SA has to solve its healthcare conundrum before we all have to use Dr Rath's magical muti.
Private healthcare in South Africa has an image problem. That much is clear.
There is a lot of mistrust between private healthcare companies, like Discovery (JSE: DSY) and Netcare (JSE: NTC), and the public. Fee scandals and constant criticism from the minister of health have resulted in a public that is suspicious of purveyors of private healthcare, that fears their profit-seeking will corrupt the service offered.
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It's strange, because people don't generally feel this way about service providers. To quote Adam Smith: 'It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.'
This is true. When one goes into a supermarket, one does not seek out the manager and explain one's need of bread. Instead, one trades value (money) for value (bread) at the till.
This will not, it seems, do for healthcare. Instead, the minister of health urges doctors to make sacrifices and provide care in reduced circumstances. Indeed, medical professionals have openly criticised the ministry's fee guidelines, saying that their costs are not covered by the proposed remunerations.
A unified system
The solution that many both within and outside the department of health (DOH) suggest is a socialized health system, under which public and private facilities would be merged and managed as a single system funded primarily by tax money. This is the vision underlying the minister's envisioned 'social health insurance', an earmarked tax on employees that would fund a range of healthcare services.
There are several objections to this plan, however admirable its intentions. First, there are only 7m taxpayers in South Africa; 5m individuals, 1,7m companies and 300 000 trusts in a population of 47m. These 7m already bear a fairly heavy tax load, including income taxes, VAT and customs and excise duties. Soon, a retirement funding tax will be added to the tax on individuals. An extra healthcare tax may be the proverbial straw.
Second, the department of health has not managed South Africa's public health resources well. Life expectancy has declined, AIDS-related illness has ballooned, and newborns at Baragwaneth lie three to a cardboard box. Problems in capacity, policy and implementation have led to serious quality concerns in public care. There are no guarantees that private healthcare would be well managed under government supervision.
Third, costs tend to run away in publicly funded healthcare systems. France, which has a world-class public health system spends close to ten times as much per capita on healthcare as South Africa. In the US, the two public healthcare programmes, Medicare (for the elderly) and Medicaid (for the indigent), spend trillions of dollars a year.
Utilization: a problem?
The problem in these cases is not the rise in cost per visit to the doctor or admission to hospital. Rather, it is the increased utilization of healthcare services. A person who, if she was paying out-of-pocket for a doctor's visit, wouldn't go to her GP for a slight rash but will go when the cost is absorbed by the state. Furthermore, hospital usage is strongly, almost linearly, correlated with age.
The older you are, the more time you will spend in hospital. Thus, aging populations consume more and more healthcare services. If these services are publicly funded, the burden on younger working-age people who pay taxes can become extremely onerous.
There are, however, many problems with privately funded healthcare too. Most obviously, it is only accessible to those who can pay. In addition, there is a risk that affordability will be negatively affected if doctors and hospitals are permitted to raise the price of their services unchecked..
This problem, the trade-offs between private and public healthcare, is one of the most vexing to governments around the world, and has not yet been definitively sold. What is probably needed is a balanced approach, combining the efficiency of private with the egalitarianism of public healthcare. Concepts like the public-private partnership Netcare is running in conjunction with the government of Lesotho are potential signposts to what such a system may look like.
There are other measures that could help the situation. For example, Netcare CEO Richard Friedland notes that private healthcare companies must charge VAT on all their services and products (government services are VAT-exempt). Simply eliminating VAT would reduce the cost-to-consumer of private healthcare substantially.
The challenge facing the South Africa healthcare system, private and public, is to move beyond ideology-based arguments and strategies and take a pragmatic look at the costs and structures of the healthcare system. Only then can affordable and accessible healthcare be provided to all South Africans.
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