9 things to know about the doomed NHI

1. Health minister Aaron Motsoaledi’s statement that the National Health Insurance (NHI) Act allows no place for medical aid schemes in universal healthcare is meaningless.

I do not really think Motsoaledi always speaks for the government. He has a tendency to say lots of things that haven't really been thought through. This is just rhetoric, and it is largely meaningless.

From an institutional and fiscal perspective, the NHI framework, even if the legislation was not facing legal challenges, is unimplementable in our lifetime. There is this tendency to be talking about medical schemes now and to relate it to the government of national unity. The fact is, there will be 10 different coalition governments before anything like this could ever be implemented.

It's not even this government that will be looking at health reform; it will be the next one five years from now, and the one five years from then, and the one five years from then. That is the timeline for our system’s reform. Economic growth also changes the timeline of implementation.

We're really not looking at this government implementing much, even if it didn't have to contend with substantial legal challenges which may affect key provisions of the act.

2. The National Health Insurance Act will move us from a system that is functioning at a low level to a system that will not be functioning at all.

The proposals for the NHI mean we will be effectively shutting down provincial health systems and shutting down medical aids to create a third system that has never existed. It is quite a radical institutional departure, and the proposals to close medical aids will force everyone to use public healthcare.

It will require an astronomical fiscal outlay, which is not possible, but the entire proposal depends on undermining medical aids and the private sector rather than attempting to achieve equity, and this is a concern for many people.

The NHI proposals do not appear to make sense as an attempt to improve coverage in South Africa, because they cannot. A proposal that prevents you from being able to take up your own coverage is a bit like saying you're not allowed to buy solar energy when Eskom fails to produce publicly supplied electricity, or you are prohibited from implementing a rainwater-harvesting system or a borehole if the public water system collapses. It makes no sense.

There is no rational reason to stop people from being able to cover themselves if medical schemes are regulated to enhance coverage for people who are able to contribute.

3. The private health sector takes nothing away from the public health sector.

There is no evidence that the private health sector undermines equity. The act looks like an attempt to make the private sector part of a public healthcare regime. And this is entirely politicised because the minister is a member of the executive who appoints everybody and the kitchen sink, which means it is a political structure rather than a government structure. So now you are putting, who knows, more than R675 billion under the control of a political organisation. That is the intention, but it will not happen.

It is also pure nonsense that the private sector is luring healthcare professionals away from public healthcare. Why do we have unemployed doctors if that is the case? Why aren’t they in the private sector?

In many respects, the conditions of employment in the public healthcare system are comparable to the private sector. They are very generous, and extremely generous for specialists and nurses. There is no better option in the private sector for many of them and for many other health professionals or allied workers. It is a very good, secure salary.

So, applications for positions in the public healthcare system would be, oversubscribed. The only limitation is budget. But if the budget is being siphoned off, then you do not have space to absorb everyone.

There is no evidence that the private sector is absorbing staff who would otherwise be in the public sector. Mostly, people end up in the private sector because they cannot be in the public sector.

4. The second presidential health compact signed at the Union Buildings last week, which was supposed to indicate consensus in the industry about the way forward, is a meaningless piece of paper.

In my estimation, the compact was always a manipulated process to facilitate general discussions on health systems reform then to try and slip in something that says everyone buys into the NHI framework. It does not appear that it was ever intended to generate a social consensus on our system.

The manipulative wording in the last version of the compact attempted to create the impression that everyone bought into NHI, and that's why people withdrew. It isn't a social compact any more when key partners withdraw. It's just a piece of paper.

5. The government is putting forward no credible argument or evidence that the NHI is not a doomed project, as everyone else seems to think. It just forges ahead with rhetoric.

The government has never provided any credible evidence for NHI. There has never been a fiscal, financial or institutional feasibility study, just token appraisals by the Presidency. But they were just cut-and-pastes  of the white paper data, not an analysis.

There is no evidence for the diagnostics in the report, the proposals themselves, the feasibility of the actual recommendations, so there is nothing there that is concrete.

