The private sector’s “inefficiency and unsustainability make a compelling case for NHI”, writes Dr Olive Shisana in an opinion piece in the Daily Maverick, which “has the potential to transform healthcare in South Africa for the better”.
She writes:
While the NHI has stirred up intense debate, addressing factual inaccuracies is crucial. Such inaccuracies create doubts about the government’s ability to effectively implement statutory schedule three public entities, of which NHI is one.
To begin with, the NHI will be classified as a schedule three public entity, similar to other reputable entities like the Council for Scientific and Industrial Research, the Council of Geoscience, the Medical Research Council and the Agricultural Research Council.
These have a proven track record of unqualified audits, and the NHI is expected to operate similarly.
According to National Treasury, schedule three entities are mandated to fulfil the government’s specific economic or social responsibilities. They rely on government funding and have limited autonomy.
This distinguishes them from schedule two state-owned enterprises, like Eskom and Denel, which are profit-driven and operate more independently. Therefore, comparing the NHI to schedule two entities is flawed.
Another misconception is that the NHI will merge the public and private sectors, leading to the collapse of the private sector.
However, as a schedule 3A entity, the NHI will operate under the Public Finance Management Act, ensuring adherence to financial management principles. The NHI Fund will accredit public- and private-sector facilities, reimbursing them for their services. This will not impede the private sector from operating; it ensures the NHI covers reimbursable services.
Regardless of income, South Africans will have access to services from both sectors if they meet the required quality standards.
Critics often claim that the private sector is more efficient, but evidence suggests otherwise. The sector is largely underused and this spare capacity can help to reduce overcrowding in the public sector.
The Health Market Inquiry exposed the private health sector as neither competitive nor efficient. Competition authorities found runaway costs and significant overuse without improvements in health outcomes. Per-capita health expenditure in the private sector is much higher than in the public sector.
The exorbitant costs stem from medical scheme administration, which accounts for 15% of expenses. In contrast, the NHI’s administration costs are expected to be less than 3%. The private sector’s inefficiency and unsustainability thus make a compelling case for the NHI.
Concerns have also been raised about the potential collapse of medical schemes under the NHI. However, medical scheme numbers and beneficiaries have declined without the NHI’s influence.
It is reported that some employers no longer require compulsory medical scheme contributions, further jeopardising their sustainability. Some individuals choose to pay only for hospital coverage, reducing the available funds for medical schemes.
Under the NHI, the pre-payment cover for medical schemes will be lower than what is paid to the NHI. Medical scheme premiums are increasing above inflation rates, and by 2030 they are projected to consume about 30% of household income.
The current medical schemes are failing the public, judged by 45% of the population exhausting their benefits before the year ends, resulting in potentially dangerous underuse of essential health services and/or significant financial hardship.
The proposed changes in the NHI Bill will also benefit medical scheme beneficiaries by offering year-round coverage at a reduced cost, leading to better cost containment for healthcare.
Question of quality
One of the arguments against implementing the NHI is the concern about healthcare quality. The criticisms ignore the Bill’s clauses related to certification and accreditation. Implementing the NHI system, focusing on certification standards and accreditation norms, is expected to improve the quality of health services. By requiring contracted establishments to meet minimum certification standards, it aims to ensure providers deliver high-quality care.
One significant measure under the NHI is the accreditation of providers for reimbursement from the Fund. This is based on the certification status received by a provider. By linking reimbursement to certification, the NHI incentivises establishments to strengthen compliance and enhance the quality of their services.
It can achieve this through a rating system that assesses certified establishments based on performance, such as a “star” system indicating good, average or poor quality of care. The implicit action is that the Bill demands quality regulation in both the public and private sectors, which is new.
Under the NHI, which aims to accredit healthcare providers and facilities, the quality of healthcare services is expected to improve.
Historical context
We must not be blind to the historical context of systematic apartheid policies that have contributed to the existing challenges in the healthcare system which the NHI aims to address.
The shortage of doctors in the health system is not a recent issue. Coovadia and colleagues analysed the doctor-to-patient ratios in the 2009 Lancet journal and found that as early as 1940, there was a significant disparity in healthcare access.
