“All you need is the plan, the road map, and the courage to press on to your destination.” – Earl Nightingale
SA’s healthcare system is highly unequal and based on two tiers. The SA government primarily provides finance for public sector healthcare which serves c. 71% of the population. On the other hand, medical aid schemes and health insurance provides healthcare services to c. 27% of the SA population. In SA, the public sector is underfunded, while the majority of South Africans cannot afford the high costs of private care. An ageing population, changing demographics, and a growing middle class are a few trends that we believe will pressure the country’s health system in the coming decades. According to World Economic Forum (WEF) data, by 2050, SA will have 15mn more people, and 77% of the population will reside in cities.
To balance the scales between public and private healthcare provision in SA, the government enacted the National Health Insurance (NHI) scheme, which will provide universal healthcare in SA by purchasing services from healthcare professionals. Healthcare professionals would then provide the procured services at public and private facilities. One cannot argue that the current SA health system is unsustainable. However, the exact workings of the proposed NHI scheme are unclear.
Medical schemes as envisioned in the NHI Bill
In the NHI Bill, there is only one paragraph about the role of medical schemes, Section 33. As stated in the paragraph, “once National Health Insurance has been fully implemented, as determined by the Minister through regulations in the Gazette, medical schemes may only extend complimentary coverage to non-reimbursable services”. Even though it appears that the Bill intends to prevent schemes from covering services provided by the NHI, we believe that medical schemes will continue to cover all the healthcare services they currently cover for the foreseeable future. A substantial restriction in the role of medical schemes would be detrimental to the NHI because of the insufficient resources available to meet the needs of all South Africans – this is an unavoidable fact.
Furthermore, almost every country with some form of NHI or equivalent government-funded healthcare system allows its citizens to purchase private health insurance coverage, including coverage that overlaps with the national system. There is no difference between this and limiting citizens’ rights to buy private education for their children or private security since the public system already provides state education and security.
The financing of the NHI system
Despite the NHI Bill’s lack of reference to the likely costs once government has fully implemented the NHI, senior health officials estimate a total cost of about R245bn in 2019 terms. Therefore, it probably refers to the additional cost of the NHI over and above the current R223bn national budget for healthcare. More than 85% of the current budget is allocated to the nine provinces and funds the present public healthcare system. The Bill aims to implement fundamental changes that will improve quality and access to healthcare through contracting private providers, thus requiring additional funding.
The government faces significant challenges in securing the funding required to implement the envisaged NHI, including current and likely future fiscal constraints. The Bill specifies that payroll taxes and a surcharge on personal income tax could be considered sources of revenue. National Treasury would be responsible for determining such taxes. According to the minister of health, the government is not considering any tax changes over the next three years of the current (2020) Medium Term Expenditure Framework (MTEF).
In addition, government officials have suggested that the government could fund the NHI by eliminating the current medical scheme subsidy provided to government employees, which is worth approximately R30bn. However, while this is possible, it would be a significant change to the employment conditions of public sector employees and their unions. In summary, raising new revenues to supplement the current government budget for healthcare is difficult and unlikely to change anytime soon. Furthermore, the lack of funding suggests that the rollout of the NHI, as envisaged, will be constrained unless the local economic outlook improves materially.
The role of private hospitals and healthcare professionals
As part of the Bill, the NHI fund would contract on an independent basis with private hospitals, professionals, and other service providers to supplement the current public healthcare delivery system. Unfortunately, the NHI Bill offers little detail on how these services will be procured. In addition, due to the lack of substantial additional funding, it will be difficult for the NHI to procure extensive services from private providers. However, the NHI may contract with some general practitioners (GPs) to augment its public primary care services for the foreseeable future and contract for certain high-priority services to fill gaps in public provision, which would be a significant step forward if achieved. Aside from that, we expect that the government will continue to deliver the majority of the NHI services through public sector clinics and hospitals. In contrast, private hospitals, specialists, and other providers will continue to receive funding from medical schemes.
What needs to change in South African healthcare?
It is easy to shout the odds from the sidelines, but our proposed steps below are realistic, actionable, and should positively impact South African healthcare. It is theoretically possible to separate public and private healthcare, but the two are not mutually exclusive in practice. Our next section provides an overview of our stepwise approach to reforming the South African healthcare environment, which we believe will benefit all stakeholders.
