Is NHI feasible?
The Strategies for Health Insurance for Equity in Less Developed Countries (SHIELD) project critically evaluated existing inequities in health care in Ghana, South Africa and Tanzania and the extent to which changes in health care financing mechanisms could address equity challenges. The final phase was completed this week with the release of the findings.
However, it found that universal coverage would be unaffordable and unsustainable if the current fees charged by the private sector are the basis for paying providers. SHIELD also found that for universal coverage to be successful, administration costs would have to be kept to a minimum, utilisation increases would need to be managed carefully and the pace of changing the health system would depend on the availability of funds.
Moving towards universal coverage would require more public funding than currently. It recommends as a first step that the allocation to the health sector from the overall government budget should increase over time to 15%. This is the level committed to be African heads of state in what is called the ‘Abuja target’.
In addition a dedicated health tax on income would be required. If a proportional dedicated income tax (all groups contribute the same percentage of their income) is applied, the maximum rate needed would be less than 4% of taxable income.
If a progressive dedicated income tax is implemented, those with higher income would pay a maximum of 6% of their income while those with lower incomes would pay about 1,2%.
In both scenarios the tax payment could be split between employers and employee.
‘There has been a lot of debate recently about the proposed introduction of a National Health Insurance in South Africa. When considering whether or not this is a good idea, it is important to compare a universal system to the health system we currently have and also consider other ways of reforming the health system,’ said SHIELD scientific co-ordinator Professor Di McIntyre.
A universal system would provide financial protection from the costs of health care and access to the healthcare needed for all South Africans. The universal coverage option is akin to the proposed NHI and considers a comprehensive package of services for all South Africans from an integrated pool of public funds ‘ sourced from general tax revenue and possibly a mandatory contribution or earmarked tax by formal sector workers. The public sector is the main vehicle for service delivery, but with substantially improved resourcing and some purchasing of services from private healthcare providers. There would continue to be a demand for medical schemes from higher income groups.
The main alternative to a universal system considered by the SHIELD project was the model widely debated in the 1990s as a Social Health Insurance (SHI) scheme. This is a mandatory extension of medical scheme coverage to all formal sector workers with the remainder of the population being covered by tax-funded health services. SHIELD found that this option had the highest level of resource requirements of all the options considered and would result in total health care spending (public/tax funds, medical schemes and out of pocket payments) in South Africa exceeding 13% of Gross Domestic Product. Only one country in the world has such high spending levels ‘ the United States.
‘The burden on households that are required to join a medical scheme under a SHI will be very high, with scheme contribution rates per person in 15 years time being twice as high as they currently are, before you even take into account inflation,’ said McIntyre. ‘This in my view is unaffordable’.
SHIELD also compared universal coverage to the status quo, where no major changes are made in South Africa’s current health system. Recent trends in spending on public sector services and medical schemes are simply projected forward to assess spending levels in 15 years’ time.
If we continue with the current health system, spending levels will be higher ‘ 9,5% of GDP within 15 years ‘ than at present. Spending levels would also be higher than would be the case if a universal system was implemented, which will be 8,6% of GDP.
The main reason why the universal coverage option has the lowest spending levels is because a smaller percentage of the population will be covered by medical schemes. Costs are much higher, and have been increasing far more rapidly, in the medical schemes environment than in the public sector. However, universal coverage would require a substantial increase in public funding, to the equivalent of about 6,4% of GDP. Even using the most conservative assumptions possible, it is not feasible to achieve universal coverage by devoting less than 5% of GDP to public funding of the health system.
The study concluded that the major decision facing policy makers was whether the country should retain the status quo or pursue universal coverage. ‘The key challenge with pursuing universal coverage is the need to allocate more public funds to the health sector, partly through increased taxes,’ said McIntyre.
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Is NHI feasible?
by Health-e News, Health-e News
October 4, 2010