In Cape Town, there was one doctor per 308 white individuals compared with one doctor for every 22 000 to 30 000 people in the reserves (predominantly black population).
By 1946, the ratio was 1:2427, which improved to 1:1721 by 1976. By 1980, the report indicated that 40% of doctors worked in the private sector, which increased to more than 60% by 1990. It is evident that the private sector predominantly caters to the privileged population, as highlighted in the statistics below:
• White: 77.7%;
• Indian/Asian: 45.1%;
• Coloured: 19.9%; and
• Black African: 9.3% (Statistics South Africa, 2021).
Despite the challenges in accessing medical care, evidence suggests no significant difference in the perception of healthcare quality between the public and private sectors.
For instance, studies have shown that 81% of patients using general practitioners (GPs) and 81% of households using public healthcare services reported being satisfied with the care received (M’bouaffou et al., 2022; StatsSA, 2018).
However, it is essential to acknowledge that improvements are needed to satisfy the nearly 20% of patients dissatisfied with the services.
The government has initiated a national quality improvement plan to address quality concerns in public and private healthcare. This plan includes 418 Quality Learning Centres as of March 2023, covering 153 hospitals, 227 primary healthcare facilities and 38 emergency medical services.
The Office of Health Standards Compliance inspects and certifies the Ideal Clinic Model, and in 2021/22, 56% of the inspected clinics were deemed ideal. However, the Department of Health still needs to do more work to ensure all healthcare services meet high-quality standards.
Cost complaints
The DA’s complaints about NHI financing, particularly its argument that the NHI was never costed, seem to overlook crucial information. Treasury conducted a cost projection for the NHI in 2012, as outlined in the White Paper on NHI.
According to the projection, Treasury estimated the cost for the NHI in the 2025/26 financial year to be R255.8bn in 2010 prices, with an annual increase of 6.7%. While it is old, it does indicate that costing has been done. It will be critical each year to prepare a budget for services to be funded.
It is important to note that the NHI’s baseline funding is derived from the current health budget and is incorrect.
It needs to be corrected to assume that the NHI requires zero-based funding. The public sector already contributes the bulk of the R255.8bn towards the NHI, which excludes various state subsidies provided to the private sector, such as medical scheme contributions from national, provincial and local government, and state entities, as well as the rebates currently offered to medical scheme contributors.
Therefore, the notion that South Africa lacks funds to implement the NHI is misguided. Some of the countries that implemented NHI have far less than South Africa, such as Thailand (3.7%), Mexico (6.3%), Columbia (7.3%) and Indonesia (3.7%).
The issue lies in allocative inefficiency rather than a lack of funds. It is essential to address and optimise the allocation of existing resources to ensure the effective implementation of the NHI and improve healthcare access for all South Africans.
Resistance from some health professionals and medical scheme administrators is a phenomenon that has been around for a while.
While some health professionals express concerns about the NHI, others, like the South African Medical Trade Union, support it as a way to address the flaws of the two-tier healthcare system.
Similar resistance was observed when the British Health Minister introduced the National Health Service, but it was eventually overcome. It is important to listen to doctors, considering their concern for patients and potential resistance to change.
In conclusion, the discourse surrounding the NHI should focus on accurate information and a comprehensive understanding of its potential impact. As a schedule three public entity, the NHI will function within the framework of the Public Finance Management Act and will not hinder the private sector’s operation.
The evidence suggests that the private sector is inefficient and unsustainable in the long run, while the NHI offers a cost-effective solution.
By addressing historical disparities, improving healthcare quality and using existing funding, the NHI has the potential to transform healthcare in South Africa for the better.
It is essential to consider the concerns raised by health professionals but also to distinguish between genuine patient-centred concerns and resistance to change.
Dr Olive Shisana is an honorary professor at the University of Cape Town and special adviser to President Cyril Ramaphosa.
See more from MedicalBrief archives:
NHI pilots point to critical fault lines
The nuts and bolts of NHI – how it will work, who pays
NHI will cover Health Market Inquiry recommendations – Crisp