As health department officials move to set up National Health Insurance's basic structures, including its board, several experts say the scheme remains a pipe-dream, doomed to the same fate as Gauteng's aborted e-tolls project. In this Spotlight special briefing, Jesse Copelyn outlines three possible scenarios for how NHI might pan out over the coming years.
The first draft regulations linked to the National Health Insurance (NHI) Act should be published for public comment this month, according to government's NHI lead Dr Nicholas Crisp.
These regulations, Crisp told Spotlight, relate to sections 12 to 30 of the NHI Act, and once finalised will "allow for selection, recruitment and appointment of a board... advisory committees and a CEO". Crisp is the deputy director-general in the Department of Health responsible for NHI implementation.
Crisp says the draft regulations will be available for public comment for three months and form the first step in "setting up" the NHI, which is intended to function like a large state-run medical insurance scheme that will cover everyone across the country.
Yet even as the health department lays the groundwork for the project, there are indications that compromise over the NHI may also be possible. In recent weeks, President Cyril Ramaphosa and other senior government officials met with business leaders, who want the NHI Act amended.
The CEO of Business Unity South Africa (BUSA), Cas Coovadia, who was at the meeting, told Spotlight that their aim in these negotiations is to ensure that the NHI is rolled out in a way that achieves its aim of universal health coverage, without destroying the private medical insurance sector.
BUSA comment iro NHI engagementhttps://t.co/B4yyEsTKE6
-- BusinessUnitySA (@BusinessUnitySA) September 5, 2024
Section 33 of the NHI Act says that once the NHI is fully implemented, medical schemes won't be allowed to cover benefits that are paid for by the fund, meaning that if the industry survives it would be relegated to covering top-up services.
But according to Coovadia, with the right amendments to the Act, the scheme could move forward alongside the medical insurance industry, with some people covered by the NHI and others retaining their private health insurance.
There are thus at least two plausible scenarios moving forward - a 'pure' NHI, in which there is a single state-run purchaser of the vast majority of health services, and an amended 'hybrid model'. Several researchers that spoke to Spotlight also believe that there is a third possible scenario - namely that the NHI simply never happens in any meaningful way. They argue that the scheme is institutionally and financially infeasible and will fail to get off the ground, even if a board and staff are appointed.
How might these three scenarios evolve? Let's take a look at each in turn.
Scenario 1: The NHI moves forward as is
In May, President Ramaphosa signed the NHI bill into law, but as of yet, none of its sections have been implemented. According to Crisp, "a board, CEO and staff" are needed "for anything to happen". As such, sections 12 to 30 of the Act - which deal with appointments - need to come first.
Once the draft regulations related to these sections have passed through public comment, the finalised regulations will be published, and sections 12 to 30 of the Act will simultaneously be promulgated, says Crisp. Though he notes that they are still awaiting legal guidance on the exact order of events.
As time goes on, additional sections will come into effect, however this will take a long time. For instance, Crisp points out that as of yet "there is no NHI Fund entity so no budget allocation", though some funds have been issued by parliament for "preparatory activities like getting the digital systems in place".
The NHI Act states that the first phase of the scheme will last from 2023 to 2026, over which time the government must strengthen the healthcare system, prepare the fund and amend other legislation to bring it in line with the NHI. It also states that the NHI fund can begin "purchasing of personal health care services for vulnerable groups such as children, women, people with disabilities and the elderly".
However, this can only happen once state spending on health is restructured. At present, public health funds are allocated to provincial governments via the equitable share allocation and conditional grants. According to Crisp, the NHI will begin purchasing healthcare services only once some of these funds are reallocated to the centrally-run NHI fund. This won't happen before 2026/2027, he says.
Once the fund has been established, it will start by covering primary healthcare services, says Crisp, who adds that the health department is "busy establishing one CUP [contracting unit for primary healthcare] in each province".
CUPs are organisational units, each of which will be responsible for a small sub-district area. The NHI Act states that the CUPs will be made up of "a district hospital, clinics... ward-based outreach teams and private providers", and have several functions, including monitoring "the disbursement of funds to health care service providers" by the NHI.
