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Motsoaledi: NHI may reduce medical costs

Aug 12 2011 13:40 Sapa

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Cape Town - The National Health Insurance (NHI) scheme, unveiled in a green paper on Friday, may be good news for those paying what the document describes as "exorbitant fees" for private health sector services.

"It will actually make the sector more sustainable by making it levy reasonable fees," Health Minister Aaron Motsoaledi said in a statement marking its release.

The green paper pulls no punches on the high cost of private healthcare.

"Over the past decade, private hospital costs have increased by 121% while over the same period, specialist costs have increased by 120%.

"This means that the private healthcare sector will have to accept that the charging of exorbitant fees completely out of proportion to the services provided has to be radically transformed," the document states.

Such overpricing had led to the collapse of many medical schemes over the past decade.

"A number of medical schemes have collapsed, been placed under curatorship, or merged. They have reduced from over 180 in the year 2001, to about 102 in 2009. This was mainly due to overpricing of healthcare."

In an effort to keep their heads above water, many schemes increased their premiums, often at rates higher than CPIX (consumer inflation).

"When this was not successful, the schemes resorted to decreasing members' benefits. This has led to an increasing number of members exhausting their benefits mid-year or towards the end of the year."

The extent of co-payments that scheme members were required to make "confirms that the current system does not provide full cover".

The green paper, accepted by cabinet on Wednesday this week, proposes a phase-in of the NHI over the next 14 years. Once in place, it will cover all South Africans and legal permanent residents.

"Membership to the NHI will be mandatory for all South Africans. Nevertheless, it will be up to the general public to continue with voluntary private medical scheme membership if they choose to.

"Accordingly, medical schemes will continue to exist alongside NHI. However, there will be no tax subsidies for those who choose to continue with medical scheme cover.

"The exact form of services that medical schemes will offer may evolve to include top-up insurance. However, no South African and legal permanent resident can opt out of contributing to NHI even if they retain their medical scheme membership."

Noting that the World Health Organisation (WHO) recommends that countries spend at least 5% of their gross domestic product (GDP) on healthcare, the green paper finds South Africa is not getting the sort of return on its health spending it should be.

It places most of the blame for this on "inequities" between the public and private health sectors.

"South Africa already spends 8.5% of its GDP on health, way above what the WHO recommends. Despite this high expenditure, the health outcomes remain poor when compared to middle-income countries."

According to the Council for Medical Schemes, the private health sector in South Africa covers just 16.2% of the population.

In his statement on Thursday, Motsoaledi said for the NHI scheme to succeed, service in public hospitals had to improve and the cost of private healthcare "tackled equally seriously".

"I cannot overemphasise this, but clearly, without these two, the NHI will not be viable," he said.

Funding of the NHI scheme would include an obligatory levy on salaries. The level of income above which NHI contributions would be compulsory still had to be determined by National Treasury. According to a table at the end of the green paper, the start of compulsory contributions appeared to be at least five years away, if not longer.

According to the document all NHI revenue collection will be done by the SA Revenue Service, including the mandatory contribution.

On the cost of setting up the NHI, it will require R125bn next year, rising to R255bn in 2025.

"Resource requirements... increase from R125bn in 2012, to R214bn in 2020, and R255bn in 2025, if implemented gradually over a 14-year period."

The current health medium-term expenditure framework budget is R101bn. This figure does not include health spending by departments such as defence and correctional services.

Spending on medical scheme contributions was R90bn in 2009, the most recent year for which figures are available.

According to the green paper, the NHI aims to offer benefits "of sufficient range and quality that South Africans have a real choice as to whether to continue medical scheme membership or simply draw on their NHI entitlements".

It says all members will be issued with an NHI card.
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