Why do we need a National Health Insurance ?

by Aug 16, 2009All Articles

Cape Times
18 June 2009
By Di McIntyre

The South African health system is in deep crisis.  We need a major transformation of our health system and we need it now.  Problems in the public health sector are splashed across the front pages of our newspapers on a weekly basis: patients being turned away from public clinics and hospitals and some dying as a result, some provinces running out of antiretroviral drugs, the doctors’ strike, and so on. These problems are a direct result of underfunding of the public health service for more than a decade.  From 1996, government spending on health care did not keep pace with inflation and population growth, let alone the AIDS epidemic.  It was only in 2005 that spending levels on public health services returned to 1996 levels.  Health budgets have increased in recent years, but the years of severe underfunding had taken its toll on staff morale and on buildings and medical equipment that could not be maintained.

Although given far less media coverage, the problems facing the private health sector are no less severe.  Medical scheme contributions have increased yearly at rates far exceeding general inflation, since the 1980s.  The range of services covered by schemes has declined and scheme members have to pay more and more out of their own pockets to cover the portion of the bill charged by a health care provider that the scheme will not cover.  A far greater share of our salaries is being consumed by medical scheme contributions than 20 or even 10 years ago.  It is becoming increasingly unaffordable for South Africans to belong to medical schemes.  And medical scheme members seem to be dissatisfied with this situation.  A recent national household survey found that 71% of medical scheme members were willing to join a publicly supported health insurance scheme if their monthly contribution was less than for current medical schemes.

The private health sector in South Africa is rapidly becoming a mirror image of the USA health system – a system that Americans themselves want completely transformed.  To quote a highly respected American Professor of Medicine (Arnold Relman, Emeritus Professor at Harvard) “…most of the current problems of the U.S. [health] system – and they are numerous – result from the growing encroachment of private for-profit ownership on a sector of our economy that properly belongs in the public domain.  No health care system in the world is as heavily commercialized as ours, and none is as expensive, inefficient, and inequitable – or as unpopular.  … there is now much evidence that private businesses delivering health care for profit have greatly increased the total cost of health care and damaged – not helped – their public and private nonprofit competitors.”

While the public health sector in SA has been drained of financial and human resources, the private health sector has seen massive increases in funding.  In 1996, spending on medical scheme members was about 3.5 times greater than that spent by government per person dependent on public sector services.  This gap had increased to nearly 6 times greater spending by medical schemes by 2006.

What is important to note is that although medical schemes account for well over 40% of health care funds, they only benefit 16% of the population!  What this means in reality is that those who have the greatest need for health care do not get their ‘fair share’ of benefits from using health services – what happens in one sector impacts on what happens in the other.  A recent study undertaken by the Health Economics Unit at UCT found that the richest 20% of the population receive 36% of the benefits from using health services (public and private) in SA although they only account for 10% of health care needs (or the burden of poor health).  The poorest 20% of the population receive less than 13% of the benefits but have more than 25% of the need for health care.

Some argue that these inequities are unavoidable because we have such an unequal distribution of income in South Africa.  The recent Income and Expenditure Survey from Statistics South Africa indicated that the richest 10% of South Africans have 47% of total income while the poorest 10% have a mere 0.2% of all income – one of the greatest levels of income inequality in the world.  I would argue that because we have such large income inequalities, we must have a health system that better meets the needs of the entire population, and that this can only happen through a strong, publicly funded health system.  Substantial public funding of health services, and other key social services, has been internationally shown to be the key vehicle for ensuring that all citizens have the opportunity to live healthy, secure and productive lives and to some extent offset the impact of income inequalities.  Substantial public funding is also in line with the 2005 call by the World Health Assembly for member states to provide universal health financing coverage “ … in order to guarantee access to necessary services while providing protection against financial risk”.

What would be the core features of a NHI?  It is not yet clear what the ANC proposals on a NHI will include, but the following are likely to be some key elements.  A NHI would be universal; every South African would be entitled to benefit from the services it covers.  It would be funded partly by compulsory contributions by employers and employees and partly by tax funds, all placed in a single ‘pool’.  In this way, every South African would be contributing to funding health care – even the poorest bear a heavy tax burden through VAT and other indirect taxes such as fuel levies (which are built into taxi and bus fares).  In effect, tax funds would be used to pay the NHI contributions of those who are not formally employed.  The rich will pay more than the poor, but given the massive income inequalities, so we should.

Some argue that a NHI will be unaffordable for South Africa, and point to what it would cost to extend medical scheme cover to all South Africans.  The question is, why would we want to follow this path anyway?  This would lead us even further down the route of the American nightmare, where over 15% of GDP is devoted to health care but where millions remain uninsured and unable to get the health care that they need (as graphically illustrated in Michael Moore’s movie ‘Sicko’).  The NHI that is envisaged for South Africa would be more akin to the excellent publicly funded health systems found in countries such as Costa Rica, where the NHI as a large, single purchaser of health services is able to improve resource use in the overall health system and to get ‘value for money’ for its citizens.

But, for the vision of the NHI to be fulfilled, it is critical that the services that South Africans will be entitled to under the NHI are seen to be of acceptable quality.  Even if the NHI purchases services from public and private providers, public hospitals will be the backbone of the system.  This is not only because most of the beds are in public hospitals but also because purchasing a large share of services from private for-profit hospitals at their current, excessive fee levels is simply unaffordable in a universal health care system.  It was not too long ago that South Africans from all walks of life were entirely confident in the services provided by public hospitals.  I believe it is possible for public hospitals to once again be regarded as the provider of choice of the vast majority of South Africans.  Actions that would be required to achieve this include:

  • Addressing health worker conditions of service through implementing the long-awaited ‘occupation specific dispensation’ or OSD;
  • Increasing the staffing in the public health sector – a recent report by the Development Bank of South Africa indicates that compared to 1997, we need an additional 80,000 staff in the public health sector simply to address the increase in the population size and the greater burden of ill-health from AIDS;
  • Address the backlog created by inadequate funds to maintain buildings, equipment and other infrastructure; and
  • Grant greater management autonomy to public sector hospitals so that problems arising in the hospital (e.g. broken toilets) can be immediately resolved rather than having to send requests through to the provincial head office.

We currently have a window of opportunity to transform our health system from a highly inequitable and unsustainable system to one that meets the health care needs of all South Africans in an efficient and sustainable way.  That window of opportunity is presented by the ANC’s commitment at its policy conference in Polokwane in December 2007 and in its recent election campaign to implement a NHI.  Strong political commitment is essential to successfully introduce health system change of the magnitude required.  We must seize this opportunity and implement the changes required in a carefully planned and phased manner, and with widespread engagement and communication with the general public, whose support for these changes is also critical.

Prof. Di McIntyre, South African Research Chair of ‘Health and Wealth’, Health Economics Unit, University of Cape Town

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