“Social solidarity’s” proposed band-aid

Comment on the second Draft Demarcation Regulations closed on 31 July. Were the outlandish proposals contained in the National Treasury’s first Draft Demarcation Regulations another case of government applying their classic “door-in-the-face technique”? Were they intended to lull the public into agreeing to the adoption of the “more reasonable” proposals contained in the second Draft?

The initial draft regulations proposed banning gap cover products and limiting hospital cash plans. This would have destroyed the private health insurance market and was met with staunch opposition. The second draft allows for their continued existence, but within specified parameters. These watered-down regulations still leave intact the dubious principles driving the perceived need for change.

The fundamental problem yet to be properly identified, let alone resolved, is the principle of so-called “social solidarity” contained in the Medical Schemes Act of 1998 (MSA). The demarcation regulations seek to draw a line in the sand between health insurance policies and the business of medical schemes. The National Treasury states, “[Health insurance products] must operate within a framework whereby they complement medical schemes and support the social solidarity principle embodied in medical schemes”.

The MSA of 1998 changed the regulations governing the operations of medical schemes and set in motion the determined process of crowding-out private medical schemes. Four changes that drastically increased the cost of providing medical scheme coverage were: open enrolment, “community rating”, statutory solvency requirements, and the introduction of a comprehensive package of hospital and outpatient services that all schemes are compelled to provide – referred to as prescribed minimum benefits (PMBs). Inevitably, consumers have borne the brunt of these cost increases. Any “social solidarity” principle unavoidably raises the price of medical scheme coverage which prevents low-income people (mainly the youth and black people) from entering the private medical scheme market.

Members who could not afford the increased costs, chose either to cancel their medical scheme membership altogether or to “top-up” with private insurance. The first draft of the Demarcation Regulations sought to ban the option of “gap cover”. However, it should be noted that health insurance products are a direct result of poor legislation. The situation the demarcation regulations seek to remedy would never have arisen if “social solidarity” had not been adopted. The proposed demarcation regulations will exacerbate the problems caused by pre-existing controls. The only real solution would be to eradicate the cause, which means deregulate.

The proposed demarcation regulations will compound the problem for consumers, especially those most in need of affordable quality care and insurance protection. Regulation-induced problems will be made worse if further regulations are introduced. More regulation will create a perceived need for even more and result in an endless spiral of destruction. Access to affordable, competitive and innovative healthcare cover will be denied to middle- and especially low-income consumers.

Wealthy people will not be as affected by limits placed on the scope of insurance options. Most will be able to afford to continue their medical aid membership and comply with the regulations. Poor people cannot afford this form of social engineering and will be denied cover.

Why would a government step in to prevent mutually consenting free adults from entering into private contracts with insurers to minimise their risks of huge medical bills when catastrophe strikes? Especially when it would lessen the pressure on the government-run provision of services to have more people covered by private insurance.

Our public healthcare is in a deplorable state. Rather than subvert private alternatives, government should concentrate on ensuring that poor people have access to basic medical care. Government officials and their aides seem incapable or unwilling to appreciate the role of the private health insurance market in securing healthcare. More individuals enrolled in private medical schemes would greatly alleviate the already overburdened government hospitals and clinics. Future healthcare reforms must recognise the positive role played by the private sector. Private healthcare financing increases access to quality care, improves consumer choice, and leads to greater health system responsiveness.

A successful private sector needs personal freedom, competition and innovation. All of these will be denied all South Africans if government is allowed to put political decisions ahead of economic realities. More regulation of private healthcare will make it prohibitively expensive for ordinary South Africans to join a medical scheme and illegal to buy supplementary insurance products. If we value our health, we should have a choice in how to protect it.

This article first appeared in the September edition of Medical News.

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