The potential impact of the National Health Insurance (NHI) Act on the private health funding sector, which currently enables financial risk protection for those with private health insurance, calls for forward-thinking reforms, write a group of experts in the SA Medical Journal.
G Solanki, V Brijlal, R Morar, J Cornell, N Myburgh and S Cleary highlight some trends and challenges in this sector and then examine two possible extreme scenarios during the NHI transition phases.
In the first, a “passive” process is assumed, characterised as a continuation of the current policy environment, where the sector is allowed to continue a downward trajectory without any specific actions to maintain its viability during the transition.
A key risk, however, is that the sector becomes unsustainable before the NHI can provide an alternative financial risk protection mechanism to those currently protected through private health insurance.
In the second scenario, an “active” process is followed, with steps taken to keep the sector sustainable during the transition period. While part of this would include the purposive shifting of government-related funding from the private funding sector to the NHI, other actions would include regulatory and other reforms necessary to keep the private funding sector viable, which would also provide a stronger foundation for the NHI.
Ponderous progress
The slow progress in carrying out the NHI and private health funding and provider reforms has been attributed to weak governance and management capacity, inability to build compromise and consensus across interest groups, the complexity of navigating provincial v national powers and political interests, and weak economic growth since 2010.
Adding to the mix are regulatory and legislative hurdles as well as legal challenges, all of which are likely to continue.
Various outcomes could emerge without active reform, the most likely being a continued downward slide for the sector, with further exacerbation of the challenges and threats to its viability.
These include above-inflation contribution increases, loss of membership, movement of members to cheaper options, higher out-of-pocket spending and potential catastrophic spending, and increased reliance on the public sector.
The major risk for the health system and the country is that the sector then becomes non-viable before NHI is put into place. For example, if the existing medical scheme population were to become dependent on the public health sector before any improvements in government-mediated funding for the NHI, this would add substantial strain to the public sector and possibly reduce the capacity of private providers.
Given that the NHI intends to purchase services from both public and private providers, protecting this capacity is essential.
On the other hand, an active reform process could mitigate these risks. Implicit in such an approach would be a recognition that (i) the implementation timelines for NHI are uncertain and will extend over a lengthy period, given the legal, financial, governance and political issues; and (ii) the sector plays an important role in filling the current gaps in public health service provision and universal health coverage, and consequently needs to be affordable and sustainable while NHI is being implemented.
Strategically important within such an approach would be establishing the building blocks for the NHI by shifting government-related funding from the private funding sector to the NHI, and carrying out the necessary regulatory and other reforms to keep the remaining private sector viable until the NHI is implemented.
The first prong has long been mooted by the NDoH, and was called for again by Health Minister Aaron Motsoaledi at the National Council of Provinces policy debate on the health budget vote, who said R30bn could be shifted by redirecting the tax rebates on medical scheme contributions.
It should be noted that while the National Department of Health has long argued for these tax rebates to be removed, it has not been able to convince Treasury to do so.
Claimants of medical scheme and medical expense deductions represent ~27%[36] of taxpayers, and these tax credits provide important relief for low- and middle-income members, the elderly and those with relatively high healthcare costs.
The Minister also mooted redirection of government funding of medical scheme membership for 1.3m public servants and Members of Parliament and legislatures.
The total combined employer and employee contributions towards medical schemes in 2022 amounted to R60.18bn for employees on the Department of Public Service & Administration (DPSA) payroll, R6.24bn for those in local government and R1.60bn for those on parastatal funds.
Despite the major public sector unions such as Nehawu and union federations like Cosatu having been vocal in their support for the NHI, the re-direction of this pot of funding would need to be carefully managed, as it would require a change in the conditions of employment of a substantial number of employees, and would have to be in compliance with the Labour Relations Act 66 of 1995, and negotiated at various bargaining councils.