After testing one CUP in each province and working out what is required, Crisp says the department will "roll out more and more CUPs until the country is covered".
A key change will be a shift away from the predominant fee-for-service arrangements, where health providers get reimbursed for each consultation or service they provide. The Competition Commission's Health Market Inquiry report argues that this is inefficient as it incentivises health workers to 'overservice' their clients.
In the case of primary health care, the plan is to change to capitation, meaning the NHI would reimburse healthcare providers with a fixed fee for each patient.
A different funding mechanism is being developed for hospital care, says Crisp - one based on Diagnostic Related Groups (DRGs). This is when patients are grouped into different price categories depending on their diagnoses. Crisp says the department is currently working on the DRGs, but this "is going to take time", and would likely only begin after the NHI has begun covering primary healthcare services.
Crisp previously told Bhekisisa that full implementation of the NHI would take decades.
Scenario 2: A hybrid system
According to Coovadia, BUSA has consistently held that "the NHI Act is necessary to put us on the road to universal health coverage, but that in its current form it is not implementable and actually takes us back".
He adds: "We will make available to the president in the next couple of weeks a document that sets out... what our concerns are and what we are recommending." These proposals will primarily involve section-specific amendments to the Act.
In BUSA's submissions on the NHI bill to the select committee on health and social services last year, it took particular aim at the proposed limitation of the role of medical schemes in Section 33 of the now Act. BUSA argued that stripping people of their access to medical schemes would violate their constitutional rights to healthcare. This is based on the argument that "medical services that fall under NHI coverage are likely to be inferior (in quality and/or extent) to the same medical services that medical schemes currently cover".
Coovadia says that apart from amendments to certain parts of the NHI Act, BUSA will also be proposing "interventions that could be made almost immediately that could begin to improve the healthcare system". He says that one of them is the social health insurance model that was recently punted by outgoing Netcare CEO, Dr Richard Friedland.
Under this model, mandatory medical scheme membership would be required under law for employed people earning above a certain income threshold. Over time, other segments of the population would be covered in a phased manner, expanding private coverage and reducing the strain on public healthcare facilities.
JUST PUBLISHED | We unpack how a system with mandatory medical scheme membership for the employed might work and asked local experts whether it represents a viable alternative to government's #NHI plans. @AlexvandeHeever https://t.co/TDtpKp0Nmh
-- Spotlight (@SpotlightNSP) September 30, 2024
The idea is nothing new. During the Mandela and Mbeki era, several state-backed working groups and committees of inquiry suggested an expansion of medical scheme coverage. The 1998 Medical Schemes Act even laid the groundwork for this option.
For Coovadia, amendments to the NHI Act could ensure that it works in combination with these kinds of models. However, achieving this may prove difficult, as the health department has remained committed to a single payer health model set to be funded through general tax revenue, the reallocation of funding for medical scheme tax credits, a payroll tax, and a surcharge on personal income tax.
Crisp for instance says that Section 33 is an important component for achieving universal healthcare: "How do you get universality - as opposed to parallel universes - with multiple funding streams for the same benefits? Our NHI is a single payer model - like many across the world," he says.
Similarly, Health Minister Aaron Motsoaledi told Bhekisisa in August, that removing Section 33 would be like building a house without the foundation.
Nevertheless, the government has begun taking a more conciliatory approach to business leaders who are pushing against the section - something which may be due to legal concerns, according to Professor Alex van den Heever, a governance specialist at the University of Witwatersrand.
At present, there are two court cases against the NHI - one was launched by the Board of Healthcare Funders (BHF), which represents the medical insurance industry, while the other was initiated by the lobby group, Solidarity.
Neil Kirby, who heads the Healthcare and Life Sciences division at Werksmans Attorneys, which is representing BHF, says their case "challenges the decision of the president to assent to the NHI bill". In essence, if it turns out that Ramaphosa signed the bill despite having information that suggests it was unconstitutional, or that the negatives outweigh the benefits, then the courts could overturn his decision, Kirby said.
