Laura du Preez | 06 December 2024
Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses.
The path of least resistance to integrating the public and private health systems to achieve National Health Insurance (NHI) may be through an NHI tax that will force South Africans to choose whether to access benefits from the NHI fund or belong to a medical scheme, two healthcare actuaries have proposed.
Insights Actuaries and Consultants CEO Barry Childs and a consulting actuary Daniel Shapiro presented their proposal at the recent Actuarial Society of South African conference held in Cape Town.
Childs said the NHI Act has been passed and regulations are expected soon, but the current plan is the “path of most resistance” to greater equality in health care.
The Act faces at least six upcoming serious legal challenges that may hinder its implementation, Childs said.
Then there are vast differences in the amounts spent per person in the public and private sector, the benefits are not comparable and the systems are not integrated at all, he said.
Spending in the public sector has not increased in real (after-inflation) terms since 2012 and may have even decreased when HIV grants were extended, resulting in under-resourced and overburdened public facilities, Shapiro said.
Medical schemes are becoming increasingly expensive since regulatory reform of schemes was interrupted in 2007. Compulsory or mandatory membership was never introduced, resulting in healthy people opting out and an older, sicker member base making schemes 30 percent more expensive than they should be, Childs said.
Mandatory membership of schemes for those who can afford it is no longer an option, but greater mandatory participation in the healthcare system could be achieved through mandatory contributions towards certain basic benefits by way of an NHI tax, he said.
This could assist the NHI fund to provide basic benefits and South Africans could be given a choice to pay the tax and access the benefits in the public sector or join a medical scheme, Childs said.
Currently there are many millions of South Africans earning above the tax threshold (R95 750 a year) who are not members of a medical scheme and are participating unfairly in either system – they are free riders, Childs says.
For example, only 80 percent of South Africans who earn above R500 000 a year, are members of medical schemes, he said.
These middle-income earners either further burden the public system or select against schemes – joining only when they need healthcare services and then leaving again, making schemes more expensive.
The NHI tax should replace fees (based on a means test) that users pay for services in the public sector so that everyone accesses care for free, but they are obliged to participate in the system which is a key step to universal health coverage, he said.
Currently, those who leave medical schemes either pay out of pocket for private health care or use public health services where fees are collected ineffectively. An NHI tax for non-scheme members who are taxpayers will collect additional revenue for the public sector when people leave medical schemes, Childs said.
Childs outlined a number of steps that could make it easier for the government to bring the public and private sector closer together:
Currently, money flows to the public sector regardless of the quality and efficacy of the services it provides, he said.
If the fund that holds the purse strings is separate or split from the providers of healthcare, it will be easier to hold providers accountable for the quality of their services, Childs said.
The mandatory NHI tax for taxpayers who are not members of a medical scheme would force South Africans to make a more rational, deliberate decision about their healthcare cover – they will either have to join a scheme or pay the tax for the NHI services, Childs said.
This upfront NHI tax can be pooled with general taxes in the NHI fund and allocated for basic benefits in line with health needs, he said
Childs and Shapiro modelled a tax of four percent of income to collect around R30 billion a year, which could enable the public healthcare system to clear the backlogs for cancer, cataracts and other health services.
A similar amount could be collected by removing the tax credits that medical scheme members currently enjoy, but this would effectively increase taxes on those already paying for health care, which would cause a drop in medical scheme membership, he said.
Childs said he and Shapiro appreciate that raising any additional taxes is difficult as the general view is that South Africa’s taxes have reached the point where further increases result in lower tax collection. They are also aware that National Treasury is not in favour of taxes earmarked for spending, such as an NHI tax to fund NHI.
However, given the alternatives, Childs and Shapiro believe the NHI tax is the best and most practical with the least resistance option to achieve the health reforms the government is seeking.
Commenting on the proposals, Paresh Prema, head of actuarial healthcare consulting at Alex Forbes, said the proposed tax for people who choose not to join a medical scheme was an innovative way to incentivise participation in schemes or a contribution to the public health system that may not collect payment. He did, however, note that the government’s unwillingness to continue to allow private healthcare funding of minimum benefits through medical schemes was a sticking point.
This package would need to include primary healthcare benefits and scale back medical schemes’ in-hospital prescribed minimum benefits (PMBs) to avoid increasing the cost of membership.
Schemes could be allowed to provide a differentiated package of basic benefits as well as supplementary benefits at an additional cost, Childs said.
South Africans could then choose their cover. Those who can afford it could choose luxury benefits accessed from any healthcare provider in high-end medical scheme options, he said.
But comprehensive care could still be offered at more affordable rates to those who are prepared to access care through tighter provider networks and stringently managed referrals to higher levels of care, the use of a limited medicine formulary and other cost-containing measures, he said.
A proper review of the PMBs and the introduction of a low-cost medical scheme benefit option could make medical scheme membership more affordable for the missing middle, Prema said in response to this proposal.
It should allow us to define the benefits better and the costs should be negotiated and regulated through a pricing structure, such as the bargaining chamber recommended by the Health Market Inquiry, Prema said.
Medical schemes should be paid for the basic benefit package in line with the health and age profile of their members, Childs said.
This risk equalisation would result in schemes with older sicker members receiving higher amounts as it costs them more to provide members with basic benefits.
Risk equalisation will stop schemes cherry-picking young healthy lives by designing options to attract these lives, Childs said.
Schemes will then be forced to compete on the basis of benefits they are able to purchase from providers resulting in more efficient contracting with providers, he said.
Prema said he is not sure there still is an appetite among policymakers for the REF, even though it is premised on principles of social solidarity. In addition, the steps that are essential to moving towards NHI should be debated using our experience from an incomplete healthcare system.
Integration of the public and private sector will also require the NHI fund and schemes to purchase health services from either sector. This will enhance competition and as the quality of services in the public sector improves, more people may opt to receive their benefits via the NHI, Childs said.
Private providers will have to compete with cost-effective services.
Prema believes general practitioners and hospitals are willing to contract with the NHI fund but a lack of trust about being paid, and how much are the biggest obstacles.
If efficiencies and benefits to providers can be demonstrated by the NHI fund, a mutually beneficial arrangement could be struck and move us closer to achieving universal healthcare for South Africa, Prema said.
Prema agrees that making the public service accountable is a step in the right direction, but is concerned that it would take a concerted effort by authorities to get the public service to be a credible provider under the NHI fund, as the majority of facilities do not meet the Office of Health Standards Compliance’s required standards.
Prema said the Insights proposal can spark debate and he hopes it will get parties to the table to discuss a way forward.
Given the largely negative publicity that the NHI has received, a working solution to address the challenges faced in achieving universal healthcare should be the focus. Proposals like these are necessary to spark a debate as to how the healthcare system can be fixed and how different stakeholders can assist in getting to a sustainable solution, he said.
