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Best chance for SA NHI is to partner with private sector – international experts

Countries with established national healthcare systems advise the South African government to partner with the private sector to ensure that the National Health Insurance (NHI) plan is successful, City Press reports from the Board of Healthcare Funders conference.

Representatives from these countries say that the only way to silence resistance while ensuring that every citizen has access to quality healthcare is to forge a healthy joint venture with the private sector.

The report says government is gearing up for the second phase of the NHI’s finance system, which was launched six years ago. This is part of its objective to abolish the country’s two-tier health system by pooling funds to enable it to provide quality healthcare services to all South Africans based on need, and irrespective of income.

Once fully implemented – by 2025, according to the Health Department – the NHI system should work the same way medical schemes do. Patients will go to accredited doctors and hospitals without paying upfront, and the NHI fund will reimburse doctors and hospitals for the services provided.

The report says universal healthcare and its implementation were discussed among local and international experts at the conference. Dr Clarence Mini, the board’s acting MD, urged the Department of Health to consider partnerships with the private health sector as it rolled out the NHI scheme.

Organised under the banner “private sector embracing universal healthcare”, he said the private sector had the resources that the public sector would need to support and help drive the insurance system.

“The journey towards universal healthcare will present new challenges. However, the promise of a partnership, along with political will and good leadership, may make the journey ahead a lot easier than we have all imagined,” Mini said.

International speakers warned that, while the implementation of the NHI scheme sounded easy on paper, it would be a different story in reality, the report says. Dr Elizabeth Fowler, vice-president for global health policy at multinational Johnson & Johnson, worked in former US president Barack Obama’s administration on healthcare and economic policy. She said South Africa could learn a lot from how the US implemented its universal health coverage policy, popularly known as Obamacare.

She said that, while universal health coverage was a journey worth fighting for, it was better to have the support of the private healthcare sector. She pointed out that it had taken the US a century to implement Obamacare: “We have had about 100 years of trying to achieve universal coverage in the US, beginning in the early 1900s and leading up to 2010, when the Affordable Care Act was passed.

“In 2009, when Obama took on healthcare, we tried to focus on why the previous attempts failed, especially in 1993/94 during former president Bill Clinton’s tenure. We took a few lessons from that. Firstly, the debate over healthcare was very long and it lost the political capital. Secondly, a task force comprising about 500 people was created to put together a proposal and send it to Congress. That proposal answered too many questions and had too many details. It was a full, written proposal with little room for input. Thirdly, it moved people out of existing coverage [about two-thirds of the US population had private medical insurance] and the Clinton proposal proposed moving everybody into the new system. That was threatening to people who had coverage they really liked. So it created a lot of enemies right from the start. Fourthly, every stakeholder in the healthcare system – doctors, hospitals, insurance companies and pharmaceutical industries – was opposed to it. It made it difficult to get things done.”

Fast-forward to 2008, when Obama was elected president. The US published a White Paper that laid out a framework for health reform – similar to what South Africa has done. It was followed by many hearings, legislative processes, debates and final votes, which led to its approval in March 2010, Fowler is quoted in the report as saying.

In terms of the politics, Obama prioritised healthcare reform at a time when the country was going through a recession. This did not sit well with private healthcare stakeholders. “We did an analysis of each stakeholder in the system to try to work out what they were afraid of, what they wanted and what they would lose,” said Fowler. “We figured out how much the private sector stood to gain from covering the uninsured. We quantified this and went back to each stakeholder group to ask if they wanted to come to the table and also finance covering the uninsured. They agreed.

“The pharmaceutical industry contributed $80bn; the hospital industry, $155bn. It was important to have everyone at the table.”

As reported in MedicalBrief last week, Nathaniel Otoo, Ghana’s former CEO of the National Health Insurance Authority, championed a similar health reform.

The report says Fowler and Otoo agreed that South Africa was “doing the right thing” by forging ahead with universal coverage despite resistance and criticism.


The National Department of Health hopes to have the National Health Insurance (NHI) Bill ready for adoption by Parliament as early as November this year. Fin24 reports that this is according to Vishal Brijlal, technical adviser on the NHI at the department, told delegates at the conference that the NHI fund cannot be established without first drafting appropriate legislation.
Parliament will be conducting public hearings from 14 August to 16 August to get input from the public and stakeholders in the healthcare industry on the department’s NHI policy proposals, the report says.

“There will be two processes going forward,” Brijlal said, “the adoption of NHI legislation through an Act of Parliament and in the meantime a transitional fund, making use of the existing systems and processes in the healthcare sector.”

The transitional fund will come into effect by 30 September and will remain in place until the NHI legislation is finalised. Briljal explained that the transitional fund will utilise the existing budget allocated towards the Department of Health for the flow of funds and purchasing. Once the NHI is fully established as a public entity it will be financed through an appropriation of Parliament.

The report says a number of current legislation will need to change along with the new NHI Bill. Priority will be given to the Medical Schemes Act, General Health Amendment Act and other legislation relating to healthcare professionals and the National Health Act.

Brijlal pointed out that all healthcare service providers – whether in the public or private sector – will need to adhere to the new National Health Act. In preparation for the NHI, the private healthcare sector should start introducing a single service benefits framework and providing quality healthcare delivery models at lower costs.

The report says there will be a number of regulatory interventions following the NHI, including: setting one standard price for services; removing differential pricing of services, based on diagnosis; and changing reimbursement from diagnostic coding to that of the type of service that is provided.

In addition, service providers will not be allowed to balance bill patients. Under the NHI, price regulation will take effect as a means to prevent the growth in co-payments for the services that the NHI provides.