At that point "the NHI Act becomes a bill," says Kirby, "and probably will then end up back in the National Assembly for further debate or it will be sent to the Constitutional Court for an opinion".
Ramaphosa's decision to negotiate with business leaders may be an attempt to pre-empt this outcome. Indeed, Coovadia and Kirby both suggested that if the president agreed to amendments being proposed by business leaders, this could ease legal tensions.
If Ramaphosa were to be swayed in favour of a hybrid system, additional amendments would be required beyond just removing Section 33 however. For instance, Kirby notes that the NHI Act currently mandates that people prepay for the NHI, whether or not they want to join. This means that even if they are legally allowed to retain their current medical insurance, they would have to double pay (i.e. for their medical scheme premiums and for the NHI prepayment), which could be unaffordable for many. To achieve a hybrid system, this would thus need to be dealt with as well, Kirby says.
Tinkering with the Act could however prove politically perilous for the President. Van den Heever notes that Ramaphosa's "position in the ANC effectively relies on the backing of different factions... one of which is the faction that supports the NHI - COSATU".
Scenario 3: An 'infeasible' scheme fails to take off
There are two main reasons as to why the NHI is unfeasible and will inevitably fail to be implemented, according to Van den Heever. The first is that the institutional changes that are required by the NHI are too dramatic to be carried out.
"In South Africa, we've got two pre-existing systems," he says, "we have a regulated insurance market [in the private sector] and we have a state-funded free health service for people below a certain income level".
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"What's being proposed from an institutional perspective is to take both of those systems and convert it into a third version that never existed in South Africa before - that transition is not feasible", says Van den Heever. For example, "just shifting [health] from the provincial structures to the first tier of government is massive," he says, and that's before looking at the change required in the private sector.
The second major obstacle to rolling out the project is fiscal, he says.
For the NHI to purchase services for everyone, including those currently covered by medical schemes, government healthcare expenditure will have to increase dramatically. However, according to Van den Heever, the state doesn't have the capacity to raise large amounts of additional tax revenue to support this spending.
"You have several different tax bases [and] each one gets maxed out at a certain point," says Van den Heever, "it reaches tax capacity".
This relates to the idea of the Laffer Curve - that if you keep increasing tax rates there comes a point where total tax revenue will stop increasing, and will instead begin to fall. This is given that economic growth could be crippled or simply because people and businesses start evading or avoiding taxes.
"National Treasury and most economists looking at public finance in South Africa largely accept that South Africa is at tax capacity, meaning it can't expect to get more revenue from increasing tax rates," says Van den Heever, "and this is the fundamental flaw of this big idea of the NHI - that it could at some point introduce a special tax, and expect that revenue will flow".
Andrew Donaldson, the former national treasury deputy director-general responsible for public finance, raised similar concerns.
"Until South Africa's overall economic performance improves... it will not be possible to raise more revenue for [the] NHI," he told Spotlight. "The present trend is falling per capita public health and education spending - at best we can hope to see some stabilisation of financing over the next few years", says Donaldson, who now teaches economics at the University of Cape Town.
Professor Iraj Abedian, CEO of the economic research firm PAIRS, largely agrees, telling Spotlight that it is plausible that the government could begin rolling out the NHI - but under the current economic climate, it won't be fiscally possible to sustain it.
Gauteng's E-toll project is potentially a good parallel for how things might pan out, he argues.
"Did they sign [the e-toll legislation] into law? Yes", says Abedian, "Did they spend the money? Yes. Did they enforce it for a couple of months? Yes". But billions of rands later and all we're left with is non-operational e-toll infrastructure scattered along Gauteng's major roads, he notes.
"They will do a similar thing [with the NHI]," says Abedian, "There will be photos of a minister cutting ribbons, but two years later... we'll be left with a corpse of the project, like gantries on the highways in Gauteng".
