Providing high quality health-care to all South Africans

by Johan Biermann

Providing health care to the millions of poor South Africans is a major health-care challenge. But how big is this challenge? Because of the wide variations in available population and poverty statistics it is difficult to assess its magnitude. According to official figures, South Africa had a population of 44,8 million people in October 2001. Poverty estimates range from 40% to as high as 60% of the population. Based on a poverty datum line of R800/month for a household, 52% of households lived in poverty in 1996. It would thus be safe to conclude that at least half of the population, or 22,4 million people, cannot afford comprehensive formal health care.

In 1999 less than 20% of the population had private medical insurance cover. This included medical scheme membership, which covered an estimated 16% of the population, health insurance products, and workplace health services provided by private firms. At that time it was estimated that about 30% of non-scheme members (nearly 36% of the total population) might use private health services on a direct payment basis.

Government's policy documents infer that 84% of the population depend on the public health system, a figure based on the estimated 16% of the population who are members of medical schemes. However, considering the estimated 30% of non-scheme members who pay out-of-pocket for care this is unlikely. Furthermore, those who pay out of pocket may use private or public care, and some patients will obviously use both, as do members of medical schemes. This was confirmed by surveys conducted in 1995 and 1998 (Table 1.)

Table 1: Comparison of sectors used by medical aid and non-medical aid members

Place of consultation 1995 1998
  % Without medical scheme % Medical scheme members % Without medical scheme % Medical scheme members
Public sector 71,2 32,6 68,5 20,5
Private sector 28,8 67,4 31,4 79,5

The figures reflect a trend towards greater use of private health-care services. In addition, many South Africans consult traditional healers and use traditional remedies. According to the Minister of Health traditional healers are the first to be consulted in as many of 80% of all cases. There are also many people who make little on no use of the services of health-care providers.

Considering the evidence, there is a range of between 16% and 52% of the population who use private health care and potentially between 48% and 84% who use the public health system.

A study of the market potential for medical schemes, undertaken by a private medical insurer, estimated that 16% of the population was covered by medical insurance in 2001, that a further 30% could afford medical insurance but was not insured, and that 54% of the population was unable to afford medical insurance. Among this last group are some who purchase private health-care services on an irregular basis and would not automatically become public health-service patients.

As the estimates quoted in the above study are in broad agreement with medical scheme membership and poverty estimates they are used to construct a broad picture of the South African health-care market (Table 2).

Table 2: Estimate of South African Medical Scheme Market 2001

  % of RSA Population Persons '000
Member of medical scheme 16 7 273
Not a member but potential member of medical scheme 30 13 636
Poor (unable to afford medical scheme membership) 54 23 891
Total 100 44 800

Clearly the foremost health-care challenge is to provide health care to the 24 million people (54% of the population) who are poor and cannot afford health insurance. This challenge is huge, not only in terms of the number of poor people, but also in that 75% of the poor live in rural areas where health services are least developed. However, it would be helpful if government officials would stop claiming credit for providing care to people who don't use their services. The private sector, which includes traditional healers, obviously serves a much larger proportion of the total population than the number belonging to medical schemes. Encouraging those who can afford health insurance to become medical scheme members is a challenge for the private sector, which private firms would meet more readily if they were allowed to create the products that more closely suit the needs of their potential members.

The longer-term health challenge is to reduce dependency on government-funded health care. This requires the adoption of economic policies that lead to rapid economic growth, increased per capita incomes, and a reduction in unemployment and dependency on taxpayer-funded social services, such as health-care.

There are two diametrically opposite approaches to the problem of ensuring that the poor have adequate access to health care. One approach is for the government to attempt to gradually nationalise all health-care services with a view to ultimately ending with one hundred per cent taxpayer-funded state-owned health services. The other 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. Whichever option is chosen, one aspect will not change, one hundred per cent of the funding will be from private sources, the first through taxes, the second through voluntary medical aid or insurance schemes and through voluntary out-of-pocket payments.

Unfortunately the Department of Health appears to be embarked on a road to nationalisation. And even more unfortunately, part of the strategy appears to consist of attempts to prevent private sector health institutions from functioning efficiently and competitively. Medical aid schemes are prevented from designing their own packages and are compelled to take on costs they would otherwise avoid. Insurance companies are prevented from providing health insurance cover. Private firms are prevented from building new hospitals and clinics and installing new equipment without official permission. Medical professionals are instructed where they may or may not practice. Pharmaceutical companies and pharmacies are instructed as to what prices they may charge.

The current trend is unfortunate as the totally private health-care policy route would have a much greater chance of improving services to the poor. If the private sector were allowed to grow as rapidly as possible with an increasing number of people taking care of their own health-care costs through medical schemes, health savings accounts, or out-of-pocket payments, the government would be able to devote its limited health-care budget to a dwindling number of poor patients. It could increase the efficiency of its delivery and cut costs by purchasing the health-care needs of the poor from the private sector. In an entirely private and fiercely competitive private health-care environment, South Africa would attract health-care professionals and not drive them away. Funding schemes would be increasingly innovative and efficiently managed. Pharmaceutical manufacturers would once again start investing in this country. The quality of service would be amongst the highest in the world, including services to the poor, surely the better of the two fundamental options.

Author: Johan Biermann is a planner and policy researcher and is currently engaged in writing a book on South African health-care policy. 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 Free Market Foundation.

FMF Feature Article\6 July 2004 - Policy Bulletin / 01 September 2009

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