National Health Insurance (NHI) Bill, no closer to understanding
On 26 July 2019, the South African government gazetted the National Health Insurance (NHI) Bill. South Africans, however, are no closer to understanding critical details such as how much the NHI scheme will cost, where the money to pay for it will come from, and where the country will obtain the additional personnel (both medical and bureaucratic) to staff the ambitious scheme.
When one considers the high levels of poverty and unemployment, the small tax base, and the poor performance of the public health sector, it is difficult to envision how a government-funded system that promises “free healthcare for all” is appropriate for South Africa. The consequences of the NHI proposal are entirely predictable. It would reduce the quantity and quality of South African healthcare provision; drive more healthcare professionals out of the country; create a bureaucracy entirely incapable of efficiently handling the huge volume of claims; and impose an unnecessary and intolerable burden on both government and taxpayers.
Given South Africa’s narrow tax base, high disease burden, and limited resources, how should the government proceed with its healthcare reform? Alexander Preker, who was previously the lead economist at the World Bank, provides part of the solution. He states, “The ability and willingness of households in developing countries to pay for health care is far greater than the capacity of government to mobilise resources through taxation”. One would imagine that regular, small, fixed payments to a form of private health insurance would make intuitive sense – as opposed to the rare but devastatingly high out-of-pocket payments required when illness strikes.
Private health insurance increases access to quality care and improves consumer choice, leading to greater health system responsiveness. If given the option, the vast majority of South Africans would choose to go to a private healthcare facility. Indeed, a significant amount of out-of-pocket healthcare expenditure is already undertaken to access private healthcare and, as incomes improve, we can expect more people to join private medical scheme arrangements.
Expanding the private health insurance sector will provide consumers with greater choice and satisfaction. However, the biggest obstacles preventing medical schemes from rolling out options for low-income individuals are the regulations put in place by government. To the extent that medical schemes are compelled to move away from economic and actuarial realities, government will be creating a situation that is unsustainable. People, to the greatest degree possible, should be allowed to make their own decisions about their own lives and not be required to bear the costs of errors made by others.
If government views “health care for all” to be politically essential, it could require the population to privately and individually purchase mandatory cover from privately competing insurers and medical schemes to insure against catastrophic, health-related events, but otherwise leave them alone to provide for their own and their families’ medical-related and other needs. Moreover, instead of the government undertaking the management of taxpayer-provided funds intended for covering the medical costs of the poor itself, it should put the task out to tender. In the same way as people have many options to choose from in household insurance, car insurance and myriad other products and services, publicly-funded patients will then have a multiplicity of medical schemes and insurers to choose from. Competition between public hospitals and clinics, and with private facilities, to win business from taxpayer-funded public health insurance beneficiaries will thrive and ensure that the best service for the best price is given.
Government should concentrate its efforts and scarce taxpayer resources on those who cannot afford healthcare. For these individuals, government could act as financier and let people decide for themselves where to spend their money – it is not necessary to finance the healthcare needs of the entire population. Doing so is not a particularly good use of scarce taxpayer resources. Spending in one area of the economy necessarily comes at the expense of other areas. If government decides to dedicate more of the budget towards healthcare, it will mean less money available for such essential services as education, policing etc.
To fulfil the task of acting as financier for the poorest of the poor, government can and should enlist the support and help of the private sector by contracting out those services that can be provided more efficiently by private providers and administrators.
Finally, the NHI Bill is thick on populist rhetoric and thin on critical details to make an informed decision on the health and economic impacts of the proposal. South Africa is facing an important tipping point that affects not only each one of us but also our children and grandchildren and generations to come. We can either choose systematic deregulation of the private sector on both the funding and provision sides, or we can choose even tighter controls where all our healthcare decisions are governed from the cradle to the grave. We need to have the courage to recognise the impending disaster and correct the mistakes before they are made.