Contrasting health systems

(This policy bulletin is an extract from South Africa’s health care under threa)

South Africa's health care is provided by the government (public) health sector, funded by taxpayers, and a private sector that is financed in various ways. The government sector provides care to those who cannot afford private care and are not beneficiaries of private philanthropy. The private sector provides services to members of medical aid funds, those who choose to pay out of pocket for health care, employees of companies in company-owned and funded facilities, government contract patients, and those who benefit from private philanthropy.

The government health sector is under strain: it suffers from shortages of medicines, doctors, staff, and managerial skills and lacks sophisticated technology. Medical personnel have left, and are leaving the country for Australia, New Zealand, Canada, the United Kingdom and the United States.

By contrast, South Africa's private health-care sector is one of the best in the world. It provides health-care services to a large cross-section of the population and attracts foreigners as health tourists. South African private hospital groups have won tenders to provide health services in the United Kingdom, medical schemes are exporting some of their ideas to other countries, and the world's leading pharmaceutical companies are represented in the country.

The government is disturbed by what it regards as an expensive private health sector, which it believes is providing superior health-care to the affluent few while the under-resourced and under-staffed government health sector is stagnant and struggles to provide care to the many. In response, it has adopted legislation that aims to establish a national health system in which the government's health department will tightly regulate, plan and manage all health-care provision.

Composition of the health market

The government's policy documents claim that 84% of the South African population depend on the government health sector, a figure apparently based on the assumption that the approximate 16% of the population who are members of private medical schemes, are the only patients treated in the private health sector. However, an analysis of available information indicates that the government sector spends its money on a potential 54% of the population (24 million people) and not 84% as claimed.

The National Health Act 2003

The ostensible aim of the National Health Act 2003 is to allow the health department to control and manage the entire health sector, so that it can reallocate and redistribute private and government health resources in a "more equitable" manner. The envisaged unified national health system ignores the failures of the country's existing government health sector and the evidence from other countries that socialised health systems are inefficient, expensive, lack sophisticated medical equipment, have long waiting lists for medical procedures and appointments with specialists, do not provide equal access to and equal treatment for all citizens, provide lower quality health care than private providers, control costs by rationing care and medical technology, and fall far short of attaining their lofty ideals.

Centrally planned health-care provision

In a fully socialised health system everything is centrally planned, controlled and co-ordinated. The government owns all the hospitals and medical facilities and government health planners determine how many hospitals and beds there should be, where they should be located, the type and quantity of services and medicines that will be available, the salaries health-care professionals may earn, the amount of money that may be spent on particular procedures and technologies, the type of equipment that may be installed at hospitals and clinics, and the prices that will be charged for health-care procedures and medicines.

A government attempting to plan and/or provide health care to an entire nation is confronted by the insurmountable obstacles faced by centrally planned and co-ordinated systems: the impossibility of knowing everything necessary to ensure effective, efficient and equitable delivery of goods and services, the ignoring or obliteration of signals provided by prices, the complexity of centralised planning, the difficulty of forecasting the future, and the inefficiency of governments in general.

Quality health care for all

There are two very different approaches to the problem of ensuring that people have adequate access to health care. One approach is for the government to attempt to gradually nationalise all health-care services, ultimately ending with fully taxpayer-funded state-owned health services.

The other approach is to establish a health-care environment in which private health-care funding and provision can grow rapidly, serving an increasing percentage of the population to the point where all health services are privately provided.

South Africa's health-care challenge will be best met if government exchanges its role in health-care provision for that of funder of health care for the poor, purchasing care from competing private health-care providers. The most effective mechanism to achieve the empowerment of the poor is to provide them with resources to purchase health care directly from service providers of their choice. The main beneficiaries of such a reform programme would be the poor, who would be given a wide range of health care choices. Benefits to the taxpayers would be a more efficient use of taxpayer funds and certainty that tax monies earmarked for funding health care for the poor reaches them directly so that poor South Africans would get more and better health care for the same or less money.


Government's policy and discussion documents do not explain how South Africa, a relatively poor country, will succeed in providing equitable health care to all through the envisaged national health system, when wealthy countries have failed in their attempts to do this. If government's health-care plans continue in the direction of nationalisation, which appears to be the ultimate goal, South Africans will lose their world-class private healthcare firms.

Source:This policy bulletin 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.

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