South Africa’s national health insurance (NHI) Bill is a step closer to becoming law and while full implementation of an NHI scheme may be a while off, the passing of the bill earlier this year marks a move in getting the country closer to its vision of achieving universal access to quality healthcare. This may be a noble cause, a moral imperative,
but it remains an issue of contention because funding and managing a system like this at the scale required is extremely complex, leaving huge question marks around
whether this is something the government can get right. Do you think that the proposed NHI is the right tool to achieve universal healthcare for all South Africans?

Universal health coverage is required for all South Africans, but I think that the status quo is unsustainable. We must make it work because the actual architecture of the NHI structure is something that is now enshrined in the law. I think the key issue of discussion and debate here should be about finding a way forward. The NHI is not workable without private sector collaboration. We should clearly understand the cost thereof, funding, implementation complexity, and acknowledge that it requires private sector collaboration. If we can work through these factors, then the bill can be made workable, but it’s worth emphasising that we must make sure that the private sector is involved in the way forward.

Just to be clear, you aren’t just saying this because of the implications it could have on your bottom line and the threat it poses to the sustainability of your health insurance
scheme model, right? Because let’s face it, private health insurers and medical providers certainly stand to lose customers on the bottom and low margin end.

Bear in mind that this is an intergenerational process. This is going to take a decade or two to roll out. So, this is more about having a brawl with an architecture that’s problematic.

I think it is also about the sentiment. Even though the NHI will not take effect immediately, it will bode well for the sentiment amongst doctors, hospitals, funders, and the overall health sector. There’s a lot at stake here. You’ve got a private sector that’s made up of thousands of doctors working in 850 different healthcare facilities.

The NHI is funded on an egalitarian community-rated basis and people in this medical scheme have prescribed minimum benefits, so it is an incredibly powerful asset that takes care of the masses. This is more important than any bottom line. I think if we maintain the sentiment, keep investing in healthcare and make sure that these kinds of debates are properly aired, we should end up with a piece of healthcare legislation that’s workable.

Where does the NHI Bill fall short and what needs to change so that we leverage its strengths and its merit?

The fundamentals of getting it to work are important, but I think that an even greater issue is the affordability thereof. Bear in mind that we currently spend around R465 per person in the public sector per month. Although there may be differing
narratives and estimates, we are told that the NHI scheme may require a further R200 to R300 billion to fund it. So, the question becomes, how do you get that money into the NHI scheme? The only way you can do that is through the taxation system – we’ve got to raise taxes. Available research shows that we’d have to raise income tax by 30% or more to raise R200 billion or raise VAT from 15% to 22% to achieve this goal. But if we were to do that, I, alongside many South Africans would argue that this would destroy the economy.

But the question is, assuming that the government does succeed in raising the required R200 billion, what would that buy South Africans? So, you have everyone in this NHI, and the critical thing is that the bill in its current form states that once it is fully implemented, medical schemes can’t provide coverage for those things that are covered by the NHI.

The R200 billion will only take us from the estimated R465 per month to about R680 per month. This is not a drastic increase in finance available per person. This is compared to the R2 400 spent per month by medical scheme members or the employers who are funding it. So hypothetically, the government would drastically raise taxes for people who are employed by about 30% and simultaneously lower their
healthcare to about 70%. We would go from R2 400 to R680 per month, illustrating the tragedy of affordability, the level of inequality in the country, and confirming that the NHI is not doable without wrecking the employed sector.

Therefore, this not only becomes a healthcare issue. It creates a real problem in the economy. I don’t think people would bear paying more taxes and having their healthcare trimmed at the same time. Again, the only way we can achieve a workable NHI bill is to keep the private sector in place.

We can’t say when the NHS will be fully funded, medical schemes can’t fund. We need that funding. We need more doctors. We need more hospitals. We need more money, not less. So I guess I’m trying to make the point that under today’s economics, you can see that it’s not workable. The NHI theory has excellent attributes of use, but once it’s fully implemented, let’s then work out the role of the private sector and medical schemes.

When it comes to thinking around a sustainable funding source that would support this and ensure long-term fiscal sustainability, it’s a blended model that you’re looking at with a mandatory contribution from citizens who can afford
it. Is this correct?

I think it’s a blended model but also a multi-funder model.
We’ll need the NHI structure and we’ll need medical schemes to be in the funding pool as well as others where necessary. I guess the point that I’m making is that we don’t yet know how to make it work. But I think once we get the collaboration between public and private sectors and we all work together, there are ways to achieve it.

Given a weaker outlook for government revenue and the budget deficit which, of course, gives rise to funding constraints, we’ve also got to consider whether the government has the capacity and capability to manage a state-run NHI fund, right?

Yes, I don’t think that we’ve even begun to think about the architecture and the laws involved here. The complexity of how it can work, and the actual executional difficulties are not clear. We’ve seen quite the opposite. Any fund we’re running
publicly at the moment is having difficulty. However, I do think that if we have the right expertise in place, the right kind of technology, the right kind of people, we can make it work. I think the primary issue at the moment is just the affordability thereof. We’re in a process now of trying to match public and private skills to solve problems in virtually every sector, and I think we’re doing better than we’ve done before. So hopefully the model of public/private partnerships will work better.

Why are we not just looking at providing the option of low-cost medical aid, which would allow the private sector to take more of the strain off public healthcare?

What are some of the constraints holding things back in that regard? And do you anticipate any movement there if these discussions are ongoing?

Indeed, there’s been a process and a discussion about low-cost benefit options, if we can solve that issue and have those coming to the medical scheme structure, we can cover millions more people and take the (pressure) off the state. If we do that, I’m hoping that over time that forms part of the tapestry of an integrated NHI. Currently, the low-cost option debate is yet to be discussed - we’re still waiting for the council for medical schemes and we’re hoping that can be passed fairly quickly. If that’s done, we can cover more people in the private sector.

What’s the way forward for medical schemes in a struggling economy, considering the high cost of everything and an increasing public perception that one does not get what you pay for in terms of medical coverage?

One of the difficulties is that medical inflation tends to be higher than price inflation. So it tends to crowd out other things in the economy, which is why our fundamental job is to make it more affordable. Although we find ourselves in kind of a cost of living crisis, the truth is that I don’t see the elasticity for medical scheme coverage rising much. I think it’s inelastic.

Where do you think the most pressing needs with regards to improving public healthcare provision sit right now?
So perhaps underfunding isn’t the issue. It’s the fact that we’re pouring these funds into leaking buckets. We have to manage our public system better. The public hospital system has a lot of areas of excellence, but it’s got a lot of areas of real weakness and almost collapsing areas which is a problem.

We need to address the management of our healthcare system, which has to improve for us to get a return on the money being spent. Furthermore, people often talk about the British NHI as a potential model, and when I hear it, I see a similarity to ours.

In our latest edition of the Monthly Investment Insights, we put the spotlight on the future of integrated healthcare in South Africa with Adrian Gore, CEO of Discovery.