The National Health Insurance will take decades to implement, government has said, but some experts wonder if the scheme will ever get off the ground. Spotlight’s Jesse Copelyn outlines three possible scenarios for how NHI might pan out over the coming years.
The first draft regulations linked to the Act, relating to sections 12 to 30, should be published for public comment this month, says NHI lead Dr Nicholas Crisp, which when finalised, will “allow for selection, recruitment and appointment of a board… advisory committees and a CEO”.
Crisp, the deputy director-general in the Department of Health responsible for NHI implementation, says the draft regulations will be available for public comment for three months and form the first step in “setting up” the NHI.
Yet even as the Department lays the groundwork for the project, there are indications that compromise over the NHI may also be possible.
President Cyril Ramaphosa and other senior government officials recently had meetings with business leaders who want the Act amended.
Cas Coovadia, CEO of Business Unity South Africa (Busa), told Spotlight their aim is to ensure the NHI is rolled out in a way that achieves its aim of universal health coverage, without destroying the private medical insurance sector.
Central to objections is section 33, stating that once the Act is fully implemented, medical schemes won’t be allowed to cover benefits that are paid for by the fund.
But Coovadia believes that with the right amendments, the scheme could move forward alongside the medical insurance industry, with some people covered by the NHI and others retaining their private medical schemes.
There are thus at least two plausible scenarios possible – a ‘pure’ NHI, with a single state-run purchaser of the vast majority of health services, and an amended ‘hybrid model’.
Several researchers who spoke to Spotlight also suggest a third possible scenario – that the NHI will simply never happen in any meaningful way. They believe the scheme is institutionally and financially unfeasible and will fail to get off the ground, even if a board and staff are appointed.
How might these three scenarios evolve?
Scenario 1: The NHI moves forward as is
Although Ramaphosa signed the NHI Bill into law in May, none of its sections has yet been implemented. Crisp says “a board, CEO and staff” are needed “for anything to happen”. So, sections 12 to 30 of the Act – which deal with appointments – need to come first.
Once the draft regulations related to these sections have passed through public comment, the finalised regulations will be published, and sections 12 to 30 will simultaneously be promulgated, says Crisp, although he adds that they’re still awaiting legal guidance on the exact order of events.
Gradually, additional sections will come into effect, but this will take a long time, with Crisp saying that “there is still no NHI fund entity so no budget allocation”, though some funds have been issued by Parliament for “preparatory activities like getting the digital systems in place”.
The NHI Act states that the first phase of the scheme will last from 2023 to 2026, over which time the government must strengthen the healthcare system, prepare the fund and amend other legislation to bring it in line with the NHI. It also states that the fund can begin “purchasing of personal healthcare services for vulnerable groups … children, women, people with disabilities and the elderly”.
However, this can only happen once state spending on health is restructured. Currently, public health funds are allocated to provincial governments via the equitable share allocation and conditional grants.
Crisp says the NHI will start purchasing healthcare services only once some of these funds are reallocated to the centrally-run NHI fund. This won’t happen before 2026/2027, he adds.
Once the fund has been established, it will start by covering primary healthcare services, and the department is “busy establishing one CUP (contracting unit for primary healthcare) in each province”.
CUPs are organisational units, each being responsible for a small sub-district area.
The NHI Act states that the CUPs will comprise “a district hospital, clinics… ward-based outreach teams and private providers”, and have several functions, including monitoring “the disbursement of funds to healthcare service providers” by the NHI.
After testing one CUP in each province and working out what is required, Crisp says the department will “roll out more and more CUPs until the country is covered”.
A key change will be a shift from the predominant fee-for-service arrangements, where health providers get reimbursed for each consultation or service they provide. The Competition Commission’s Health Market Inquiry report argues that this is inefficient as it incentivises health workers to ‘over-service’ their clients.
In the case of primary health care, the plan is to change to capitation, meaning the NHI would reimburse healthcare providers with a fixed fee for each patient.
A different funding mechanism is being developed for hospital care, says Crisp – one based on Diagnostic Related Groups (DRGs). This is when patients are grouped into different price categories depending on their diagnoses.
Crisp says the department is currently working on the DRGs, but this “is going to take time”, and would probably only begin after the NHI has begun covering primary healthcare services.
Crisp previously told Bhekisisa that full implementation of the NHI would take decades.
Scenario 2: A hybrid system
Coovadia says Busa has consistently held that “the NHI Act is necessary to put us on the road to universal health coverage, but that in its current form it is not implementable and actually takes us back”.
“We will make available to the President in the next couple of weeks a document that sets out… what our concerns are and what we are recommending,” he said. These proposals will primarily involve section-specific amendments to the Act.
In Busa’s submissions on the Bill to the Select Committee on Health & Social Services last year, it took particular aim at the proposed limitation of the role of medical schemes in section 33, saying stripping people of their access to medical schemes would violate their constitutional rights to healthcare.
This is based on the argument that “medical services that fall under NHI coverage are likely to be inferior (in quality and/or extent) to the same medical services that medical schemes currently cover”.
Coovadia says apart from amendments to certain parts of the NHI Act, Busa will also be proposing “interventions that could be made almost immediately …to begin to improve the healthcare system”. One of them is the social health insurance model that was recently punted by outgoing Netcare CEO, Dr Richard Friedland.
Under this model, mandatory medical scheme membership would be required under law for employed people earning above a certain income threshold. Over time, other segments of the population would be covered in a phased manner, expanding private coverage and reducing the strain on public healthcare facilities.
