An alternative approach to healthcare reform in SA

Recently the Department of Health suggested that the government would like to enact laws to introduce a National Health Insurance as early as April next year. An NHI-style system will completely alter SA’s healthcare industry and have far-reaching implications to be borne not only by us, but also by our children and our children’s children. Surely, before any decisions regarding the future of SA’s health care can be made, these implications have to be carefully weighed, measured and considered. To introduce something that will have such a wide impact on the future of our healthcare system in such a rushed manner and with little consultation is a betrayal of our trust in those who govern the country.

It is said that an NHI will be funded through general taxes and a dedicated payroll tax for all those who are employed where half the payroll tax will be paid by the employer and half by the employee. Low-income people and the unemployed will be provided with health care at the expense of the taxpayer. The funds will be collected and administered by a central agency provisionally called the National Health Insurance Agency (NHIA).

All public and private sector healthcare providers will have to obtain accreditation and agree to provide NHI services at a tariff negotiated by government. Everyone in South Africa will have to choose a primary healthcare provider who practices in their district from the list of accredited providers and will be allowed to visit their chosen clinic/GP about three times per year. If more serious care is required, they will have to obtain authorisation from the NHIA before they can visit a higher healthcare facility. Services will be free to the public and healthcare providers will be remunerated at a government-negotiated tariff.

Under a “free care for all system” how will costs be controlled? By rationing, of course! Governments, with the best will in the world, cannot raise enough funds to provide unlimited care to all of their citizens. Inevitably, under single payer models, price controls get imposed that limit and thus ration the supply of medicines, access to treatment, the procedures that can be carried out, the number of hospitals that can operate, and even the number of beds in those hospitals. The slow and bureaucratic nature of governments prevents new technologies from entering the system. The end result is that everyone in need of health care has to suffer increased waiting times and being treated with outdated medical technologies.

A central agency such as the proposed NHIA, will probably be administered from somewhere like Pretoria, miles away from the practicing doctors and their patients. This agency will be constantly under pressure to keep costs down and, in order to do this, will be given the power to decide if a procedure constitutes ‘unnecessary care’, and whether or not it is justified.

How does anyone know when a test or scan would not be a life saver? By controlling how much doctors are reimbursed, the NHIA will force them and other healthcare providers to change the way they practice medicine. They will order fewer CAT scans, fewer MRI scans, fewer blood tests and fewer operations for the simple reason that the NHIA will stop paying for procedures it considers unnecessary. Quality of care will end up being sacrificed. So not only do we face the prospect of long waiting times to see doctors and being treated with outdated medical technologies, we face the very real threat of receiving sub-standard levels of care. And, no doubt, in time, over-work and under-reward will drive more healthcare professionals out of the country.

In view of the fact that public enterprises are not subjected to competition, they do not have the same incentive as the private sector to modernise and maintain their facilities. Consumer choice forces private sector hospitals to constantly modernise, evolve new strategies and invest in new technologies. It takes months, if not years, for government central planners to recognise and make timely decisions to overcome shortages of equipment or health professionals, or to arrange for the improvement of facilities that are in desperate need of repair or renewal.

SA already spends a considerable amount of money on health, yet the health status of South Africans compared to people in other middle-income developing countries is relatively poor. In 2008/09, SA’s expenditure on health amounted to R80.8 billion. At more than 3.5% of GDP, this rivals many developed countries’ expenditure on health as a percentage of GDP. A number of factors, such as income, education and access to basic services such as water and sanitation, influence health status and a high level of spending on health services will not, by itself, result in a country’s citizens enjoying good health. Simply pouring more money into a dysfunctional system will not solve the underlying problems.

As part of her input to the 1994 Finance Committee established by the Department of Health to advise on NHI, Professor Anne Mills, Head of the Health Economics and Financing Programme of the London School of Hygiene and Tropical Medicine, succinctly summed up the situation regarding the appropriateness of a NHI-style system for SA by saying, “It is clearly financially unaffordable to offer universally either the benefits currently on offer in medical aid schemes, or free and complete in the public sector. Benefits would therefore have to be severely restricted. However, it is difficult to see how this can be achieved because the setting up of a universal scheme would raise expectations about access to care. Moreover, the scheme would put in place a financing mechanism before having in place the health service infrastructure to satisfy demand. Benefits would inevitably be unevenly available, causing justifiable grievance”.

Although South Africa has some of the best health care in the world, it also has some of the worst. A nationalised takeover of the healthcare system as is being proposed would be a step in the wrong direction and would impose an unnecessary and intolerable burden on government. Rather than assuming responsibility for all health care, which is not necessary or desirable, government should allow the private sector to operate more freely. By removing barriers that prevent the market from functioning efficiently and contracting out those services that can be provided more efficiently by private providers, government would be able to enlist the support and help of the private sector and thereby be able to concentrate its efforts and taxpayer resources rather on those who cannot afford health care. It could also enlist, wherever possible, the help of charities and philanthropists since these are not a burden on taxpayers and, when based in communities, have a very good idea of what services are needed.

Author: Jasson Urbach is a director of the Health Policy Unit. (a division of the Free Market Foundation) and of Africa Fighting Malaria. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.

HPU Feature Article / 08 October 2009

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