Step 1: Address the infighting between stakeholders in the private and public healthcare environments
Private healthcare in SA is highly concentrated, with the largest three private hospital groups (Netcare, Mediclinic, and Life healthcare) accounting for c. 83% of all private hospitals. Moreover, one medical aid (Discovery Health) accounts for c. 55% of the private medical aid market. In light of this high concentration, the government and the public are more likely to criticise healthcare providers and medical insurers. Therefore, the healthcare market needs more competition. The current high concentration also presents an opportunity to reform the local healthcare system with fewer stakeholders, improving communication and facilitating agreement between current stakeholders. SA is unique in that it has a world-class private healthcare sector but a third-world public health system. The private sector cannot partner with the government to address the problems in the South African public healthcare system until all stakeholders align their goals. We believe that the government must play a central role in facilitating this.
Step 2: Change the current legislation prohibiting healthcare providers from employing clinicians directly
It is not unusual to find doctors working in silos in SA’s healthcare sector. To decrease the administrative costs of funders having to reimburse doctors and hospitals separately, the government should permit hospitals to employ doctors and share fees paid by funders.
Step 3: Facilitate the shift from healthcare providers working in silos to working within an integrated care model
As a result of operating in silos, local healthcare providers cannot deliver the coordinated care required by healthcare reform. In the past, the country’s general practitioners were the first point of contact for their patients, who, following an assessment, sent them to specialists when necessary. Patients can now seek treatment directly from specialists, leading to asymmetrical information and rising healthcare costs.
Step 4: Privatise the training of doctors to increase their numbers in SA
Although local private healthcare providers offer nursing training, only the government can train and qualify physicians. Therefore, we believe that increasing the number of doctors by privatising the process can be accomplished independently of the other suggested steps.
Step 5: Standardise Information systems used to record patient details and medical histories
Funders and healthcare providers are working on developing information systems with the same goal of quality data. For example, Discovery Health has a Health ID system that allows GPs to have a complete medical history at their fingertips, which is essential for treating a patient effectively. Likewise, Netcare focused on its digitisation strategy at the Group’s 2018 results presentation. To achieve its digitisation plan, Netcare has partnered with Apple, Deutsche Telekom, Qualcomm, and IBM Watson (Micromedex). However, the lack of collaboration among stakeholders leads to information systems that do not integrate, duplicate data, and provide an inconsistent appraisal of medical interventions. Discovery Health has, for example, offered to share its Health ID platform with competitors and healthcare providers. However, the offer has not been accepted.
Step 6 Patient-focused care, with the ability to monitor the outcomes
A patient-focused approach is not possible without integrating patient-centred care and having access to quality data to assess and monitor the results of medical interventions. Funders will be able to reimburse healthcare providers based on the quality of care they provide, thus increasing quality while reducing costs.
Step 7: Regulatory response to implement universal healthcare
We agree with the principles in the proposed NHI. Yet the implementation and delivery mechanisms (including the interaction with stakeholders) leave much to be desired. Consider the case where stakeholders cannot agree on a standard set of goals. If that happens, we can expect increased pressure from the government and funders on the South African private healthcare provider sector. Increasing regulations and disagreement among stakeholders will lower margins for private healthcare providers. In our opinion, the government should focus on aligning the goals of the private and public sectors, which would involve gaining their trust through transparency regarding the proposed NHI policies.
Step 8: Private and public sector vertically integrated public-private partnerships (PPPs)
Once the private healthcare sector has developed an integrated healthcare system, the next step would be vertically integrated PPPs that cover both the provision of medical services and the maintenance of infrastructure. For the private healthcare sector, this would result in increased patient volumes. According to Econex, South African private healthcare providers could serve an additional 7.7mn public healthcare patients per year. Medical professionals, however, may perceive an increase in volume at a lower price as more work without a corresponding increase in compensation. In addressing this concern, information systems help healthcare providers make their jobs easier. Using such information systems, healthcare providers can see more patients and provide better care within the same amount of time that they currently do.
There are low-hanging fruits in many industries in SA that, if picked, could materially improve the lives of people throughout the country. We believe that SA needs both private and public healthcare, but unfortunately the NHI is unclear in many areas.