Costing and Long-term Modelling of NHI September 2009 National Health Insurance Policy Brief 6

Pricing Source: IMSA NHI Policy Brief 6: Costing and Modelling NHI Costing Raw price from cleaned historic data. Margins and adjustments depending on quality and applicability of raw data, including IBNR. Inflation to period of use. Adjustments including contracted delivery, negotiated contracts, managed care efficiency, non-healthcare costs, investment earnings, solvency margin. Demographic correction for expected target market. New benefit package correction. Spread price across cells using allowable rating factors e.g. adult/child, income bands Allows some groups to be excluded from contributing Contribution Table

Pricing of National Health Insurance Need to determine a table of amounts or a formula relative to some definition of income, payable by defined contributors and incorporating income cross-subsidies and an equitable Government subsidy. The total amount needed would be determined from historic data, population projections, other inputs and assumptions. The total amount needs to be set to cover a defined package of benefits for the entire population (or a phased target population), with an expected dispensation of efficiency in healthcare delivery. There would be loadings for administration and managed care costs but probably no loading for solvency as money in would equal money out.

Benefit and Contribution Cycle Applicable year: 2010 Historic data: 2008 Current year: 2009 Data extraction, tariff changes, final design, pricing. Assess enrolment, close non-viable options, assess competition. Previous year’s results. Broad design concept, contracting with providers. Board approval, rule changes, marketing, enrolment.

Benefit Package Cost Curves Source: Heather McLeod and Pieter Grobler, as used by Servaas vd Berg and Heather McLeod, August 2009 Preliminary work. Needs adjustments for effect of benefits becoming mandatory, anti-selection effect and evolution of HIV epidemic on NHI population.

Forms of Healthcare Rationing Government: by means of budget constraints; by long queues (at clinics or for getting certain elective surgery); by availability (limited ICU beds or surgical beds); and by denial (no dialysis after a certain age and no resuscitation of very low-birth-weight babies). Health funders (like medical schemes or NHI): by means of limits, co- payments, deductibles and thresholds or by means of volume (like one pair of spectacles every two years). Patients and their families: by means of affordability (choice to have private insurance, level of savings account or degree of out-of-pocket spending) or conscious choice (choice to refuse care in terminal illness). Doctors: by prognosis typically but also by affordability in some cases (differential treatment or prescribing based on patient income).

Long-term Modelling of Disease for the Future NHI September 2009 National Health Insurance Policy Briefs 3, 4, 5 and 6

Estimate of Incidence of Cancers 1985 to 2025 Estimate of number of new cases of cancer in each year due only to the changes in the age and gender of the population. In 1994 estimate 53,000 new cases. By 2025 this increases to 93,000 cases a year. Assumed same prevalence by age and gender for all cancers as reported in GLOBOCAN 2002 for South Africa. Have not assumed any change in the incidence of cancer by age and gender.

Treatment for Chronic Disease 1985 to 2025 Estimate of number of people needing to be on treatment for 25 key chronic diseases due only to changes in age and gender of population. In 1994 estimate that 3.0 million people needed treatment. By 2025 this increases to 5.1 million people. Assumed same prevalence by age and gender for 25 CDL diseases as found in medical schemes.

Estimate of Future Chronic Disease Shows sensitivity to higher and lower rates of chronic disease by age and gender. The aging and growth of the population dominate. Source: IMSA NHI Policy Brief 3: Chronic Disease and Future NHI

Treatment for Chronic Disease and ARVs 1985 to 2025 Used Actuarial Society of SA 2003 model of people needing to be on ARVs. Estimate of number of people needing to be on treatment for chronic disease and HIV. Rising burden of disease on funders of healthcare – whether public or private or future NHI.

Treatment for Chronic Disease HIV and Cancer 1985 to 2025 The national health system is having to cope with much higher levels of chronic disease than before Possibly some overlap of CDLs and HIV+ but chronic diseases beyond the 25 CDL diseases that must be covered in medical schemes not yet added.

Staging of the HIV/AIDS Epidemic Using WHO staging of the disease, with two added stages in ASSA2003 model: on ARVs and discontinued ARVs. Source: IMSA NHI Policy Brief 4: HIV and Future NHI

Implications for NHI The key issue remains for planning in South Africa – that the number of elderly people is expected to increase rapidly and that chronic disease and cancer prevalence and need for hospital facilities are strongly related to age. While the extent may be difficult to quantify precisely, there is no doubt that there will be an increasing burden on the health system in future. Add to this the well-documented and modelled HIV/AIDS epidemic and related epidemics of sexually-transmitted infections and tuberculosis, and the immense challenges for a sustainable National Health Insurance system become apparent.

Implications for NHI Combining the 25 CDL chronic diseases (including hypertension, hyperlipidaemia, asthma and diabetes), cancer and HIV, the numbers with these diseases are projected to have increased as follows: from 2.3 million in 1985 to 3.6 million in 1994 to 9.9 million in 2009 and could rise to 11.3 million by The non-CDL chronic diseases, the burden of violence and infectious diseases needs to be added for a more complete picture. The resourcing requirements in terms of staff needed in the health system become particularly stark when compared to the burden of disease in the national health system.

Innovative Medicines South Africa (IMSA) is a pharmaceutical industry association promoting the value of medicine innovation in healthcare. IMSA and its member companies are working towards the development of a National Health Insurance system with universal coverage and sustainable access to innovative research-based healthcare. Contact details: Val Beaumont (Executive Director) Tel: Fax: Innovative Medicines SA (IMSA) Cell: PO Box 2008, Houghton, South Africa

Material produced for IMSA by Professor Heather McLeod