National Health Insurance: A revolutionary disaster for South African healthcare – Katzenellenbogen - Biznews

Jun 21, 2023
Minister of Health Dr Joe Phaahla has described the National Health Insurance (NHI) Bill as ‘one of the most revolutionary pieces of legislation… since the dawn of democracy’.
National Health Insurance: A revolutionary disaster for South African healthcare – Katzenellenbogen - Biznews

The National Health Insurance (NHI) Bill proposed in South Africa aims to revolutionise the country’s healthcare system by nationalising medicine and creating a state-financed monopoly. Proponents argue that it will provide free healthcare to all and address existing inequalities, but critics raise concerns about its potential negative impact. They argue that the NHI will add unnecessary complexity without improving performance, potentially leading to corruption, bad management, long waiting times, and a black market in healthcare. The government’s track record in running large organisation’s raises doubts about its ability to effectively implement such a massive system. Katzenellenbogen suggests alternatives such as decentralisation and public-private partnerships instead. The NHI remains a controversial topic, and its implementation could have far-reaching consequences for the South African healthcare system.

Jonathan Katzenellenbogen

Minister of Health Dr Joe Phaahla has described the National Health Insurance (NHI) Bill as ‘one of the most revolutionary pieces of legislation… since the dawn of democracy’.

There is little doubt that it is revolutionary, as it aims to fundamentally change the healthcare system in the country. Indeed, it could also be one of the most destructive pieces of legislation since 1994.

The goal of the NHI is the nationalisation of medicine in the country.  This will be achieved by the government taking over all funding and procurement, and the setting of tariffs for procedures.

Alex van den Heever, who is the Chair in Social Security at the Wits School of Governance says, ‘the NHI is an unnecessary change in the architecture of the health system.. It seeks to create a completely new system out of two potentially functional public and private systems. While not addressing existing weaknesses, it will add a layer of unnecessary complexity with no added value in performance.’

The origins of the NHI idea can be traced back as far as the Freedom Charter, passed by the Congress Alliance, which included the ANC in 1955. This called for ‘free medical care and hospitalisation’ for all, and was endorsed at the ANC’s Polokwane national conference in 2007. It has deep resonance in ANC ideology for the National Democratic Revolution.

With the ANC facing its most difficult election since 1994, the bill is one of three populist measures the party wants to get through before next year’s election. Earlier this year the Act to allow Expropriation without Compensation, and another to allow tighter racial quotas in hiring, the Employment Equity Amendment Act, were passed. All could mean the ANC might implement some pretty draconian measures sooner rather than later.

The NHI is an attempt to allow free health care to all, called universal health care. As it is, South Africa does pretty well on this score, although not on quality, according to the World Health Organisation.

Gigantic state-financed monopoly
What is known about the NHI Act is that it allows for a gigantic state-financed monopoly. Only services that NHI will not finance will be covered by medical schemes. Nothing is known about the potential cost, how it will be phased in, what additional institutions will be required, and what services will be provided. And little is known about funding mechanisms that could include a personal tax surcharge.

The idea behind the NHI is that private and public sector health resources be pooled to lower costs. Private medicine is viewed by the proponents of the NHI as the ‘hoarding’ of health resources by the rich. Under the scheme, an NHI Fund will be established by the State to finance the provision of all healthcare. Hospitals, doctors, and dentists will then be reimbursed at tariffs set by the NHI. An important part of the case for the NHI is the claim that centralisation costs will be reduced through greater economies of scale in operations and purchasing.

With such large budgets there will be an enormous scope for corruption and patronage in procurement and staff appointments. The result will be bad management, run-outs in key pharmaceuticals, inability to conduct procedures, doctors emigrating due to frustration and better earning opportunities elsewhere, and long waiting times. That could result in a massive black market in healthcare.

The government has shown itself incapable of running large and complex organisations. And here it is setting up a mega-sized system at a time when much of the world is going for decentralisation and public-private partnerships to provide healthcare. Everything in the NHI goes against international trends, which questions whether the drafters have any idea of the reasons why so much of the world has moved away from this mammoth monopoly model for providing health services. These trends give scope to private health care insurance and making sure that the public health system is well managed in smaller units.

Deep problems
There are deep problems with our current health system, but there is little chance that the NHI will fix these.

Our present healthcare system is an unequal one, with far better outcomes in the private sector than in the public. For those who can afford membership of medical aid schemes, the private sector provides medicine with low waiting times and good results. The public health sector is poorly run due to known problems with patronage, over staffing, and extensive corruption. It would run a lot better without political appointments, and greater competence.

There are a few centres of excellence within the public sector.

‘The Western Cape is like another country,’ in the performance of its public health service, says Van den Heever. What makes a big difference is the way they manage their budgets, keep staff costs under control, have few negligence suits against them, and show flexibility in providing services when required. In much of the public health service corruption eats into budgets, leaving little for maintenance of buildings and equipment. Dealing with the problems of overly pricey procurement and corruption could make for big improvements in health care.

Other solutions could involve concessioning functions in public sector hospitals to private groups and private-public partnerships. Further decentralisation could also work so that bad practices are not widely implemented.

What could also help is if the medical schemes could be given regulatory approval for new products which a greater number could afford. Those on lower-cost options could take on plans for daily treatment, but would still have access to the state for hospital treatment. Lower cost options would help reduce the health care burden on the state. But recently, the regulatory body, the Council for Medical Schemes has blocked the offer of low-cost medical aid products.

The hostility to these schemes might be motivated by the government’s intention not to allow low-cost alternatives to what the NHI is meant to offer.

South African schemes face the problem of consumers starting and stopping cover on the basis of their medical need. This means a large younger cohort don’t want to buy cover, which in turn raises the cost of the scheme for its membership. Excluding cover for pre-existing medical conditions for a certain period lowers risks and costs for schemes, but does not provide an incentive for youngsters to join.

Making membership of medical schemes mandatory for those with employment and offering lower cost options would help lower costs for all participants, says Mike Settas, who heads the Free Market Foundation’s Health Policy Unit.

As much as the NHI seems unachievable today, the ANC could find itself pushed into implementing the un-workable due to the need to succumb to populist pressures. Once the first step toward this is taken, it might be very difficult to reverse and rebuild the health system.

Jonathan Katzenellenbogen is a Johannesburg-based freelance financial journalist.

This article was first published on the Daily Friend.

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