Paying for Intervention! How statutory intervention harms South African health care

07 June 2017
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In 1998, the medical scheme market in South Africa was dramatically altered when the SA government introduced a new Medical Schemes Act. The changes in policy were intended to move SA towards a Social Health Insurance (SHI) system, and, ultimately, a National Health Insurance (NHI) system. The purpose of this paper is to examine the effects of this legislation and offer insight into the likely outcome and appropriateness of a socialised healthcare system for SA.

It is argued that these policies involve a conflicting mix of social and efficiency objectives that entail a number of unintended consequences which have dramatic and far reaching implications for the South Africa healthcare market. A NHI style system is simply not affordable for a poor developing country such as South Africa and will result in sub-standard levels of care for SA’s citizens. Furthermore, it is argued that a nationalised system is based on false promises and is not sustainable given the increasing burden on the small tax base, the antiquated infrastructure within the public health sector and SA’s aging population.

A socialised healthcare system in SA will also have the unintended consequence of exacerbating the massive exodus of skilled personnel, the so-called ‘brain drain’. However, far from attempting to increase the supply of skilled personnel, the SA government continues to restrict the number of skilled healthcare professionals entering SA as well as the number of positions available at tertiary education facilities. It is recommended that, in order to increase the number of skilled medical personnel, the government relax the restrictions on foreign skilled medical personnel entering and practising in SA and allow the private sector to train prospective students.

Finally, it is argued that the private health insurance market has a significant role to play in alleviating the burden on the public sector by increasing the number of individuals enrolled in private medical schemes. To enable them to do this, the government should amend the legislation compelling medical schemes to provide a minimum package of benefits known as prescribed minimum benefits. These benefits have the unintended consequence of raising the cost of medical scheme options, which prevents certain groups of individuals from accessing private medical schemes. Furthermore, given SA’s aging population and the fact that healthcare expenditure increases as age increases, it is argued that the current system of cross-subsidisation is unsustainable. Medical schemes should be allowed to rate individuals according to their risks so that individuals pay premiums commensurate with their expected health outcomes – the only feasible option to avoid any future disappointment. READ here


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