NHI The role of administrators, restricted and open schemes in the NHI environment

South Africa needs a healthcare house to accommodate all its citizens An estimated 8.2 million citizens have a private one The remaining estimated 41 million citizens cannot afford a private one

Do we say what we mean and do we mean what we say? The debate up to date Do we say what we mean and do we mean what we say?

Quotes from ANC Today, 24 July 2009 on NHI “We have stated clearly in past engagements and various forums that the policy of government and the ANC is that the private sector is an important role-player in the delivery of healthcare.” “The implementation of the NHI will require that we develop partnerships to ensure accelerated transformation of the National Health System.” “The private health sector has to deal with cost escalations mainly from over servicing of patients and non-health related expenditures such as administration fees, managed care fees and brokerage fees.”

“Parallel efforts to improve health services and introduce efficiencies will focus, amongst others, on the improvement of human resources for health and physical infrastructure, effective and efficient management especially financial, the establishment of effective Information and Communication Technology for health, and special focus on Quality of Care, norms and standards.” “Once the White Paper process has started, we urge ANC members and the public to study government proposal on the NHI, engage in debates and contribute resources, skills and expertise to the final product that will emerge after consultations.” “We dare not fail to bring about a better and integrated national health system that benefits all South Africans.” “Working together we can do more.”

South Africa has a track record of successfully solving seemingly impossible problems Can this also be achieved for healthcare?

Ms Jessie Duarte, ANC spokesperson, said in a statement that the ANC is concerned about the ongoing crisis in the medical schemes industry. She said that the party said that it is because of the problems at medical schemes that the ANC started with a process to draft a NHI plan whereby they want to provide comprehensive, free and quality healthcare services to all South Africans. She also said members pay between R12,000 and R80,000 per annum but their benefits are depleted before the end of the year.

This stuff is in the way. What do you want to do? Make way for progress! NHI

Countries that have NHI systems Some facts Countries that have NHI systems United Kingdom and Canada Highly developed economies High levels of personal income Low levels of unemployment Low levels of income in equality Large taxpayer base Can afford to subsidize the minority that are unemployed and unable to contribute Private health insurance systems exist alongside the NHI

Current situation in South Africa Beneficiaries of medical schemes (2007) 7,478,040 (15.6% of population) Taxpayer base 5.2 million individuals 1.6 million companies 379,675 PAYE 384,747 trusts 745,487 registered to pay VAT Approximately 10% of the total population are taxpayers

Subscriptions vs Benefits Examples Benefit option Subscriptions per annum (R) Benefits per annum Medihelp Plus 160,920 32,742 32,184 1,447,543 Necesse 80,352 31,619 19,872 451,965 Total for Scheme Average per beneficiary 15,618 13,508 (86.5%) Non-healthcare costs = 10,9% of gross contribution income

The role of administrators, restricted and open schemes in the NHI environment Access Equity Efficiency Healthcare Affordability Quality Effective and efficient infrastructure, hospitals, specialists and providers of healthcare services Effective and efficient management and administration

What are the beneficiaries of medical schemes accustomed to? Operational metrics, trends and service levels in respect of administration

Average number of calls answered per beneficiary per annum

Number of beneficiaries of registered medical schemes 7,478,040 (2007) + 4.9% from 2006 8,228,842 (2009) (estimated growth of + 4.9% per annum) South Africa’s population 47,000,000 (2005) 49,320,500 (mid-year estimates) Additional number of beneficiaries to administrate under the proposed NHI 41,091,658

Estimated number of employees needed for NHI administration Number of employees in healthcare benefits administration industry Source: Inseta Workplace Skills Plan submitted for 2007/8 If existing administrators and self-administered medical schemes have to administrate the additional 41,091,658 beneficiaries, they will have to increase their capacity by 5.5

Do we have enough skilled people? Occupational category Mapping of the provision of skills to specific occupational categories Occupational category Comments on supply Senior officials and managers Few senior black managers with sufficient industry experience Shortage of skilled black managers High turnover among black managers Professionals Sufficient general output from higher educational sector, but the sector competes with the rest of the financial services sector and the rest of the economy Insufficient industry-qualified professionals Growth and transformation in high-level professions is slow Long lead-time before new industry-specific qualifications start to make an impact Clerical/Administrative workers Sufficient number of people in the market Lack of numeracy and language skills Source: Inseta Sector Skills Plan 2007/8

The cost of private healthcare (registered open schemes) Healthcare cost As % of GCI Average per beneficiary per month 10% Saving result Gross non-healthcare expenses 15.7% R119.00 R11.90 Gross relevant healthcare expenditure 84.8% R641.40 R64.14 Source: CMS Annual Report 2007/8

Do we have enough money to administrate NHI? Current administration and managed care fees, excluding broker fees, marketing and advertising expenditure of registered medical schemes R5.6 billion (2009 estimate) Beneficiaries 8.2 million (2009 estimate) R685.14 per beneficiary per annum R 57.10 per beneficiary per month If we have to administrate an additional 41 million beneficiaries at the current costs and standards we will need an additional R28.2 billion per annum. If we only have to administrate membership, claims and client enquiries it will cost an additional R13.4 billion.

What can we do? Let’s accept that healthcare in South Africa will have to change Keep the present 8.2 million people in their private healthcare house, but keep on focusing on cost in respect of healthcare as well as non-healthcare expenditure Bring the management and administrators of all medical schemes together into one representative body Get all the representative bodies in the private healthcare sector to work together and to represent the private industry on a common point of view Set up a work committee that consists of experts on healthcare in the public sector as well as the best architects, developers and builders who helped build the private sector healthcare house into what it is today to come up with a workable solution for South Africa’s healthcare challenge

What can we do? Reconsider Prescribed Minimum Benefits and the basic benefits package to make a lower cost option more affordable Consider employer-mandated cover in the private sector that could grow the current market from around 17% to 28% of the population (formerly proposed SHI and REF) Encourage private healthcare companies to invest in South Africa in order to address this country’s healthcare problems, by providing them with reassurance, guarantees and incentives as most of them are currently investing in foreign countries

Thank you Anton Rijnen