The idea is nothing new. During the Mandela and Mbeki era, several state-backed working groups and committees of inquiry suggested an expansion of medical scheme coverage. The 1998 Medical Schemes Act even laid the groundwork for this option.
For Coovadia, amendments to the NHI Act could ensure that it works in combination with these kinds of models. However, achieving this may prove difficult, as the Health Department has remained committed to a single payer health model, to be funded through general tax revenue, the reallocation of funding for medical scheme tax credits, a payroll tax, and a surcharge on personal income tax.
Crisp says that section 33 is an important component for achieving universal healthcare: “How do you get universality – as opposed to parallel universes – with multiple funding streams for the same benefits? Our NHI is a single payer model, like many across the world,” he says.
Similarly, Health Minister Aaron Motsoaledi told Bhekisisa in August, that removing section 33 would be like building a house without the foundation.
Nevertheless, the government has begun taking a more conciliatory approach to business leaders who are pushing against the section, something which may be due to legal concerns, says Professor Alex van den Heever, a governance specialist at the University of the Witwatersrand.
At present, there are two court cases against the NHI: one was launched by the Board of Healthcare Funders (BHF), while the other was initiated by Solidarity.
Neil Kirby, who heads the Healthcare and Life Sciences division at Werksmans Attorneys, which is representing the BHF, says their case “challenges the decision of the President to assent to the NHI Bill”. In essence, if it turns out that Ramaphosa signed the Bill despite having information that suggests it was unconstitutional, or that the negatives outweigh the benefits, then the courts could overturn his decision, Kirby said.
“At that point the Act becomes a Bill,” says Kirby, “and will probably then end up back in the National Assembly for further debate or it will be sent to the Constitutional Court for an opinion.”
Ramaphosa’s decision to negotiate with business leaders may be an attempt to pre-empt this outcome. Coovadia and Kirby both suggested that if the President agreed to amendments being proposed by business leaders, this could ease legal tensions.
If Ramaphosa were to be swayed in favour of a hybrid system, additional amendments would be required beyond just removing section 33, however. For instance, Kirby notes that the NHI Act currently mandates that people prepay for the NHI, whether or not they want to join.
This means that even if they are legally allowed to retain their current medical insurance, they would have to double pay (i.e, for their medical scheme premiums and for the NHI prepayment), which could be unaffordable for many. To achieve a hybrid system, this would thus need to be dealt with as well, Kirby says.
But tinkering with the Act could prove politically perilous for the President. Van den Heever says Ramaphosa’s position in the ANC “effectively relies on the backing of different factions… one of being the faction that supports the NHI – Cosatu”.
Scenario 3: An ‘infeasible’ scheme fails to take off
There are two main reasons why the NHI is unfeasible and will inevitably fail to be implemented, believes Van den Heever. The first is that the institutional changes that are required by the NHI are too dramatic to be carried out.
“In South Africa, we’ve got two pre-existing systems,” he says. “We have a regulated insurance market (in the private sector) and we have a state-funded free health service for people below a certain income level.
“What’s being proposed from an institutional perspective is to take both of those systems and convert them into a third version that never existed here before – that transition is not feasible.”
For example, he adds, “just shifting (health) from the provincial structures to the first tier of government is massive”, and that’s before looking at the change required in the private sector.
The second major obstacle to rolling out the project is fiscal.
For the NHI to buy services for everyone, including those currently covered by medical schemes, government healthcare expenditure will have to increase dramatically.
Van den Heever says the state doesn’t have the capacity to raise large amounts of additional tax revenue to support this spending.
“You have several different tax bases (and) each one gets maxed out at a certain point. It reaches tax capacity.” This relates to the idea of the Laffer Curve – that if you keep increasing tax rates there comes a point where total tax revenue will stop increasing, and will instead begin to fall.
This is given that economic growth could be crippled or simply because people and businesses start evading or avoiding taxes.
“National Treasury and most economists looking at public finance largely accept that South Africa is at tax capacity, meaning it can’t expect to get more revenue from increasing tax rates,” Van den Heever points out, “and this is the fundamental flaw of this big idea of the NHI – that it could at some point introduce a special tax, and expect that revenue will flow.”
Andrew Donaldson, the former national Treasury deputy director-general responsible for public finance, who now teaches economics at UCT, raised similar concerns.
“Until South Africa’s overall economic performance improves… it will not be possible to raise more revenue for (the) NHI,” he told Spotlight. “The present trend is falling per capita public health and education spending – at best we can hope to see some stabilisation of financing over the next few years.”
Professor Iraj Abedian, CEO of the economic research firm PAIRS, largely agrees, saying it is plausible that the government could begin rolling out the NHI, but under the current economic climate, it won’t be fiscally possible to sustain it.
Gauteng’s e-toll project is potentially a good parallel for how things might pan out, he argues. “Did they sign (the e-toll legislation) into law? Yes,” says Abedian. “Did they spend the money? Yes. Did they enforce it for a couple of months? Yes.”
But billions of rands later, all that’s left is non-operational e-toll infrastructure scattered along Gauteng’s major roads.
“They will do a similar thing with the NHI,” he says. “There will be photos of a Minister cutting ribbons, but two years later… we’ll be left with a corpse of the project, like gantries on the highways in Gauteng.”
See more from MedicalBrief archives:
‘Patent nonsense and deep confusion about NHI’ – Crisp
HFA opposes proposed medical scheme tax credits’ removal
Busa and Health Department have ‘constructive’ meeting on NHI
Government open to more talks and ‘collaboration’ on NHI