How will the proposed reforms in the NHI Bill affect the cost of health care?

Much has been said about the potential cost of National Health Insurance (NHI) to the fiscus. In most cases, alarm bells have been rung warning that the scheme to transform health care in SA is simply unaffordable in our current economic and political climate.

But what do we actually know — and not know — about how the reforms proposed in the NHI Bill and the Competition Commission’s Health Market Inquiry (HMI) will affect the actual cost of health-care services in SA?

The first and most obvious stumbling block to more informed debate on what NHI will cost and how it will be financed is the uncertainty that remains about what the road to NHI, as well as what the final destination, will actually look like. But the discussion also takes place in a vacuum of information on costing models and financing options thanks to the consistent withholding of that information by the National Treasury over the years.

What is NHI?

NHI encompasses a series of changes to the financing, purchasing, arrangement of and access to health-care services in SA to enable us to realise universal quality health coverage. Section27 has developed some handy posters to help guide confused readers through the proposed new system and how it will affect them.

How much are we spending on health care now?

Total expenditure on health in SA is almost R500bn, of which about half is spent by the government on services for 84% of the population, and the other half on private services for 16% of the population. Most of the public budget is spent by provincial health departments while most of the private spend is paid for by medical aid subscriptions and out-of-pocket payments.

Importantly, the total spend is equivalent to 9% of our GDP. This is a similar percentage to the UK, whose National Health Service (NHS), while imperfect, is one of the best performing health systems in the world. There is much evidence for this, but on a more personal level, my mother worked at the coalface of the NHS as a nurse for decades and still advocates for it passionately, and I have seen how my family has benefited from free, quality health care from cradle to grave.

This indicates that solving our health problem, like so many of our other socio-economic challenges, is not only about spending more money, but using what we already have much more efficiently and equitably.

What effect will the health system reforms have on both the cost and the demand for services?

The central NHI reform is the creation of an NHI Fund that will pool public-health resources (and risks) and become the single purchaser of all public-health goods and services in the country. Big questions remain about the governance arrangements for the fund.

Section27 and the Treatment Action Campaign (TAC) have made recommendations in our submission on the NHI Bill aimed at maximising our chances of realising large cost savings as a result of bulk purchasing, while protecting the fund from corruption and capture by vested interests.

How expensive NHI will be will also depend on the implementation of NHI and HMI proposals on primary health-care reform. Both the public- and private-health sectors massively over-service health-care needs at the much more expensive secondary and tertiary levels of care, but this should change under NHI.

The enhancement and use of primary health-care services will allow us to achieve greater population coverage of services at a significantly reduced cost per capita.

There remain major question marks on whether the government will put the necessary political will behind the implementation of the full set of HMI recommendations, and what kind of co-operation will be forthcoming from the dominant private-sector health players. Implementation of the HMI proposals would lead to more competition, widespread efficiencies and ultimately lower costs for private-health users and enable a smoother integration of private and public systems through NHI.

Another factor is whether we can find a way to navigate away from the health risks that our fast-paced lifestyles and industrialised food system create for us. These encompass our unhealthy dependence on sugary drinks and fast food; the reduction of bread and maize by monopoly producers to a collection of unrefined carbohydrates with close to zero nutritional value; bacon and red meat remaining aspirational staples of most households; as well as excessive drinking and widespread tobacco addiction, combined with low rates of exercise.

Much greater levels of public education and smarter food market regulation are needed to tackle these crises, which have led to SA now having among the highest rates of adult obesity (54%) and child stunting (malnutrition) (27%) in the world, according to the World Health Organisation.

These translate into inexorably rising rates of diabetes, hypertension and cancer. The burden on our health system that these non-communicable diseases create is probably the biggest risk to the affordability of decent health care for all.

Taxes

On taxes for financing the reforms, the likelihood of middle- and higher-income earners facing additional taxes resulting from NHI in the immediate future is small. The memorandum to the bill states that no new taxes will be even considered to fund NHI until 2023 at the earliest, and even then “only in a favourable economic environment”. 

In the long run, though, private medical users should see any new payroll or personal income taxes as an effective replacement for their existing contributions for private medical insurance. Indeed, given how medical insurance premiums have skyrocketed in the past decade, if the efficiency savings mentioned above are realised, private medical users may actually find themselves better off at the end of the month than they are now.

Funding for health-care reform needs a rethink

The current funding provided and envisaged for public health-care reform is, however, far too low and additional funds do have to be found in the 2020 budget to enable reforms and NHI transitioning to take place. For example, the proposed allocation of only R75m to the implementation of the national Quality Improvement Plan for health care is paltry. We highlight in our submission a myriad of ways to find additional resources for health-care reforms in a fiscally and economically positive way.

Towards transparency

We do need to move towards a debate on NHI that recognises the inadequacies of the status quo but is also realistic on the risks inherent in widespread change and, most important, that is based on evidence and information about what works and what could work better. For that to happen, the Treasury must release its discussion documents, costing tools and financing projections on NHI and start workshopping with the public on our options.

The Treasury has got away with making policies, such as tax policy, fiscal and macro-economic policy in closed rooms in tall buildings with close to zero public engagement for far too long. The same approach with NHI will only deepen public mistrust of the process.

Instead we need to lessen the confusion by bringing more people and expertise into a conversation that touches everyone’s lives.

The Section27 and TAC submission on the NHI Bill can be accessed at www.section27.org.za. 

About the author: Daniel McLaren is a budget analyst at Section27 and a founding member of the Budget Justice Coalition and Imali Yethu.

This article was paid for by Section27.