22 September 2011

NHI and private health insurance demand

There is unlikely to be any significant reduction in the demand for private health insurance if NHI tax is introduced if quality doesn’t improve in the public healthcare sector.


There is unlikely to be any significant reduction in the demand for private health insurance if a National Health Insurance (NHI) tax is introduced if quality doesn’t improve in the public healthcare sector, says Health Economist at Mediclinic, Dr Okore Okorafor.

Speaking at the Hospital Association of South Africa’s (HASA) annual conference in Cape Town, Okorafor said although an NHI tax on income could be introduced, demand for private healthcare insurance was mostly dependent on perceptions of quality of healthcare provided in the private and the public sector.

“If the quality of care provided in the public sector improves dramatically, only the very rich would purchase private health insurance, but if there is not, there will be insignificant change in demand for private cover,” he said. 

Although private health was considered a luxury good , it was very sensitive to healthcare quality perceptions which included waiting times; the availability of drugs; staff attitudes; treatment; as well as cleanliness of facilities.”  

Quality of care not addressed

Okorafor said additional funding to the public sector was a necessary, but not sufficient condition for improvement of quality.  But a lack of managerial capacity; lack of accountability; severe shortage of health professionals; poor disciplinary procedures and corruption; as well as delayed responses in the public sector affected quality.  

“The Green Paper does not address systemic challenges to improve quality of care,” he added.  “This will have a negative impact on the ability of the public sector to efficiently translate financial resources to quality healthcare.”

While the Office of Health Standards and Compliance will be one of the tools used by government to improve quality in the public sector, it was essentially an organ of state that was not independent and had no accountability to any other organisation besides the Minister of Health.  This will have a negative impact on its ability to effectively regulate quality.

Some observers have suggested that medical schemes would see their membership drop by 40% when NHI is introduced as lower income groups would not be able to afford private cover as well as the NHI tax. 

“If the quality gap between public and private sector healthcare services becomes small people can easily substitute one for the other, but if the gap remains big, there is very little effect on demand for private health insurance,” he added. - (Press release, September 2011)

Read more:

SA schemes facts and figures
Medical scheme tariff structures


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