The NHI Health Insurance for South Africa White Paper (10th December 2015) has just been released, and it’s important for the sector to understand its intent and debate its approach.  The following posts will outline our views:

Consistent with the Green Paper, the proposal is based on an insurance model where the insurer is a single inclusive national fund that collects and pools contributions and undertakes selective purchasing / contracting from providers on behalf of the population.

For us, these are the issues that arise:

  1. What problem Is South Africa solving?
  2. What is the tactical approach to achieve Universal Health Care in SA?
  3. ‘Demand side’ management by Health Insurers / Medical Schemes: what’s their role? What are the virtues of a single vs. competing funds?
  4. ‘Supply side’ provision: What is the policy aim for the design of the effective supply model; and how will this be engineered?

Addressing the first 2 issues:

The Problem of the public sector is poor service and responsiveness, because it is not structured for its post-apartheid role and is badly managed. Many words written about this, were not going to add more here.

By contrast, there is too little useful analysis of the performance of the private sector, which has a major, worsening crisis of affordability in regard to most South Africans (including current Scheme members) because it provides relatively poor ‘value’. We don’t agree that this can be mostly ascribed to aging and selection. Instead we believe the sector performs relatively poorly:

It has huge excess capacity relative to the currently covered population (it could easily deal with double the population) and consequently over-servicing is rife (in many regions) as providers struggle to meet their (‘threshold’/ sustainable) income requirements.

This process marginalises thousands of general practitioners; invalidates any role for mid-level workers and obliges specialists to take on the primary care role for which they are poorly suited.

All this is made worse by a tariff schedule that fragments patient care because it rewards clinicians working alone and for each service they perform. (A better alternative would be to fund organised teams that are paid to look after the care of a population for which they are accountable and to get merit rewards for doing this well – more in the next posts)

The result is that, while the sector is good at dealing with acute problems, it is badly structured to treat patients with complex medical and social problems, especially the aged. But it is on these patients that the bulk of healthcare costs are expended. They experience poor quality, expensive care, driven by unmanaged and plenty of unneeded hospital services.

Fix this and you go a long way to getting better value and lower premiums.

 So is there a feasible tactical approach outlined in the white paper?

We don’t think so. Today there is a two tier system that serve populations reflecting the enormous income and wealth disparities of South Africans. They have very different structures and organisation, costs and outcomes. How is it possible to achieve a unified system in 14 years? We believe this is neither economically or politically feasible, nor is it practical.

But is there a better alternative?

Developing countries with similar income inequality problems that have succeeded in healthcare reform have succeeded by understanding the economics of the healthcare system.  Eddy van Doorslaer from the Institute for Health Policy & Management & School of Economics Erasmus University Rotterdam provided a good overview of Asian healthcare changes. Essentially they adopt an incremental approach with clear supply strategies linked to demand within income bands, with a special focus on the ‘gap’ market i.e. people neither wealthy nor poor.

New efficient delivery models of care are promoted that meet the affordability and care needs of the ‘gap’ market segment are key. These are not cheap and nasty nor do they offer a narrow range of therapies.

They are affordable because they are efficient.

This is supported by State provide partial subsidies for access via Scheme premiums as well as for supply side innovation.

It offers support in other ways too because supply side reform is the key to success.

Finally, systems that provide comprehensive care of good quality at affordable price have strong community level primary care services. They also rely on market driven competitive systems to deliver iterative population value and market equilibrium, within a population determined capacity plan.