National health insurance

Health Minister Manto Tshabalala-Msimang has upped the ante in her battle with the private healthcare sector to control the spiralling costs of health and medicines by rejecting suggestions that she was the minister of public health and should only focus on that sector.

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: http://www.id21.org/health/h1dm1g3.html 29 July, 2003).

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).

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

The Committee of Inquiry into a Comprehensive Social Security System has proposed that SA move towards a national health insurance (NHI) system in which everyone, except the poor, contributes to the cost of providing universal healthcare. Presented to Cabinet last month, the committee's report covers many social security issues, including the idea of a basic income grant. Cabinet will consider input from relevant ministries before making the final decision on the report. Rather than advocate a big bang approach, the health subcommittee proposes that change be achieved gradually in four phases, starting in 2003. In phase one, the reforms involve containing costs in the private sector and raising the quality of public hospital services. Both are huge undertakings that are likely to take many years, but the model allows only one year before beginning phase two. This phase proposes a closed, compulsory medical scheme for all 1m civil servants, compared with 450 000 at present. Phase two should see the establishment of a risk-equalisation fund to redistribute funds from schemes that have a good risk profile (many young and healthy members) to those with a poor risk profile. The aim is to reduce the cost of medical aid by eliminating any residual risk selection from the market. With this proposal goes the transformation of the current tax subsidy to employers and employees with medical aid (worth R7,8bn/year for 7m people) into an income and risk-adjusted subsidy. Government spending on health (about R33bn/year) plus this R7,8bn subsidy will be pooled in a central fund and disbursed on a per capita basis to the whole population. The rich, young and healthy will receive a smaller subsidy than the sick, old and poor. Those using the public health system will receive the subsidy in kind and those belonging to medical aid schemes will receive discounts on their medical-aid contributions. The report recommends the tax system be restructured in this way to allow for the greater pooling of risk. Phase three (starting in 2005) focuses on creating a contributory, voluntary scheme for those with jobs but no medical aid. It will help to establish the institutions in government that will ultimately manage a public sector contributory scheme within an NHI framework. It will give members an enhanced public health benefit. The poor will receive a basic health benefit for free. In phase four (starting in 2006), low-income earners will be compelled to make contributions to an NHI fund as will all middle- and high-income earners. The latter will also pay contributions to schemes, which they will be compelled to join. Health economist Alex van der Heever, who chaired the health subcommittee, says this proposal should not worsen unemployment by increasing the cost of labour. He says about 70%-80% of this group already belong to schemes and only large employers will be targeted. Also, medical aid will be cheaper because of the reforms made in the earlier phases. Employers of low-income earners will not be affected as, unlike in previous social health insurance proposals, this group will not be compelled to take out medical aid. Like other employees, low-income earners will contribute to the NHI fund from personal income tax. The NHI fund will be funded through earmarked taxation, rather than general taxation, the current source of public health finance. (Source: Financial Mail, 17 May 2002)

During this month (April) new proposals will be released by Cabinet which could alter the entire foundation of South Africa's healthcare system by changing the way health is financed. The proposals for a social health insurance scheme, which will be part of a wider plan for social security, will be released for wider consultation before the final recommendations are made, said Fezile Makiwane, deputy DG for Social Development and a key member of the committee of inquiry into social security. The Ministers of Health, Social Development, Transport, Labour and Finance have all been briefed by the committee and, as their sectors are all affected by these proposals, they are taking the process forward and making a joint submission to Cabinet. Cabinet will release the proposals in early April, said Makiwane. Social health insurance is seen as one component of a potential future social security system. In addition to health, the committee considered how to provide social security benefits in relation to unemployment, retirement and old age, disability, poverty and social assistance, injuries and diseases arising from employment, and road accidents. A social health insurance scheme is regarded by its proponents, mostly health economists, as the answer to the crisis in South Africa's overburdened state hospitals and it is being eagerly awaited by the medical aid industry which will double its business if the proposals go through. But the unions are against the plan and are ready to fight it. Nearly a decade after social health insurance was first proposed as a mechanism for extending health care coverage and promoting equity in South Africa - and after investigation by three government committees since 1994 - the plan could finally be coming to fruition. Its proponents are confident it will have a better chance of getting through this time because for the first time it is part of a wider social security plan. The proposal is that everyone in South Africa who is in formal employment, but who is not already on medical aid, should become part of a compulsory social health insurance scheme. It will be an earmarked tax which will go into a state fund, but it may be administered by the medical aid schemes. Also, by reducing the number of people whose health care has to be funded out of the public budget, or by contributing to the public budget through fees paid directly to public services, it has the wider effect of improving equity across the entire health care system. Professor Di McIntyre, director of the University of Cape Town's Health Economics Unit, said the plan rested on the ability of medical aids to contain costs. McIntyre said the original proposals were that everyone who is insured, including those who currently have medical aid, would fall under the social health insurance scheme - which would promote a wider distribution of resources. But under the present proposals, the medical aid schemes and the state fund will be completely separate, which rules out cross-subsidisation between high income and low income groups. She said this would limit the extent to which the original objectives of the social health insurance proposals could be met - it was envisaged that the social health insurance could extend health insurance cover in South Africa, as there would be substantial cross subsidisation and lower income groups would pay relatively little in contributions to the fund. The other potential landmine, said McIntyre, is that government would now have to pay for the contributions of all civil servants. At present, government spends a considerable amount of money on the medical scheme contributions of civil servants. However, only half of all civil servants are currently covered by medical schemes, and if the new fund is introduced, then government spending on contributions for health insurance cover could double - and questions are being raised as to whether this is affordable. (Source: Health-e, 3 April 2002)

Social health insurance was first proposed in the 1980s. It was seen as a key mechanism for extending health care coverage and promoting equity in South Africa. Lack of policy action has meant that the SHI has not been implemented and wide disparities between health care in the public and private sectors remain untouched. This summary brief explains why consensus was never reached on the exact form social health insurance should take, and suggests strategies for building support amongst important stakeholders. The chapter critiques features of the governments most recent proposal, published in 1997.

It is well known that South Africa spends a considerable amount of money on health services compared to other middle-income countries. Yet, the average health status of South Africans is relatively poor.