Posted on August 25th, 2011 in Industry News
The National Health Insurance (NHI) Green Paper of 12 August outlines, in broad strokes, the envisaged future of health care in South Africa. The paper lacks fine detail and is light on financial information. What it delivers, however, is the structure of health care provision that could be a reality 14 years from now.
What is the NHI?
The proposals outline an NHI which is a combination of vastly improved public healthcare and contracted-in private providers. Those private providers receive a monthly fee from the state in exchange for being available to see NHI members at no extra cost. All residents contribute to the NHI and all can use its services at no cost.
The emphasis in the new framework is on education, prevention and early detection, combined with a referral system which will be designed to ensure that every patient receives the right level of care.
The eventual cost is estimated to be in the region of R255 billion per year in current money terms. The current healthcare spend is R227 billion, of which R90 billion are medical aid contributions. Basically, the proposals are to redeploy the current private and public health spending into the NHI which is intended to largely replace both as the main healthcare provider.
Building a new tomorrow
The main focus of the paper is the way services will be delivered under the new NHI. It is a manual for building a healthcare framework. The system it outlines would, in our view, be capable of delivering on the promise of universal healthcare if it is successfully implemented.
The greatest challenges in such an implementation will be:
- Improvement to the public sector service. A full restructure and new management is proposed, with new oversight bodies monitoring quality of service. The proposals recognise that the current public hospitals are failing and the redesign and improvement of these facilities is the focus of the 14 year transition period. It is essential that this succeeds to the point where individuals who currently turn to the private sector would be comfortable to be admitted to a public doctor or hospital.
- Participation of private practitioners. In order for the NHI to work, private doctors, hospitals and other providers must become willing participants in the system. It is a delicate balance: if the NHI works, private patient numbers will reduce, and contracting into the NHI will become a viable income stream for private doctors. But if the NHI pays too little, doctors won’t contract in and it is likely that the NHI will as a result not succeed among private patients, leaving current private patient numbers the same and private doctors with no need to try and contract in. The right path is a compromise where the cost of treating each patient is lower, but each doctor has more patients to make up the revenue.
- The right spread of providers is achieved. South African medical services are currently concentrated in the urban areas. The outlying, mainly rural areas will however also require sophisticated medical teams. The challenge will be to attract doctors to such remote posts.
- More resources. Even if private practitioners participate, there are currently not enough doctors in South Africa to deliver satisfactory healthcare to the whole population. More doctors will have to be trained or enticed into the country in order for the system to be effective.
If the above challenges are overcome, the NHI will be a sustainable framework. What will the future of SA’s medical service look like in such a case?
A bright vision
Let us fast forward to 2025. The NHI has been fully implemented, and let us assume that the fine balancing act of upgrading public healthcare facilities and incentivising private practitioners to contract into the NHI has been successful.
If you are a South African resident, your monthly pay check is automatically debited with an NHI contribution, deducted by SARS in the same way as income tax. You do not have an option not to contribute (just like you don’t have an option to pay tax!). The contribution is likely to be related to your salary – the more you earn, the more you will be contributing, we expect. (This is not clearly spelt out but equity at different salary levels is emphasised in the proposals).
If you are a South African resident, whether you contribute or not (i.e. even if you are unemployed or earning below the contribution threshold), you have a card in your wallet, showing the details of your NHI membership.
In 2025, if you require medical help, you make an appointment with one of the primary healthcare providers in your ward – basically, your voting district. Those providers may be a public primary health clinic, or they may be private doctors in your area who are contracted into the NHI. You make an appointment and see one of these providers, at no fee.
If your condition warrants it, your doctor will refer you to a specialist. That may again be a specialist in a public hospital or a private specialist contracting into the NHI. It is unlikely, however, that you will be offered a choice. Any hospital stay, specialist visit or procedure resulting from such a referral is also free of cost.
The NHI will cover any condition you may have except elective procedures and certain other exceptions (such as expensive dentistry). There will not be co-payments or any of the other costs experienced in the private system.
If you would like, you may want to obtain top up cover from a medical aid fund. These will be insurance type products as the industry has been deregulated and companies are be permitted to make a profit. If the NHI works really well, these products are unlikely to offer full cover as they do now. They may however offer innovative top up products covering whatever the NHI will be struggling with – if NHI dentists are in short supply, expect top up private dental plans to be popular, and so forth.
