If the NHI is going to deliver healthcare services to all patients successfully, it will have to procure services from both the public and private sectors, write Nicola Theron and Paula Armstrong.
National Health Insurance (NHI) as a path to universal health coverage (UHC) first appeared on the policy agenda at the ANC National Conference in Polokwane in 2007.
In the 16 years since the appearance of NHI on the South African policy agenda, stakeholders in the private and public healthcare sectors have found very little common ground on its format and implementation. Interestingly, the National Department of Health seems insistent on creating a world with either no private sector, or a very limited one, whereas the Competition Commission’s Health Market Inquiry published various recommendations to strengthen the private healthcare sector.
While all parties agree that there is a need for UHC to address the inequalities in the system, that is where the agreement ends.
This is disappointing, as the Covid-19 pandemic produced green shoots of cooperation between the public and private sectors. Within days of South Africa’s first confirmed case of the virus, government published regulations granting exemptions to the Healthcare sector from certain sections of the Competition Act. These exemptions enabled the National Department of Health to establish service-level agreements with the private sector to procure services, so that state funded patients could be treated in private hospitals.
If the NHI is going to successfully deliver healthcare services to all patients, it will have to procure services from both the public and private sectors.
However, recent pronouncements in the media about the inefficient use of resources in the private healthcare sector (both private hospitals and pharmacies) do not help in progressing the debate.
A recent article by Netwerk24 reports that the head of the NHI in the National Department of Health, Dr Nicholas Crisp blames fragmented risk pools and the existence of too many medical aid funds for over-servicing by providers in the private healthcare sector.
Crisp refers to nine provinces and 76 medical funds that “all do what they want” and highlights the need to find a way to use the 265 private hospitals “more efficiently”.
In his view, the answer to this problem is a single pool of funds, in the form of the NHI Fund. He proposes that the pooling of all available funds will lead to more efficient procurement from both the private and the public sector. The state will then control all available resources to buy healthcare services, and medical schemes will be limited to covering “complementary” services, which are services not provided by the NHI.
Theoretically, a single pool of funds available to a buyer of healthcare services will provide such a buyer with the power to negotiate lower prices. However, a glaring concern with another publicly managed pool of funds is potential corruption. There can be no argument that corruption has become endemic in South Africa. The opportunity that this substantial amount of money will create for the misappropriation of state funds is significant and cannot be ignored. Many stakeholders have raised this concern, both in the public comments on the NHI Bill and by various political parties last week when the Amendments to the Bill were approved by the Parliamentary Portfolio Committee for Health.
The problem with the view held by government officials, like Crisp, is that there is limited – if any – role for medical schemes under NHI. This is in direct contrast to the recommendations of the Competition Commission’s Health Market Inquiry (HMI).
The HMI was tasked with considering the state of competition in the private healthcare sector. The HMI’s final report and recommendations were published in 2019, following 6 years of intensive fact finding and research by the Competition Commission. The depth of the research and the quantum of taxpayer’s money spent on this inquiry surely requires that the state at the very least contemplate these recommendations.
This has also recently been pointed out by the director of the HMI, Mapato Ramokgopa, at a conference of the Board of Healthcare Funders.
She indicated that none of the HMI recommendations have been implemented since their publication in 2019.
To solve the issue of fragmented risk pools, the HMI proposes a risk adjustment mechanism (RAM) to address the issue of fragmented risk pools, which will create a single risk pool amongst medical schemes “ready for integration with the NHI Fund”.
The HMI also recommends the establishment of a standard medical scheme benefit package which is easily comparable across funders, and which may ultimately strengthen competition in the market.
The final report explains that recommendations like the RAM are:
essential market mechanism(s) to ensure that purchasing in the market becomes more effective, by forcing funders to compete on value and, therefore, stimulate competition between and the efficiency of providers. The resultant competitive environment will benefit the NHI in which a fully implemented NHI can function
Crucially, these recommendations (amongst others) aim to make medical scheme cover more accessible and ultimately, to extend cover. The intention is certainly not to limit medical scheme cover.
The market solution is to allow more members into the medical scheme market by creating a regulatory framework that makes medical scheme more affordable. This will increase the buyer power and managed care functions of medical schemes, both of which put downward pressure on private sector healthcare costs.
If Crisp and the state are concerned with over-servicing in the private hospital market (he quotes data on caesarean sections, grommets, and tonsillectomies to support this point), then the correct market response is to allow medical schemes to exercise their buyer power by introducing options for lower income members.
In this way, government also benefits from procuring high quality services for the public sector beneficiaries from the private sector providers – an important step towards achieving true universal coverage. In contrast, insisting that the only path towards UHC is with of a single pool of funds managed by government, and eroding the role of medical schemes as buyers of healthcare services, will likely contribute to the demise of a strong and well-functioning private healthcare sector.
This reduces consumer choice, erodes competition, and may well lead to the same outcomes as other recent examples of state-owned enterprises and funds.
Prof. Nicola Theron and Dr Paula Armstrong are with FTI Consulting.
News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.
