SA cannot afford "free" healthcare

As the ongoing debacle in the Gauteng Department of Health’s financial department continues, we are repeatedly told that the proposed National Health Insurance (NHI) will fix South Africa’s healthcare crisis. But if the mismanagement of funds in the country’s financial hub is anything to go by, what reason is there to believe that the public sector’s woeful track record will not be perpetuated under the proposed NHI?

It appears that many people are simply sitting back and waiting for NHI to arrive like a knight in shining armour to cure all of our ills. In the meantime, matters within public hospitals deteriorate while patients suffer and too often, end up paying the ultimate and fatal price.

The Department of Health (DoH) has raised an unrealistic expectation of what is possible under NHI, given the financial and human resource capacity constraints in SA. Considering SA’s small tax base, our country simply does not have the resources to pay for the inevitable cost escalations that accompany the implementation of so-called “free” medical care. This is not a unique situation. Due to the rationing effect that inevitably follows “free care”, patients even in high-income countries such as the United Kingdom and Canada are forced to endure extraordinarily long waiting periods, first to see a doctor, then between doctor and specialist, and finally between specialist and treatment. At no point in the process is there any incentive for service providers to be as efficient, or as effective, as they would be if functioning in a private environment. For a developing country such as ours to even contemplate introducing such a system bodes ill for anyone who ever requires hospital treatment.

History has clearly demonstrated that the best way to improve the overall health of a nation is to grow the economy. Worldwide life expectancy increases as countries and individuals increase their incomes. The landmark article by economists Lant Pritchett and Lawrence Summers shows the dramatic effect that increases in incomes have on health. Pritchett and Summers found a strong causative effect of income on infant mortality and demonstrate that if the developing world’s growth rate had been 1.5 percentage points higher in the 1980s, half a million infant deaths would have been averted. In simple terms what the authors demonstrate is that wealthier is healthier.

The Health Policy Unit (HPU) has long propagated the idea of ‘the big giveaway’ which involves the transfer of hospital assets to those who operate it,coupled with negotiated contracts for the entities to provide government-funded services to their existing patients and clients. Where would this leave the poor? Government would be able to devote its limited health budget to financing services for the poor, to purchase an increasing percentage of those services from private providers, and to allow and encourage the rapid growth of the private health care sector, enabling it to supply services to an increasing percentage of the population.

The government does not have to provide “free health care to all” – this is a disastrous use of scarce taxpayer resources and it must be emphasised that additional spending in one area will necessarily come at the expense of spending in some other area of the economy. Payment through a medical aid scheme is criticised as providing an incentive to over-utilise. While that may happen to some extent, the probability becomes significantly higher when the total cost is borne by the taxpayer. As a result of the disconnect of consequences (such as loss of income) for providers of medical services and the escalation in demand, a perverse incentive develops for personnel to attend first to patients with less urgent and less professionally onerous conditions.

Patients are best served by a rapidly growing private healthcare sector that serves a steadily increasing percentage of the population. As time passes and incomes in SA increase, we will get to the point where the government will no longer need to provide health care to the poor but purchase their health care needs from a competitive private sector.

A poor developing country such as South Africa will not be able to afford a nationalised system of health care given the increasing burden of disease. SA’s small tax base, the antiquated infrastructure within the public health sector, the country’s aging population, the inevitable increase in demand that will result from promised “free” health care, the inadequate number of medical personnel in SA, will impose an impossible burden on taxpayers. If the government truly wants the best for the country’s people it must let the private sector do what it does best – provide the services and shoulder the costs that it is not necessary for government to bear.

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.

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