It is unlikely that full medical aid, as we see it now, would continue in this scenario of a well-implemented NHI. There would not be sufficient demand. The NHI will effectively deliver suitable levels of care to all residents.
This is the ideal scenario envisaged by policy makers. But what if things don’t turn out as expected?
All good intentions…
The challenges of successfully involving private providers, getting enough medical staff and enticing them into rural areas are not trivial. Here is an alternative future where the NHI system has failed to surmount these challenges:
It is 2025, and your pay check shows a new deduction – the NHI contribution. Your employer no longer insists that you belong to a medical aid fund, but nobody in your family feels that they want to go to the NHI when they are ill – you have heard you wait in queues for days and the doctors are under-qualified and overworked. You have made the decision to continue medical scheme membership voluntarily.
Unfortunately, contributions to a medical aid are no longer tax deductible, and so the contribution is more expensive than before. On top of the new NHI contribution, which you see as a tax, the costs of medical care seem prohibitive.
You may want to rethink the private medical aid. The medical aid providers have been deregulated and there are myriads of new products on the market, some functioning as NHI top ups. For example, you could use the NHI GP, but choose to go to a private hospital for operations. You may decide that you cannot afford the medical aid at all any more, but once you are ill, you will consider paying out of pocket for private care.
The NHI, in this scenario, is basically the current public healthcare network, with whatever improvements have been implemented over the 14 year period. The private healthcare system continues side by side, and total medical costs for most employed people have gone up.
What about employers?
From the perspective of employers, the main change will be the introduction of the NHI contribution. If the employer previously had no compulsory medical aid cover for its employees, this will be a new deduction. For employers who currently enforce mandatory medical aid membership for their staff, the conditions of employment would need to be amended to replace such a contribution with the NHI contribution. We do not expect any employer to continue with mandatory medical aid membership as the double deduction (NHI and private, where private contributions are not tax subsidised) would be too high to enforce in our view.
It is unclear if the NHI contribution will be member only, or split between member and employer, like for example the UIF contribution. If it is split, the employer portion of the contribution would be in excess of total cost to company, and so there would be an increase in total cost of employment.
For employers with post-retirement medical aid benefit schemes, the arrangement would need to be renegotiated if the promise is expressed as a proportion of medical aid contributions. It is likely that medical aid scheme options and prices would change in the new framework, so the previous arrangement would no longer be meaningful. Employers could use the opportunity to buy out the benefits in exchange for a cash lump sum or a monthly monetary “pension”. The other alternative is to cover the pensioners’ NHI contributions instead.
Next steps
The implementation will be gradual. A pilot scheme will be run in 10 selected districts from 2012. These pilot schemes will be funded by the state, not by member contributions, and the emphasis is testing the new mechanisms for service delivery. Detailed costing of the scheme is only expected in 2013. Accreditation of private providers and population registration is likely to commence in 2012 -2014 but will only be finalised towards the end of the 14 year period.
Healthy balance
In summary, the proposals describe a viable collaboration between private and public providers that should be able to address the inequities of healthcare in South Africa if implemented properly.
If the public health sector is successfully improved, private practitioners are enticed to contract in with reasonable fees, doctors are properly incentivised to work in outlying areas and the number of medical workers is increased, the NHI can work and become the main healthcare provider for most South Africans. Private medical schemes and private medical care will continue, but on a greatly reduced level.
If implementation does not work out as planned, the danger is that the NHI becomes a “tax on the rich”. Higher income workers will not choose to use the NHI benefits, private practitioners will not contract in, and the dual private/public system will continue, albeit at greater cost to the public.
The final result is likely to lie between the two scenarios. The NHI may end up being sufficiently developed for a proportion of current medical aid members to rely on it. The remainder will utilise medical insurance top ups and out of pocket payments to continue supporting private doctors. Over time, if the NHI improves, the system may slowly shift further towards full NHI utilisation.
We will continue tracking developments in the NHI design and implementation and will keep you up to date. Further reading on the proposals can be found here:
NHI Green Paper [PDF, 1.9MB];
NHI Questions and Answers [PDF, 270KB];
NHI Unpacked at Fin24.
