Close co-operation with the private sector could improve public healthcare delivery

In commenting on proposals for reforming US healthcare, satirist PJ O’ Rourke said, “If you think healthcare is expensive now, wait until you see what it costs when it’s free!” If that statement is true of the world’s biggest economy in terms of gross domestic product (GDP) and 10th biggest in terms of GDP per capita – about whether it should nationalise health care, how can such a plan even be considered in South Africa?

South Africa today has chronically high levels of poverty and unemployment, low levels of incomes and a public health care system crumbling under current demand.

The promise of “free health care for all” strikes a chord with every South African but the truth is that there is no such thing. Nothing is free – someone has to pay for it. And in this case it would be the taxpayers. And in SA by far the greatest percentage of total taxes is paid by a small group of individuals.

No official documents have yet been released indicating what services an NHI will provide, who will provide them and how much it is expected to cost. Some analysts suggest that to fund an NHI will cost at least an extra R80-R100 billion, over and above the current public sector expenditure of approximately R56 billion per annum.

Last year, out of a total population of about 49 million people, SA had approximately 5.2 million registered taxpayers of which the top 7 per cent, those with taxable income in excess of R300,000 per year, accounted for over 45 per cent of income tax assessed. It has been suggested that the proposed system will be funded out of general taxation and a specific progressive payroll tax for those taxpayers above a minimum tax threshold.

The unemployment rate in SA is at least 23% according to the strict definition but probably closer to 36% according to the expanded definition, which includes those that have simply given up searching for work because they believe there is no work available. This tells us that our tax base is already seriously over-burdened. The introduction of yet another tax on SA’ s citizens will force more into poverty. SA’s small tax base just cannot bear the increased responsibility of meeting the health care needs of the entire nation.

SA’s situation is not unique. Most, if not all, developing countries face the challenge of having insufficient revenues to adequately provide for the health care needs and demands of their populations. Bowie and Adams from the Wharton Business School say, “In the majority of low and middle income countries, the government cannot raise enough funds through general taxation to adequately finance the public health system and lack the institutional and organisational capacity to establish a functioning system of mandatory health insurance for the formally employed”. But it is also important to note the findings of Alexander Preker, lead economist at the World Bank, who wrote, “The ability and willingness of households in developing countries to pay for health care is far greater than the capacity of government to mobilise resources through taxation”.

For a government to accommodate the truly destitute who cannot afford to sustain themselves, let alone purchase medical care, it could act as financier and buy the best possible care available from outside providers. Indeed, Wolvaardt and his colleagues wrote in the 2008 South African Health Review, “Given the fact that the majority of primary care providers still congregate in the private sector, despite numerous attempts by government to increase professional staff in the public sector, serious consideration needs to be given to outsourcing patients to the private sector. Not utilising this resource while the public sector annually shows unspent budget allocations for PHC (primary health care) services makes little sense”.

NHI is not a new idea. As far back as 1944, the SA government considered the idea of introducing a fully tax-funded National Health Service. The policy was never adopted, primarily due to a lack of funding. More than 60 years later, this ambitious goal is still not a feasible option. We have to keep the high levels of poverty and unemployment in mind, as well as the small tax base, and the poor performance of the public health sector. These factors make it extremely difficult to envision how a government-funded system promising free care for all is appropriate for SA.

The country and the taxpayers will not be able to cope generally, and even less when the likely consequences set in such as a reduction in the quantity and quality of healthcare provision, more healthcare professionals being driven out of the country, the volume of claims increasing to such an extent that the bureaucracy will become entirely incapable of efficiently handling them. It will be an unnecessary and intolerable burden imposed on government. Instead, government should seriously look at and explore close co-operation with the private sector in a joint initiative to increase service delivery to the uninsured and destitute.

Author: Jasson Urbach is a director of the Health Policy Unit (a division of the Free Market Foundation). 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.

FMF Feature Article / 01 September 2009

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