Modelling the resource requirements for universal coverage: A case study of South Africa Di McIntyre Health Economics Unit University of Cape Town SHIELD project: Strategies for Health Insurance for Equity in Less Developed Countries

Background Proposal to introduce universal coverage in South Africa: – Heated debate with particular concerns about ‘affordability’ Modelling useful to explore likely implications of different financing reforms: – Resource requirements (and impact of key design features) – Revenue potential

Broad approach used Identified the key scenarios: – What kind of financing reforms are being considered, proposed, or might be feasible? Resource requirements: – Population x utilisation x unit costs (Excel spreadsheet model) – Absolute amount and relative to GDP Revenue: – Health sector share of government budget; additional tax or mandatory contributions

Reform scenarios Status quo: – Limited growth in private insurance (<20% of population); limited improvement in public sector Extended schemes: – Mandatory extension of private insurance to all formal sector workers and dependents (<40%) Universal system: – Core of substantially improved public services; access to all; mainly tax funded including additional payment by formal sector

Core methods and assumptions Benchmarked baseline15 year projections PopulationSources: Census, schemes, SHIELD household surveys Disaggregation: Age & sex, insurance status Reliable projections (AIDS impact not adequately accounted for in official stats) UtilisationSource: SHIELD household surveys; benchmarked against HMIS & scheme data Disaggregation: Age & sex, insurance status, type of service Normative targets and cross-checked with international experience Unit costsData from Treasury & HMIS Scheme claims Real increases: trends & improved resources Expenditure benchmark Audited public & scheme expenditure

Excerpt of model

Coverage and utilisation

Total expenditure as % GDP

Public expenditure as % GDP

Public funding requirements Status quo: – Will decline to 10.5% of government budget Extended schemes: – Will decline to 9.4% of government budget (but increased costs of covering civil servants) Universal system: – Increase share of government budget to 15% plus – Proportional income tax of 4% (2% employer & 2% employee) – Or, progressive income tax of 1.2% to 6%

Conclusions UC is lowest cost option in SA, but places greatest burden on public funds and requires: Increased allocations for health in line with Abuja target, and Additional taxes Modelling illustrates likely resource requirements for reform scenarios, but also provides insights into reform design (sensitivity analyses)

Pre-conditions for success Cost containment: – Minimise unit costs, careful purchasing from non- government providers – Minimise administration costs: avoid fragmentation – Contain utilisation: strengthen primary & community services; improved gate keeping – Need for ongoing M&E, refine model with updated data

SHIELD partners For more informaton visit: Funding: European Commission and IDRC