The process of redirecting the funds could begin with fast-tracking the amalgamation of the DPSA schemes (GEMS), the SA Police Service Medical Scheme (Polmed) and the Parliamentary and Provincial Medical Scheme (Parmed), as the government has direct influence on the flow of funds to and the governance structures of these schemes.
Parmed, the parliamentary scheme, is a notable outlier in terms of contributions and expenditure, with average expenditure per individual more than three times the average of the DPSA schemes. This redirection of funds could be initiated as soon as is practically possible, with later consideration for moving the local government and parastatal funds.
Members of these DPSA schemes could be directed to use the public health sector as the preferred service provider in the transition phase – ensuring the funding is directed towards public health services rather than the private provider sector, and hopefully the requirement that public servants utilise public health services would lead to quality improvement in those services.
Overall, however, it needs to be recognised that the feasibility of government-led consolidation remains speculative, and a strategy of influencing market forces and regulatory guidance, rather than outright enforcement, may be more appropriate.
Sustainable
The second prong of the strategy would be to take steps to ensure the remaining portions of the private health funding sector remain sustainable while NHI is being implemented. Key here would be tackling the many broader health system governance challenges and recommendations to address them – as suggested in the Academy of Science of SA report on achieving good governance and management in the health system.
The failures of the private sector regulatory framework highlighted in the HMI report also need to be dealt with. Policymakers must acknowledge that regulation is a function of government, and regulatory failure is a failure of government.
The first step would be to systematically review the performance of the important regulators including, but not limited to, the CMS, the Health Professions Council of SA (HPCSA) and the SA Nursing Council, and to address the underlying reasons for under- or non-performance.
Only once the regulators are competent and fully functioning can the regulatory shortcomings of the sector, and the health system, be tackled.
Viability
In terms of regulatory reforms, creating a risk-sharing mechanism and the establishment of a supply-side regulator should be prioritised. This would contribute to keeping the sector viable while also building towards the NHI.
Pilot projects for contracting of district health services as well as for specialised and highly specialised services could be implemented and phased in. A defined monitoring and evaluation system could be implemented, focusing on clinical governance, good quality and affordable care and alternative reimbursement methods.
Pilot projects that are well planned and managed offer a chance to encourage the evolution of innovative and integrated models of care, including consideration of multidisciplinary group practices with various re-imbursement models.
This will also provide impetus for bodies like the HPCSA, the CMS and others to carry out the required regulatory reforms.
Conclusion
The passing of the NHI Act could signal the start of fundamental reform of the SA healthcare system. It is important that policy-makers consider seriously these potential private health funding reform scenarios during the transition phase.
The most likely outcome of the current, largely passive-leaning approach, is a continued downward spiral for the sector, with further exacerbation of the challenges and threats to its viability. A more pragmatic and deliberate approach for the next 10-15-year period would be to proactively lead and manage private sector reforms, to ensure the sector remains viable until such time as the NHI offers an integrated and acceptable alternative.
These reforms will also provide important foundation blocks for building the NHI.
G Solanki,1,2,3 BChD, DrPh; V Brijlal,4 BCom (Law and Economics), MSc (Economics); R Mor ar,5 MB ChB, MMed (Comm Health); J Cornell,6 MA, PhD; N Myburgh,7 BDS, MChD; S Cleary
1Health Economics, Health Systems Research Unit, South African Medical Research Council
2Health Economics Unit, School of Public Health, Faculty of Health Sciences, University of Cape Town
3 NMG Consultants and Actuaries, Cape Town
4Clinton Health Access Initiative, Pretoria
5 Director and Head Nelson Mandela University Medical School, Faculty of Health Sciences, Gqeberha
6Director of Institutional Development and Planning (retired), Nelson Mandela School of Public Governance, University of Cape Town,
7Faculty of Dentistry and World Health Organisation Collaborating Centre for Oral Health, University of the Western Cape
8 Head of Department and Director, School of Public Health, Faculty of Health Sciences, University of Cape Town.
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