05 November 2009

NHI to be put on hold

Minister of Health, Dr Aaron Motsoaladi, is expected to give notice that the National Health Insurance scheme (NHI), which was expected to cost taxpayers billions, will be delayed.

Minister of Health, Dr Aaron Motsoaladi, is expected to give notice that the National Health Insurance scheme (NHI), which was expected to cost taxpayers billions, will be delayed.

A number of senior participants in the sector told Moneyweb that Motsoaladi is "uncomfortable" with NHI proposals, which were supposed to be published in a green paper before the end of the year. Ministry officials have given presentations to interested parties that suggest a postponement of the programme.

The biggest obstacle to the programme is cost, which is estimated from R100bn to R300bn, depending on the benefits made available to Everyman.

Said one top consultant, who did not want to be named: "The people drafting the plan lack the technical capacity to move beyond superficial recommendations that do not take into account financial and other constraints."

The Department of Health has as its mission statement: "A caring and humane society in which all South Africans have access to affordable, good quality healthcare." That could imply that the NHI is a cornerstone of its policy.

Cosatu and the SACP are vociferously behind the proposals, regardless of cost and will be dismayed at any delay.

Not enough doctors to supply free medical services
But SA does not have enough doctors, nurses, hospitals and clinics to be able to supply free medical services to all citizens. Indeed, a premature national health system could drive more doctors out of the country. Government is now saying it has a ten-point plan to get to its ultimate goal.

"The NHI is not the first step," said Mandy Mzimba deputy general manager, health policy at Discovery (JSE: DSY) Health, "It is the final step that comes after hospital revitalisation."

Roly Buys, funder relations executive at Medi-Clinic (JSE: MDC) said the green paper has been expected since June.

Now the minister appears to be more concerned with service delivery problems and upgrading the anti-HIV/Aids programme. A key strategy is to step up training of health professionals.

The Democratic Alliance complains that the ANC is trying to force through NHI implementation by avoiding public debate on the matter. It calls for more public input.

The DA accuses the ANC of making the NHI policy "covered in a cloak of secrecy" and without consulting experts. It contends that money is not the biggest shortage. It also advocates fixing public hospitals as a top priority.

Futurologist Clem Sunter told me in September that the NHI is "one of the most critical determinants of future economic success or failure in SA".

NHI could become a costly failure
As it was originally described, the NHI will "fail to meet expectations of the poor, will leave medical scheme members (including the working poor) worse off, will be massively expensive or even completely fiscally unaffordable, and will require far more doctors and nurses than are available. The danger is that it could well become a highly costly failure that will further increase frustration with service delivery".

That warning came from a joint paper by Professor Servaas van der Berg and Professor Heather Mcleod of Stellenbosch University. The authors favour a fairer health system and a move from voluntary to mandatory contributions because the young and the fit stay out of the system until they become old and infirm. They want the NHI to proceed but in a more affordable way.

The Van der Berg/Mcleod document continues: "A costing by Sule Calikoglu and Patrick Bond offers a range from R134bn to R231bn, with a preferred model of R205bn for 2006.

"A preliminary costing by Di McIntyre, John Ataguba and Sue Cleary produced a cost of R77bn in 2010, escalating to R169bn at current values by 2020."

Van der Berg and Mcleod found that even if the fund would provide only a basic benefit package, it would cost R5 140 per person per year... ie, R251bn for the full South African population. This can be compared to a more restricted and a more comprehensive package of benefits:

  • Prescribed Minimum Benefits or PMBs only R156bn
  • Basic Benefit Package (PMBs plus primary care) R251bn
  • Fully Comprehensive Benefit Package R334bn

"Even if one accepts the optimistic view that public sector provision could be up to 30% cheaper (though this ignores service quality) and applies that 30% reduction across the board, the funding required to fund the NHI at BBP benefit levels is a full R176bn - a massive amount compared to budgeted income tax revenue of R206bn and public health expenditure of R84bn!"

NHI funding through income tax would require tax rate increase
Van der Berg and Mcleod found that a payroll tax of over 17% would be needed to fund such a conservatively estimated revenue need.

"Alternatively, to fund the NHI through an income tax would require tax rates to increase by 85% across the board - the top marginal tax rate of 40% would have to rise to 74%!

"Our estimate of the tax costs is similar to that of a 2005 ministerial task team, who declared an NHI "unaffordable at the existing level of economic development", even with fiscal substitution (ie, reducing other public health spending). Laying claim to present medical scheme contributions for the NHI (around R76bn) is not a solution for getting financial resources for the public system, as scheme members will want to continue receiving the benefits currently covered.

"The NHI proposal can be taken seriously only once a proper analysis of its costs, fiscal consequences and affordability has been undertaken. The current proposal is beyond what the country can afford.

"Moreover improving the quality of health care requires more real resources - doctors, nurses, hospitals, equipment - that do not automatically follow funds, but depend on management and incentives in the public health system. History teaches us that improving such management is difficult to achieve in a moderate timeframe. Indeed "(the most urgent need is to ensure that the public sector is well-capacitated to deliver the envisaged services at all levels."

Alex van den Heever, a prominent consultant, told a conference in Durban recently that from his knowledge of the NHI, the system was a "completely unworkable, unaffordable solution that won't improve health services despite massive increases in expenditure".

Van den Heever said one of the proposals made in the yet-to-be released document, compiled by the ANC task team, was increasing the health budget by R100bn.

"The danger is that there seems to be an attempt to avoid debate on this issue," he said.

"The documents have been produced, but have not been subjected to external peer review or technical analysis".

(David Carte, Moneyweb, November 2009)


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