A serious part of the problem is that the act proposes a huge change in the way the health system operates without any evidence of what is wrong with the system or whether the policy proposals are feasible. You require evidence for both, in all policymaking. Its absence is the reason the proposals are so crazy – it's because they’re detached from reality, so you can promise anything.

Many people scratch their head and say, “I don’t know why they’re doing it.” From a political perspective, it might be that they have to sustain the rhetoric because it will be hugely embarrassing when this falls over.

6. Our medical aids are good but could be better. But the Catch-22 is that they cannot reform without the government providing the framework.

Overall, medical schemes perform well. They provide adequate coverage. The Health Market Inquiry looked at systematic weaknesses or difficulties within the medical scheme system, and they do require a number of key institutional interventions, but not NHI.

The regulatory framework protects minimum benefits and prohibits  discrimination against people who have pre-existing medical conditions or poor health status. On that score, they perform well. But they could be a lot better.

The healthcare systems in many European countries are made up of regulated medical schemes: Germany, the Netherlands, Belgium. Then there are hybrid systems, as in France, and predominantly public systems with insurance in Nordic countries.

There is no country that is exactly like ours or exactly like any other. They are all context-specific. The medical scheme system is not problematic but it needs structural interventions, and unfortunately that requires government intervention. The Health Market Inquiry made it clear that the weaknesses in the medical scheme system, in competition, are entirely due to the fact that government hasn't regulated this market properly.

While the government focuses on NHI, it is unlikely to correct either the huge governance weaknesses in provincial health departments or the wider structual weakness in the private health system.

But overall, the two systems provide a substantial degree of coverage and we have some of the lowest levels of out-of-pocket expenditure in the world. The only issue is that we could be providing much more or a much higher level of productivity for our spend if we had a government that was doing its job.

7. Medical schemes cannot provide a proper low-income system without the government's help.

If medical schemes are to provide better coverage for poor people, the government must create the enabling framework. It cannot just happen naturally because it is an insurance market. Insurance markets involve the risks of anti-selection – people choosing a better deal depending on their health status.

If somebody suddenly gets pregnant, they want to join a medical scheme even if they were not covered before. That creates a huge problem for insurers, which have to manage the risk of people buying down or buying up for periods and joining only when they are sick. If you’re trying to create a low-income framework, you have to be prepared for many people who can’t afford comprehensive coverage buying down to the lowest level of coverage or out of coverage, then joining when they get sick, and that destabilises health insurance. It requires a framework that’s established by the government to make it work better.

Many countries have created a framework which allows lower-income groups to participate without gaming the system.

8. The unattainable NHI idea will persist because it allows corruption to flourish in the meantime.

We have a government that is making decisions today for something that could possible arise in 20 or 30 years while failing to properly manage either the private or public sector.

We should not be talking about NHI. It offers us nothing in terms of better coverage and improved outcomes. We must deal with the system we have and make adjustments so that it works better.

The massive corruption in provincial health departments is designed to remain because it depends on politicians being able to appoint people into the public system. And that will continue.

There is no political will to change that corruption, and that’s why Babita Deokaran’s murder won’t be solved. The people involved are politically connected, and there’s no political will to stop it.

9. It is not as if we don't know which system will work

Typically, in a country like South Africa, and following the structures in quite a few developing countries, you should have about three tiers of healthcare: a public system that is free at the point of service, a social insurance contributory fund, which might use a mix of public and private suppliers, and a regulated private system.

Between the three, you maximise revenue mobilisation for the entire system.

Developing countries cannot provide universal coverage because there are limits on how much you can raise taxes. Typically, they leverage different tiers, because people contribute directly towards a benefit they receive. It's not the same as a tax.

The hybrid framework is the configuration countries such as South Africa should look at. There is no other option. South Africa has not invested in the middle part, the contributory social insurance fund. Instead, the NHI proposal says, “let's just raise tax and put everybody in the first system". That is not going to happen, because we will never be able to raise the amount of tax required for the model to work.

You cannot keep increasing the tax rate to get extra revenue because you will hit a ceiling where revenue starts to fall. This is well understood in public finance, and South Africa is pretty much at that level now.

♦ VWB ♦