Healthcare by its very nature is emotive. The consistent underperformance of the South African healthcare system when measured against other nations is therefore not only costly in financial terms, but also impacts individuals and their families at a personal level every day. High profile horror stories of inadequate care in public facilities accompanied by doctor strikes over recent weeks have highlighted the urgency of effective treatment for South Africa’€™s ailing healthcare system.

The ANC’€™s 2009 election manifesto proposed a ‘€œNational Health Insurance’€ (‘€œNHI’€) system as a key component of its efforts to address the serious problems afflicting South Africa’€™s healthcare system. At this stage, very little is known about the details of any NHI proposals.   However, key elements of the proposals are reported to include the implementation of a new, dedicated payroll tax for healthcare along with the establishment of significant administrative infrastructure to oversee these funds and purchase healthcare benefits for the population.

It is clearly too early to comment on these proposals in any detail, since the absence of a formal policy document means that many critical details are still lacking; but it is not too early to lay the foundations for a robust and healthy public debate on the NHI proposals ‘€“ which will be essential as we embark on this very ambitious and potentially risky healthcare reform process.

We believe that any healthcare reform for South Africa, including the proposed NHI system, should be firmly based on the following 4 key principles:

Transparent and vigorous public debate, based on hard evidence: Thus far, the NHI debate has been held behind closed doors, with no public or stakeholder participation. It is vital that detailed policy documents be put into the public domain as soon as possible to allow all interested stakeholders to participate in this important process. It is also vital that proposals be based on hard evidence, and not on ideological assertions and beliefs.   In particular, it is critical that we understand the true economic cost and impacts of any proposals as accurately as possible.

We also need to bring into the debate a detailed understanding of the successes and failures of other countries which have attempted reforms of these kinds, particularly those countries with similar socio economic profiles to our own.  It took countries like South Korea, Australia, Canada and many other European countries decades to establish universal healthcare access at the scale that we are contemplating in South Africa. We can and must do more in a shorter space of time, but this will require contributions and collaboration on the part of all stakeholders.

Healthcare reform, including NHI, must uplift the standards of public healthcare and improve quality and accessibility of decent healthcare for all South Africans: The key objective of the proposed NHI system appears to be to provide universal access for all South Africans, to a decent package of healthcare benefits. We strongly support this objective. To achieve this will require a focus on tackling the severe and ever worsening problems of our public hospital system. This is the backbone of South Africa’€™s healthcare system, and fixing it must surely be the highest priority for government over the next five years.  In an independent rating of healthcare system performance across 43 countries conducted by Monitor Group, South Africa’€™s public sector ranked 36th. The most fundamental problem ailing our healthcare system is the failure of the public healthcare sector to meet the healthcare needs of our country’€™s citizens, as well as its failure to use our scarce public funding efficiently and appropriately in order to improve accessibility, quality of care and health outcomes. The upliftment of standards in South Africa’€™s public sector will go a long way to expanding access and delivering quality healthcare to the population.    

Healthcare reform must be rooted in South Africa’€™s economic realities:  The NHI proposals appear to be based on three critical components ‘€“ raising substantial additional funding for the NHI through a dedicated payroll tax; the provision of a comprehensive package of healthcare benefits to all South Africans;   and the use of a combination of public and private healthcare providers to deliver the comprehensive package of benefits.   While there can be no objection to these as hypothetical objectives of a health reform programme, it is critical that we understand the interactions between these objectives and the realities of our economic environment. Raising additional tax revenues for the healthcare system will have major impacts elsewhere in the economy, particularly in the context of an economic recession which is already resulting in the economy contracting (as demonstrated by the 6% decrease in GDP in the last quarter).   While the levels of any proposed new payroll tax remain uncertain (levels of up to 2%-5% have been suggested), any new payroll tax (which will be shared between employers and employees) will undoubtedly impact on the cost of employment, and hence on the potential of the economy to create new jobs.  

