Health Funding

Social health care a step closer

Cabinet is due to release proposals this month that could alter the entire foundation of South Africa’s healthcare system by changing the way health is financed. Proposals for a social health insurance scheme will be open to comment and debate before the final recommendations are made.

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.  

A person who earns R3 000 a month would pay about R200 a month. In return they would get the core package of benefits that are currently available to medical aid members. This would cover only hospital services, not primary care services such as GPs and dentists.

At present, these people (employed but uninsured) are receiving free health care from the state, but as part of the new fund, they may be able to access private hospital care. This would free the state health services and allow them to offer better quality care to the unemployed.

Social health insurance appears in many different shapes and sizes across the world.   But there are a few key features that are common to all schemes, and that distinguish it from other resource-mobilising policies such as taxation, private insurance and charging user fees at the point of service.  

These are that it is legislated by government and requires regular, compulsory contributions by members; that eligible members cannot opt out of a scheme or be excluded by the scheme; premiums are calculated according to income; benefit packages are standardised; and contributions are earmarked for spending on health services.

Together these features create large ‘risk pools’ where a stable membership of contributors and their dependents cross-subsidises the care of the elderly, sick and poor with premiums paid by the healthy and wealthy. This promotes equity within the membership of the scheme.

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.

 Heidi Kruger, spokesperson for the Board of Healthcare Funders, said the medical aid schemes were expecting the proposal to go ahead and they had done a lot of work on how they would administer the claims for the enormous influx of members.

It would be a real advantage for medical aids as their membership would double – which would take them to about 14 million members – but they would have to come up with a way of containing costs. “This is the challenge,’ she said.

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.

“At present medical scheme contributions are rising at double the rate of inflation and for many people membership is becoming increasingly unaffordable. If this trend is not reversed, a social health insurance scheme will soon become unsustainable,” she said.

Neva Seidman Makgetla, co-ordinator of fiscal, monetary and public sector policy at Cosatu, said “we are not happy with the social health insurance proposals at all. It is a way of making the poor pay for the poorest”.

The concern of the union movement is that their members are at present receiving these services from the state for free – and now they will have to pay for them. The counter argument is that under the new plan they will be receiving better quality of care.

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.

In the end, the view is that there is still potential for social health insurance to be a positive development, it just needs to be properly structured.

The concern is that the specific proposals currently on the table will have a limited impact on equity and are not sufficiently robust to generate the improvements in resources and quality of care so badly needed by the public sector.

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