The report says Brijlal acknowledged that there are a number of matters that still need clarification under the NHI. One is the financing of the proposed universal healthcare scheme. "The reason why we have no updated numbers is because we're playing around with different scenarios and the type of services that should be included under the NHI." Other cost drivers that need to be clarified before the financing structure can be finalised are reimbursement structures and whether public sector or private sector cost structures should be used for pricing.

During question time, a conference delegate asked Brijlal when government intends to phase out tax refunds for medical expenses as mooted in the NHI White Paper. "To be fair, I cannot say," Brijlal responded. "That's a question we need to ask National Treasury."

According to the report, he added that there should be more clarity around the phasing out of tax refunds around September or October this year.


Writing on behalf of the Free Market Foundation, Jayne Boccaloeno notes that the latest iteration of the NHI policy paper is pure déjà vu.

She writes” “We are no closer to understanding critical details, such as how much the scheme will cost and from where the money to pay for it will come. Meanwhile, South Africa risks running out of tax payers to finance its social security commitments.

Boccaleono writes that the key messages delivered by Dr Johann Serfontein, senior healthcare consultant with HealthMan and Jasson Urbach, FMF director & head of the FMF’s Health Policy Unit are that the NHI scheme is based on a government administered, centrally controlled, single-payer model; health care decisions will be determined by government from the cradle to the grave; NHI will reduce the number of available services, mean fewer health care providers and patients will face long waiting lists; NHI concentrates power in the hands of government and requires it to act as both player and referee, leaving no room for the private sector; and under NHI, whether directly or indirectly, government will control the availability, financing and delivery of healthcare for all.

She quotes Urbach as saying: “Given its timing and the absence of the substantial details, we can only assume that the release of the NHI policy document is politically motivated. Critical details such as cost, funding and from where the additional personnel (both medical and administrative) will come, are absent. What is clear is that it will not materially improve the health outcomes of the poorest and most vulnerable members of society”.

Boccaleono writes that the NHI Policy Paper states: “An NHI Fund must be established through legislation. The sources of revenue for the Fund will be through a combination of pre-payment taxes derived from general taxes and complemented by mandatory payroll and surcharge taxes”. The Davis Tax Committee confirms that the tax to GDP ratio will need to rise “quite substantially”.

However, she says, high levels of unemployment mean that South Africa suffers from relatively low levels of incomes and, critically, a very narrow tax base: only 3.5m people shoulder 99% of the total personal income tax take. There are too few tax payers in SA to finance NHI. NHI will mean that the 3.6% (of a total of 8.5%) of GDP spent by 16% of the population on their own healthcare should be redistributed to the whole population. This is unconstitutional.

Serfontein is quoted by Boccaleono as saying that the minister and Department of Health consistently use factual inaccuracies to justify NHI. “It is inaccurate to say that 80% of specialists serve only 20% of the population. HPCSA registration figures show that, at most, 66% of specialists work in the private sector. It is also inaccurate to say the private sector is poaching doctors from the state. Between 2002 and 2010, there were 11,700 medical school graduates in South Africa. The public sector created only 4,403 posts in that same period”.

She says other flaws in the NHI are: the costing models are unrealistic and still based on the 2010 green paper. Simply inflating these costs from 2010 to 2017 values, increases the cost in 2024 to R372bn; the implementation of NHI will reduce, not increase access to services as shortfalls will not be covered by increases in taxes and the predicted low growth; currently only 33% of government facilities comply with the Office of Health Standards Compliance (OHSC) standards required to contract with the NHI fund. The 30,000 to 70,000 existing private practices would require the OHSC to increase their inspection budget from R34.5m to between R700m and R1.4bn; the NHI fund will be the single largest state owned entity in South Africa and risks being as corrupt and failed as SASSA, Eskom, SABC, Compensation Fund, RAF, SAA, SANRAL, PetroSA and ACSA. Failure to pay providers could collapse service delivery in the entire health system; only service delivery costs are mentioned, not administration; asingle strategic purchaser is not justifiable. If the NHI Fund is going to set prices, it does not need monopsony buying power to reduce them; medical schemes will only be allowed to cover services not in the NHI basket but there is no clarity; and edical scheme options will be reduced and tax credits scrapped. Members will also have to pay full price for the state system charged at current income tax threshold levels.

Boccaloeno writes that government’s role should be to finance healthcare for the poor and leave the private market alone to provide for those able to fund their own healthcare. This will allow government to concentrate scarce taxpayer resources on the truly destitute, whilst allowing the private sector to grow, innovate and expand. In order to fulfil this task of acting as financier the government can and should enlist the support and help of the private sector by contracting out those services that can be provided more efficiently by private providers and administrators. In the same way as people have many options to choose from in household insurance, car insurance and myriad other products and services, publicly-funded patients will then have a multiplicity of medical schemes to choose from.

She says competition between public and private hospitals and clinics to win business from taxpayer-funded public health insurance beneficiaries will ensure the best service for the best price.

[link url="http://www.news24.com/SouthAfrica/News/sa-urged-to-tackle-nhi-as-one-20170722"]News24 report[/link]
[link url="http://www.fin24.com/Companies/Health/nhi-bill-may-be-ready-for-adoption-by-november-20170720"]Fin24 report[/link]
[link url="http://www.politicsweb.co.za/politics/critical-details-still-missing-on-nhi–free-market?utm_source=Politicsweb+Daily+Headlines&utm_campaign=3548bc1f35-EMAIL_CAMPAIGN_2017_07_19&utm_medium=email&utm_term=0_a86f25db99-3548bc1f35-130040921"]Politicsweb report[/link]

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