It is also not clear that economic realities will allow an NHI system to provide a comprehensive package of benefits to all South Africans. We live with the unfortunate reality of one of the world’€™s highest unemployment rates.   This means that a relatively small number of employed tax payers will have to carry the cost of providing the envisaged package of healthcare benefits to the entire population.   Some simple examples illustrate this dilemma clearly: if the NHI were to provide the current package of benefits obtained by the average member of a medical scheme to the entire population, this would cost approx R497 billion, equivalent to 20.1% of South Africa’€™s total GDP.   Some have argued that South Africa needs to spend 5% of GDP on the public healthcare system, up from the current 3.5%. If we were indeed able to fund this dramatic 30% increase in funding for healthcare, when spread across the entire population, it would still only buy a package of benefits equivalent to about one quarter of the package currently obtained by medical scheme members. The harsh reality is thus that at our stage of economic development, a NHI system will only be able to provide a very limited package of benefits beyond what is already provided within the public healthcare system.  

The NHI proposals also assume that an NHI fund will be able to ‘€˜purchase’€™ the package of benefits from both public and private healthcare providers. While this objective is again a laudable one, it seems to ignore the reality that the supply of healthcare providers is highly constrained, and that there is very little excess capacity to provide additional services to the entire population. This is certainly true for specialists, and for private hospital beds. The proposals also seem to assume that a single NHI ‘€˜purchaser’€™ will be able to use its purchasing power to reduce prices charged by private doctors and hospitals.  But this ignores the reality that our private specialists and GPs firmly believe that they are currently under- remunerated by medical schemes, and that they should be remunerated more highly than at present. They are thus hardly likely to contract with an NHI purchaser which aims to reduce the prices at which they charge for their services. Conversely, an improved public hospital system, which creates a more attractive working environment and pays doctors and nurses better, would no doubt attract some private practitioners back to the public sector, which would be of great benefit to the system as a whole.

South Africa’€™s private healthcare system should be seen as part of the solution, not part of the problem:   South Africa has developed a sophisticated and world class private healthcare system. This is a national asset, and is critical to many key government objectives including those of skills retention and foreign direct investment. Proponents of the NHI seem to see the private health sector as the root of all problems, and many of the proposals seem aimed at damaging private healthcare, rather than improving the public system. Ironically, any weakening of the private sector to attempt to supplement the public sector will result in an increased burden on the public system, simply because people who have previously used the private system will invariably consume more healthcare services in the public system than the available funding for them. This means that there is then less funding for the existing users of the public system ‘€“ precisely the opposite of what is required.

The fact is, while the private healthcare system can certainly be improved and made more efficient, it is an effective, high quality, self-sustaining system, funded by the voluntary contributions of the public ; it needs to be seen as part of the solution. Of the approximately R70 billion spent by medical scheme members on healthcare each year, R57billion is purely private money, paid by employees and employers. The balance, R13billion, is provided by Treasury as a tax subsidy, in recognition that those who fund their own private healthcare are not a burden on the public sector.   The implementation of an NHI system will thus not magically move the R57 billion of private money from the private sector into the NHI.  Even if an NHI tax is implemented, millions of South Africans will continue to purchase medical scheme cover, since they will not be willing to depend on the NHI system to provide the quality of healthcare and the access which they believe they require; this should be viewed as a positive outcome as this population would otherwise consume scarce resources in the public sector.  

We are at the beginning of a critically important health policy debate. How this debate progresses, and its final results, will impact on our healthcare system, and our economy, for decades to come. As we engage in that debate, we believe that the principles outlined above provide an important platform for rational debate, which will hopefully lead to a beneficial outcome for all South Africans. We urge all interested stakeholders, including government, political parties, business leaders, and citizens, to take these principles into account as the NHI debate moves forward.

·                 Broomberg is the head of Strategy and Risk Management at Discovery Health

This is the second in a series of articles on this topic to be published by Health-e over the coming weeks.