The National Health Insurance (NHI) Scheme Misdiagnosis

by Aug 12, 2009All Articles

Financial Times  31 July 2009

Carol Paton

Free medical cover for the poor. Sounds like a dream, right? SA’s new health plan, being driven relentlessly by the Left, might be just that. Carol Paton dissects the plan and shows how government is setting itself up for a disaster

In the week or so before the April election, SA Communist Party general secretary Blade Nzimande stood on the stairs of the Cape Town city council, addressing a rowdy crowd of supporters who, after a hot, sweaty protest march, were eager to hear him talk.

Of all the things he chose to focus on in the ANC’s election manifesto during his short speech, he homed in on the biggest promise of all: a national health insurance (NHI) scheme within the next five years. “This means you will be able to go to any doctor or private hospital without having to pay anything,” he told the rather surprised crowd of protesters. Blade Nzimande

Now that election promise is being put into action. A 200-page policy document has been produced by an ANC task team and endorsed by the national executive committee, and a political campaign to popularise the NHI through leaflets will soon begin. After this, there will be no turning back on what is possibly the biggest and most far-reaching reform of SA’s public finances ever.

So what is the plan all about?
In a nutshell, the ANC proposes setting up an NHI along the lines of those in Europe’s wealthiest and most advanced countries, where everyone but the poor will contribute a portion of their salary to a giant state health insurance fund. All citizens would then be able to make use of health-care facilities – both public and private – that are contracted to the NHI, without paying any fees. That’s the theory and it sounds perfect. But in reality, the architects and proponents of the plan are so politically determined to push it through that they don’t know how it will work. Some detail is provided, but not nearly enough.

The technical work has not been done
Government push for NHI could backfire

Firstly, the NHI will be compulsory. All citizens will be registered individually to be a part of it and those whose income is above the minimum income tax threshold of about R54 000/year will be required to contribute a percentage of their salary to the fund. The payments will be split equally between employees and employers, in a way similar to the Unemployment Insurance Fund (UIF), for which monthly payments are shared between the two. The amount that employees will pay will depend on their income: the wealthier will pay a higher proportion of their income. This means high- to middle-income earners could end up paying three times for health care – normal tax, contribution to the NHI fund and medical aid. (See story “A heavy load to carry”.)

The unemployed and those who are below the income tax threshold will not make contributions. The monetary value of contributions is not discussed in the policy document. All that is said is that contributions will be less than people typically pay for medical aid and will be “a modest” amount.

The money collected through the NHI – tax as well as funds the fiscus allocates to public health – will be pooled in a single fund managed by a national health insurance authority (NHIA). The NHIA will fund “comprehensive” benefits, meaning almost all medical and dental procedures. It will do so by contracting both public and private hospitals in the same way that medical aids do. Private providers, such as hospitals, doctors and specialists, which choose to contract with the NHI, will need to be accredited.

A special arrangement is suggested for primary health care. General practitioners (GPs) will be encouraged to contract with the NHI. The GP will be paid a flat or per capita amount every month by the NHIA for every person on their database regardless of whether they receive treatment that month or not. It’s likely that a GP would sign up about 3 000 patients.

Under the ANC proposals, there will still be space for a private health-care sector. Though the 200-page policy proposal leaves the future of the private sector ambiguous, a four-page pamphlet issued by the ANC last week reassuringly says “the policy of government and ANC is that the private sector is an important role player in the delivery of health care”.

So SA citizens, if they choose to, will be able to make use of private health care outside the system at their own cost. They will also be able to purchase their own medical aid in addition to paying for the NHI. However, an NHI system will affect the prices and sustainability of private health care and medical aid. One of the main architects of the plan, UCT professor Di McIntyre, envisages that the number of medical aids will shrink as the vast majority of the population will be content with the NHI and only a small, very wealthy elite will be able to afford private medical aid.

A critical part of the plan is that public health care would improve demonstrably, and that the envelope of resources for the health budget would increase significantly to achieve that. It is suggested that R80bn-R100bn will be required for the health budget – at least 50% more than is allocated at present.

All this sounds great, but will it work? Historically, it has hardly been attempted. Europe’s advanced democracies already had large parts of their populations covered by health insurance by the time they extended this to provide universal cover. An NHI, in these examples, has usually been linked to strong employment growth.

The biggest problem with the ANC’s NHI proposal is that in the 200 pages (which represents a year of work by the task team) is that, besides the estimate of the health budget, not a single rand amount is mentioned. No estimates are made of what the size of contributions would be, nor of the level at which payments from the state to providers would be fixed, the crucial determinant of whether the private sector will contract in. So the vital detail is missing.

Health economist Alex van den Heever, who is a consultant to the Council on Medical Schemes, describes the document as completely lacking in technical work and the proposals “as not properly thought through… without any rational connection to SA”.

Above all there’s no projection of the risk that an NHI could pose to the fiscus, and the obvious danger is that, given the comprehensive benefits promised, costs will be impossible to contain.

Yet despite these glaring omissions, the NHI is being relentlessly politically driven by a coalition of the Left (SACP and Cosatu) who have been championing the idea and the new post-Polokwane guard of the ANC, which believes that it should be the ANC and not government that initiates public policy. Though strongly politically endorsed, the proposal hasn’t yet entered government.

Dynamics within the task team have also been frightening, with those who have raised criticisms being branded ” imperialist” or “anti transformation” without any attempt to answer their criticisms. (See story “Left-hand drive”.)

Yet this is a far-reaching reform with implications not just for health care but also for the macroeconomy. An NHI would have profound effects on government choices on public spending, tax policy and employment levels. The rush to push it through is alarming.

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