Universal healthcare funding and the role of Medical Aid in South Africa

“A tremendous amount of needless pain and suffering can be eliminated by ensuring that health insurance is universally available.” – Daniel Akaka

The cost of universal healthcare in South Africa

There are three critical sectors in a society where people tend to exert themselves to obtain service – health, education and security. Not surprisingly, these sectors are generally considered by mainstream political parties as government’s responsibility or requiring its intervention. There are differences in the extent of government involvement.

The health sector in developed countries has various degrees of income redistribution to make healthcare accessible to all citizens, from minimalistic in the US to extensive in the UK, and various blended systems in between, which seem to work best.

In his book, The Conscience of a Liberal, economist and Nobel laureate Paul Krugman found that the blended system is capable of delivering the same quality of care at a lower cost than the minimalist system of the US. He also affirmed the argument that 20% of the population (those who get seriously ill) consume 80% of the cost, which undeniably is a strong argument for an insurance-based policy/product with a broad (universal) membership.

Objections against or limitations to universal healthcare are that it is a burden on state budget resources and the rising cost of medical care. It has become a focal point of South Africa’s health policies, especially due to the fiscal cost in the context of universal access. Another concern raised by civil society and private healthcare providers is government’s halfway plan for an NHI system that doesn’t cover everything and the lack of clarity as to which conditions will be covered and which ones will not. How would people be serviced for conditions not covered in a nationalised health system? Services might no longer be sufficiently catered for from the supply side (inordinately long waiting times and lower quality of service). This raises the question of whether government can achieve its constitutional principle of universal health, implying equal access to quality care for all, as conceived by the NHI.

Without comprehensive medical insurance, the impact of falling seriously ill can have catastrophic financial and emotional consequences.

The National Health Insurance (NHI) project

South Africa has a dual system that is unequal compared to France or Germany, which have a blended system. 15% of the population consumes 55% of the national health spend in a privately-funded medical aid setting, while 85% depends on the underfunded public sector health. Simply blending the overall health budget, and upgrading the service quality of the public health sector to the level of the private sector, would be onerous, and require a vast amount of additional funds which would have to come from additional taxes at a time of a shrinking tax base and weak economic growth.

With the creation of the NHI, government plans to take control of the entire health budget for a more equal distribution. In addition, it considers a “certificate of need” for healthcare professionals to limit their choice of where to work or establish a practice, risking an exodus of healthcare professionals.

A more progressive blended system might be the ideal option to maintain individual (medical professionals) rights and gradually make services more affordable. That approach, complemented by fiscal discipline and the participation of well-run private sector medical aids, could offer a workable solution that could also deal with moral hazard and other risks.

Significant savings are feasible in the public health sector if government can relax regulations to allow private sector primary health care (PHC) facilities with a proven track record to run at lower costs, with efficient and technologically advanced systems. It can vastly reduce the pressure on district and tertiary hospitals, caused by poor service delivery at many public sector PHC facilities.

Medical Aid administration costs

In the US, the cost of administration by the government-run medical care amounts to 2% and private insurers charge about 15%. In South Africa the operational costs, although not entirely comparable to the US, are 61.5%. Surely they could do better for their members? Closer collaboration between government and the private medical aids in a blended system can offer a pathway to a more equitable sharing of resources and reduce the burden of an acceptable universal healthcare system.