Speculation around the shape and form of South Africa’s National Health Insurance (NHI) system is mounting. Opposition parties, health economists and medical aid members are watching each new development in a bid to piece together government’s thinking on the matter.
Thus far we can only work with a 'leaked' ANC-task team policy document tackling the topic. The document, chock-full of grand social outcomes, pays scant attention to the financial, infrastructural and human resources the plan requires to work. Until we have an official ‘white paper’ outlining government’s national health proposals we remain in the dark.
Distracted by the likely rush implementation of NHI most of us have forgotten about the various legislative changes currently in progress in the healthcare environment. At the fifth annual Aon Healthcare Seminar, held at Aon’s Sandton head office on 29 September 2009, we received a quick refresher. Esme Prins of Benguela Health offered a detailed assessment of Legislation and the Pending Environment – particularly as it relates to NHI.
Tabled, but still waiting for regulations
The Medical Schemes Amendment Bill (MSAB) was tabled in Parliament last year, but hasn’t made any progress in anticipation of NHI. The key issues dealt with in the MSAB included changing the allowed business of a medical scheme, to restructure medical schemes benefits through the introduction of innovative benefits packages, to introduce a framework for low income products, to enhance corporate governance within medical schemes and to introduce risk equalisation.
"They can either withdraw the MSAB and amend it, or proceed with the bill as it is currently tabled," said Prins.
Proposed NHI solutions introduced uncertainty about the future of the medical schemes industry. Experts believed that government wanted to do away with the 'multi-payer' system and handle all healthcare purchasing functions through a single publicly administered NHI super fund.
Since then the stance has moderated slightly as government realises it will have to consider the section of the population enjoying medical cover through the private sector. At the end of 2008 there were approximately 7.8 million medical scheme beneficiaries representing 16% of the country’s 48.7m citizens.
An industry beset by problems
The industry has its own problems. According to Prins, "financially – particularly looking at operating results – the industry doesn’t look well at all." Too many schemes reported net deficits for the latest financial year. Prins notes that 41.6% of beneficiaries belonged to schemes that reported operating deficits in excess of R20m in 2008.
This situation persists despite contributions per average beneficiary per month exceeding R800. "It’s becoming an expensive issue to have ‘good’ medical scheme cover," Prins said.
There are three main cost drivers that impact on medical schemes affordability. The first is healthcare costs, comprising hospital expenses, doctors and medical specialist remuneration and medicines. R64.7bn was paid in healthcare costs in the 2008 year. The second is non-healthcare costs which include gross administration, managed care and brokers and other marketing expenses.
Medical schemes spent R10bn on these lines last year. And finally, we have Prescribed Minimum Benefits (PMBs). Prins says one of the major problems faced by medical schemes is the manner in which PMBs are administered. The current system forces medical schemes to pay the providers invoice unless they can prove it is "excessive, unreasonable or unprofessional."
Affordability is the reason there has been no significant increase in medical schemes coverage since the Medical Schemes Act first came into force in 1967. There are currently too few beneficiaries and too many medical schemes. The Council for Medical Schemes 2008/2009 Annual Report lists 119 schemes and nine of these have since closed shop or merged with other schemes. And there are a number of voluntary and compulsory mergers in the pipeline.
Medical schemes under NHI
We don’t know what the final NHI system is going to look like, but we can make some ‘educated’ guesses. "Medical schemes will be there – in what form I cannot tell you – but we probably know with the background I’ve just given you that schemes will have to be restructured to be part of the solution," said Prins. To survive they will have to be competitive and affordable. Prins believes the medical scheme could even compete with the NHI under certain circumstances. What about other legislation?
The National Health Amendment Bill (NHAB) was introduced into Parliament in 2008, but has since been withdrawn. The bill proposed reintroducing central negotiations on prices between healthcare funders and providers. The NHAB also proposed setting prices on PMBs. The ‘central negotiation’ process is part of the proposed NHI solution. Prins says the NHI will probably create a central tariff setting function which could render the NHAB obsolete.
(Gareth Stokes, FA News, September 2009)