primary health care and many provinces had fallen behind. She also suggested to the committee that attention should be given to mechanisms that determine the spending on provincial level on health services. Health is a shared competence between national and provincial government and health spending in the provinces comes out of their global allocation from the national treasury. The size of health spending is determined by the provinces. Ntuli said that consideration should also be given to introducing a stronger equity-backlogs component to the formula which determined the global allocations in the provincial budgets. She indicated that in addition to some provinces perhaps not allocating sufficient funds for health care there were also indications that SA was not getting value for money in terms of the money which it was spending on health care. She pointed out that while Venezuela had the lowest gross domestic product (GDP) per capita, it also had the lowest mortality rate of the four for children under five years at 23 per 1000. SA, with a per capital GDP almost a third higher, had a mortality rate for the under fives three times higher. Ntuli said that between 199293 and 1997-98 there was growth in government spending on health care and a shift towards primary health care. To illustrate the divide between private and public health sectors, she said that of all nurses in SA, 59% were in the public sector while of all psychologists 94% were in the private sector. Seventy-six percent of pharmacists were in the private sector, 93% of dentists, 75% of specialists and 73% of general practitioners. This led to the recommendation that further measures to reduce the inequity between the sectors should consider a social health insurance that allows for cross subsidising between the haves and the have-nots. (source: Wyndham Hartley Business Day, 1st Edition Oct 23 2002)