The Department of Health’s funding model for South Africa's vaccination roll-out is “inherently unfair, unethical and illegal”, Profmed CEO Craig Comrie told MedicalBrief in an interview. Profmed's Comrie was this week the first medical scheme CEO to break ranks over an arrangement whereby around half of the entire nation's vaccination bill will be paid for by the 9m members of SA's medical schemes.
Fedhealth's Principal Officer, Jeremy Yatt, has also spoken out against the plan, which he says, “contrary to what is being punted in the media, is by no means a done deal”. “Aside from Discovery, I don't know of a single scheme that is buying into a proposal that is damaging to the interests of members and will weaken the schemes financially.”
The opposition comes among rising disquiet and uncertainty, in general, over the DoH's roll-out strategy and plans. This week the Democratic Alliance filed papers in the Western Cape High Court demanding that the government explain how it will handle the rollout of the COVID-19 vaccination. It wants clarity on the number of vaccines still to be secured, the steps taken to secure those doses and the anticipated delivery dates, and the anticipated price per dose.
The DA also wants clarity on how the government intends to fund costs, estimates of which have varied substantially. Negotiations between the medical schemes and government about them footing the bill for their members, as well as at least one additional dose, was based on an initial estimate that R12.1bn was needed to vaccinate a targeted 27.5m people.
However, this week Treasury said in a News24 report that the cost might double to reach 40m people — between R20bn and R24bn. National Treasury's director-general Dondo Mogajane said that finance would not be an issue. He detailed three main options: taxes; increased borrowing; and reprioritising of existing budgets.
An additional option was the National Revenue Fund, by means of a process enabled by s16 of the Public Finance Management Act, which allows for the use of funds in emergency situations. No mention was made of medical scheme subsidisation.
Comrie says that while everyone in the sector embraced the most rapid vaccine roll-out possible, the fixing of a standard exit price (SEP) that is at least twofold the actual cost, is innately unfair to schemes in general and the smaller schemes in particular. Schemes, only one part of the healthcare sector, were alone in the sector being asked to shoulder the bill for a public good that benefited every South African business and individual.
Instead of the forced subsidisation by their medical members, the burden should be more widely shared. The critics of the proposed DoH funding arrangement instead want it to be via voluntary contributions to the Social Solidarity Fund, not only by the schemes but all of SA's corporates, as well as from wealthy individuals.
“Life insurers benefit from herd immunity. Corporates benefit, so do individuals. All should be asked to contribute,” says Comrie. “They could provide equivalent funding to what the schemes are being requested to fund. And in that way, instead of us paying double, we could probably pay a fairer, more palatable portion.” If cross-subsidisation were still found to be necessary, it should be done the customary budgetary way, through tax mechanisms.
“The fact that medical scheme reserves grew during 2020 has made them a convenient target for government. However, it's not as simple as that. The reserves are the funds of members, it's actually outside our ability to agree to that type of funding without the agreement of members.”
It's simply illegal to target members funds in this way, says Comrie drawing an analogy with moves to pressure the pension funds to invest in assets and projects chosen by government. In an analysis (see MedicalBrief's TALKING POINTS), Comrie likens it to government “nationalising” the funds in an individuals' savings account, because they are unspent, and banks being asked to approve that decision without account holders consent.
Comrie says the arbitrary fixing of the SEP at a multiple of actual cost is simply a convenient way to circumvent “what I think is an unethical and illegal transaction, since this is effectively a mechanism to extract members funds from schemes to fund non members”.
“This is money that is held in trust,” says Comrie. “To simply hand it over to government, as the big players and regulators are suggesting, is a betrayal of that trust. The only way that it can be ethically and legally done is by obtaining a mandate from the members of every scheme.”
“There is also a bigger context when you look at the fact that we've got probably around 15 million employed people in South Africa. Only half of those belong to medical schemes. The other half have varying levels of affordability, but many could belong. This means that our members will land up cross-subsidising people who could afford to pay.”
Comrie says that there was concern that the process had not been transparent. “The conundrum is that we don't want to hold up the vaccination process [with legal challenges]. So, we want government and other schemes seriously to consider the alternative funding proposals. But it seems … we are not being heard.”
Fedhealth's Yatt told MedicalBrief that it was not a matter of miserliness and that the schemes were keen to be part of the solution. They had immense experience and expertise that they were very ready to apply to deliver the common good of a vaccine rollout.
But, said Yatt the funding proposals — which he described as “fraught with complications and vagaries" — were fundamentally at odds with the underlying philosophy of medical schemes. “Unlike the insurers which exist to make a profit, we're essentially not-for-profit stokvels, existing for the benefit of our members.”
“While it is certainly true that we've benefited from decreased use of medical services during the pandemic, the improved reserves are not just a pile of cash that we're hoarding because we're greedy. There is a great deal of uncertainty of what unexpected financial demands the pandemic might still bring, as well as what the uptake of services is going to be going forward, for medical procedures that were put off last year.
“Fedhealth's solvency ratio (schemes must statutorily hold at least 25% of revenue in a reserve fund) is prudently high, but there are schemes that are close to the statutory minimum. Does that mean that they will be exempted from paying? How fair is that?”
Yatt said he was “very concerned” about the “slippery slope” that the proposal represented. “I keep reading about how the pandemic has proved the need for the NHI (National Health Insurance) to be implemented immediately. It actually shows the opposite — the need for a two-tier health system.”
“It is galling that the state is continually slamming the medical schemes as elitist, inefficient and useless, but then comes cap in hand, asking that their members, who already have removed themselves from being a health burden from the state, to hand over their reserves,” said Yatt.
Another medical scheme executive, who did not want to be named, told MedicalBrief that the schemes were being “naive” if they thought that this “punitive” funding mechanism agreed to the DoH would be a once-off: “The pandemic has a long way to run. Variants and an uncertain future mean that more funding will be needed down the road. This is just the first knock at the medical schemes' door by the government.”
[link url="https://www.news24.com/fin24/economy/south-africa/we-have-the-funds-to-pay-for-vaccines-says-treasurys-mogajane-20210127"]Full Fin24 report (Open access)[/link]