Media release: Alternatives exist to the catastrophic NHI proposal

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When will the media and public wake up to the looming disaster of NHI? The free quality healthcare for all that the NHI white paper promises is an impossible pipedream that will fail to meet this objective, cost as much as R 1 trillion, create a colossal bureaucracy, and destroy private health care in South Africa.  

The White Paper seeks a centralised system and a new ‘NHI Fund’, to be run by a government which already loses some 40% of its R600bn procurement budget to fraud and inflated prices. The R256bn (at least) to be paid into the NHI Fund each year will open yet another avenue for fraud, mismanagement, and corruption. 

Price controls, as decided by officials, will be imposed on all hospitals, doctors and medicines, plus all other necessary goods and services.  Bureaucrats will also decide on the treatment protocols to be followed by doctors, along with the diagnostic tests, medicines, and health technologies they may use. Membership of the NHI will be compulsory.

This was the frightening message delivered by Dr Anthea Jeffery, Head of Policy Research, at the IRR (Institute of Race Relations) at a Free Market Foundation (FMF) media briefing on the alternatives to NHI on 18 October. 

NHI claims it will provide universal access to ‘quality, affordable health services’ that are free to all at the point of delivery. This will be done via the NHI Fund, into which all health monies will be paid and from which all health expenses will be met. 

Jeffery said the NHI is based on a number of flawed assumptions (1) and is likely in practice to prove unworkable and unaffordable. It will plunge SA’s heath care sector into chaos, exacerbating the already acute shortage of doctors, nurses, specialists, and other health professionals.

Private medical schemes will be limited to offering ‘complementary’ cover for health needs not dealt with by the NHI (e.g. specialist dentistry, rare diseases). The costs of such cover will be so high that most medical schemes will be forced to close. This, coupled with state controls over every aspect of medical treatment, will effectively put an end to private health care.

Some 55m South Africans will then be forced to rely on a public health sector beset by inefficiency and what Health Minister Dr Aaron Motsoaledi has called a ‘management crisis’ (2) in public hospitals. An extra 320 000 bureaucrats could also be needed to run the NHI Fund alone, which will push costs up yet further.

No one knows what the NHI will cost. The white paper says total costs in 2025 will be R256bn in real terms; but industry experts point to much higher figures, ranging from R400bn to R720bn a year. (3)

Astoundingly, the white paper also claims that it’s ‘not useful to focus on getting an exact number’ on costs. Dr Aaron Motsoaledi has said the NHI ‘could cost up to R1 trillion’, depending on how it’s designed.

The Department of Health (DoH) wants to pool all current public spending (R183bn) with all current private spending (R189bn), but the total of R372bn will still fall short of what is needed.  It also assumes that people will be happy to transfer what they currently spend on the efficient private health care of their choice into a public fund likely to give them very little in return.

Jeffery argues that SA could achieve the goal of universal health care (UHC) by scrapping the NHI proposal and implementing more practical ideas. We need, for example, to extend medical scheme membership to all in formal employment (15.6m people), which could be done by restoring risk rating and allowing low-cost options.

We should also introduce state-funded health vouchers for the unemployed, which would allow them to buy into low-cost medical schemes and take out medical insurance to cover adverse changes in health status. These vouchers could be funded in various ways, including efficiency savings in public health care through public/private partnerships.

Government regulation has also done much to push up private health care costs and needs to be reversed (4). Other necessary reforms include boosting the supply of health professionals by allowing the private sector to train them.

Adds Jeffery: “We should give the poor access to the benefits of private health care, which include competition, innovation, and choice, rather than leaving them dependent on a public sector monopoly (the NHI) with all its inherent inefficiency. Raising unrealistic expectations about free health care holds dangers too, as demands for free education now clearly demonstrate.”




Notes to the Editor


1.        Flawed Assumptions & Facts

               16% of S Africans belong to medical schemes, so 84% must depend on public health sector


·           37% use private GPs, 29% private hospitals, and 59% private specialists, with many people paying for private treatment out of their own pockets


Private sector is ‘not doing its share’


·            It pays the great bulk of all health care costs, including (via taxes) all public sector ones


Private sector prices too high, driven by greed


·            Equating like with like, private hospital costs were 1.1 times those of public ones in 2012 

·            Main cost drivers are increased utilisation, growing burden of disease, ageing population, new medical technologies, increased labour costs, high administered prices, generally high inflation, and falling rand


2.      Public health care in crisis:

·               People appointed for reasons of demographic representivity and/or political loyalty. Cadre deployment. 

·               DBSA report in 2011: ‘teachers, nurses, even clerks with only a matric are running hospitals’

·               Result is ‘poor administrative and financial management’

·               Shortages of essential medicines (non-payment, poor supply-chain management)

·               Constant shortages of doctors and nurses

·               Poor maintenance of hospitals

·               Long treatment delays (7 years for hip surgery, up to 3 yrs for 6 000 in Gauteng needing cataract surgery 

·               More than 82 400 avoidable baby deaths over a two year- period in 600 public facilities

·               Other babies left badly brain damaged through negligence

·               By March 2015, state’s contingent liability for medical malpractice lawsuits: R25bn

·               In 2012, baseline audit of 3 900 public hospitals, clinics etc.  found most scored badly on basics such as cleanliness and availability of medicines

·               Office of Health Standards Compliance (OHSC) re-inspected 417 facilities in 2014/15

·               Only 3% were found compliant, while 13% were ‘conditionally compliant’

·               Remaining 84% were non-compliant, of which 40% were ‘critically non-compliant’


3.      Industry Cost Estimate for NHI

In 2009 Dr Jonathan Broomberg, CEO Discovery, said that providing the average package of benefits will cost R497bn (20% of GDP) a year, or roughly R720bn today. Cover limited to the prescribed minimum benefits (PMBs), at an average cost of R 600 pp/pm, would come to R400bn a year.


4.      Government regulation pushes up costs, adds to health care crisis:

·              Restrictions on new or expanded hospitals 

·              Prohibition on hospitals employing doctors

·              Refusal to allow private training of doctors  - leads to shortages & higher prices. Number of places is much the same as in 1970s

·              Single exit price for medicines, which bars negotiation of bulk discounts to purchasers in the private sector

·              Prescribed minimum benefits (PMBs) that all medical schemes must provide to all members and pay for ‘in full’. On average, R600 pp/pm    the minimum to cover PMBs, which bars cheaper medical schemes

·              Initially, PMBs were to be provided at state hospitals, but this increased burden on them so the Council for Medical Schemes ruled payment is obligatory for private treatment too

·              Higher premiums are unavoidable, so fewer people can afford medical schemes

·              Government will not allow lower-cost medical schemes, freed from PMB obligation, which would extend coverage to 15 million more

·              Currently 8.8m people belong to medical schemes, with most paying more than they themselves need because of compulsory PMBs and community rating

·              Government wants to ban medical insurance schemes, also a low-cost option

·              Medicines Control Council takes too long (up to 5 years) to register generics

·              Poor standards in public sector, often also the result of regulation, push people to the private sector

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