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.

We are convinced that in this country, the risk-equalisation fund would be an important instrument to buttress the sustainability of the contributory environment.

We are committed to exploring its feasibility and proper implementation in this country

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.

It is aimed at making medical aid cover affordable for more people by subsidising their contributions. Because the current tax subsidy is based on the size of the medical aid contribution, it favours high-income earners belonging to high-cost medical schemes, to the detriment of lower-income earners.

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).