National Health Insurance - where are we? Val Beaumont Executive Director Innovative Medicines SA

“WE KNOW WE MUST REFORM THIS SYSTEM – THE QUESTION IS HOW.” 9 September 2009

DoH Ten Point Plan Government Plan of Action 2009; Human Development Cluster: Health 10.Strengthen Research and Development DoH Ten Point Plan Government Plan of Action 2009; Human Development Cluster: Health 1.Strategic Leadership & Social Compact for better health outcomes. 2.Implementation of National Health Insurance (NHI) 3.Improving the Quality of Health Services 4.Overhauling health care system - improve management 5.Human Resources Planning, Development & Management 6.Revitalisation of infrastructure 7.HIV & AIDS and Sexually Transmitted Infections National Strategic Plan and increase focus on TB and other communicable diseases 8.Mass mobilisation for better health for the population 9.Review of Drug Policy

DoH Ten Point Plan: NHI Government Plan of Action 2009; Human Development Cluster: Health 2.Implementation of National Health Insurance (NHI) Finalise policy proposal on the NHI  Policy document released for public Comment [Nov 2009]  Revised Policy document incorporating public comments produced and presented to Cabinet [April 2010] Finalise draft legislation [July 2010] Set up National Quality Management and Accreditation Body [Mar 2010] Perform an audit of Health Information Communication Technology (ICT) at all levels of the National Health System (public sector only) [final report Nov 2009] Draft the National ICT Strategy for Health [final Mar 2010]

NHI proposals Brief history & progress update Confidential ANC proposals (Feb & June 2009) Handed to DoH in June 2009 (not in public domain) Many rumours of a public report or White Paper in 2009, but none forthcoming and n o official publication date set Deputy Minister of Health: “legislated by April 2010” DoH NHI policy proposal presented to Human Development Cluster on 23 September 2009 Ministerial Advisory Committee announced on 7 November 2009 to receive input and to consider comments on White paper, once released The Presidency’s Green Paper on National Strategic Planning published on 4 September 2009 (Minister Trevor Manuel) “Decisions on social security reform require long-term perspectives […] …getting the design wrong can bankrupt countries in two or three generations.”

ANC NHI promises 2009 Source: Proff. Servaas vd Berg and Heather McLeod, August 2009 “All South Africans (i.e. universal access) will be equally covered to access comprehensive and quality health care” “No upfront payment…” (at point of service) Everyone above the tax threshold will contribute through a national payroll or income tax All of this will be done within the current funding envelope - “requiring no increase in total health care spending as a % of GDP” At an individual level, “Contribution will be less than what members and their employers currently pay to medical schemes” South Africans may choose to continue to contribute to private medical schemes, AFTER they have contributed to the NHI Fund

Comprehensive benefits NHI benefit package What is meant by “comprehensive benefits”? What is the burden of disease? (and what will it be in future?) What will it cost? (and what can the country afford?) The benefit package will depend on what is needed versus what the State can afford and deliver. This depends on: Population and disease projections (by age, gender, province) Funding Infrastructure Resources For a more complete picture, also add Non-CDL chronic diseases The burden of violence Infectious diseases Source: IMSA NHI Policy Briefs 1-7

Chronic disease, cancer and HIV/AIDS The national health system is having to cope with much higher levels of chronic disease than before 1994 Source: IMSA NHI Policy Brief 6: Costing and long-term modeling of NHI

Universal access for all South Africans Study by Prof Servaas van den Berg, Dept. Economics, Stellenbosch University: % of respondents who declared they were ill and consulted a health worker in past month by wealth decile, and reasons for those who did not: Universal access has virtually been achieved, although at low quality levels

Quality care for all South Africans The NHI proposal requires a proper analysis of its costs, fiscal consequences and affordability Improving the quality of health care requires more real resources that do not automatically follow funds, but depend on management and incentives in the public health system doctors, nurses hospitals, equipment History teaches us that improving such management is difficult to achieve in a moderate time frame Indeed “(t)he most urgent need is to ensure that the public sector is well-capacitated to deliver the envisaged services at all levels” – and this is not mainly a question of money Source: Proff. Servaas vd Berg and Heather McLeod, August 2009

Initial costings of NHI 2009 Preliminary work, excludes administration and managed care costs. Needs adjustments for effect of benefits becoming mandatory, anti-selection effect and evolution of HIV epidemic on NHI population. Source: Proff. Servaas vd Berg and Heather McLeod, August 2009

Public-Private coverage current SA statistics Source: McIntyre D, van den Heever A Social or National Health Insurance. In: Harrison S, Bhana R, Ntuli A, eds. South African Health Review Durban: Health Systems Trust.

Phased Introduction of NHI South Africa Even if all earning an income and their insurable families are covered, only 51.1% of population would be covered Source: IMSA NHI Policy Brief 2: Health Insurance Coverage

Time to full coverage Examples Twenty seven countries have achieved universal coverage through social health insurance (SHI). The development from the start of SHI legislation to universal coverage is an incremental process. Germany: 1854 to 1988 (127 years) Austria: 1888 to 1967 (79 years) Belgium: 1851 to 1969 (118 years) Luxembourg: 1901 to 1973 (72 years) Israel: 1911 to 1995 (84 years) Costa Rica: 1941 to 1961 but only 83.4% coverage by Only two countries achieved full coverage in under 40 years: Japan: 1922 to 1958 (36 years) Republic of Korea: 1963 to 1989 (26 years) Source: World Health Organisation, January 2004

Nature of the debate Questions we should ask Source: Heather McLeod, 2009 The benefit package for NHI Affordability for the country Fiscal and economic consequences Quality of care and resourcing Single vs Multiple Purchasers Will patient/ consumer choice be compromised The role of Medical Schemes Substitute and Supplementary cover Principle cover and supplementary cover (Exempt from NHI if employer or union based) Duplicate cover and supplementary cover (too expensive for many medical scheme members)

Be prepared to take part in the public debate

IMSA and the NHI project IMSA is funding the work on the website and hosting the website IMSA is funding the academic work on the NHI Policy Briefs, but Prof. Heather McLeod retains complete academic freedom IMSA will continue to provide new links to Government documents on NHI Other organisations that release statements on NHI Academic papers on analysis of the proposed NHI system Web-address: Free subscription to updates on additions to the website

The Role of Private Health Insurance 7 December 2009 National Health Insurance Policy Brief 7

The Future Role Existing Medical Schemes South Africans may choose to continue to contribute to medical aid schemes but ONLY after they have contributed their share to NHI Fund (mandatory contribution) Source: National Health Insurance Policy Proposal. Presentation to Cabinet Human Development Cluster 23 September 2009

% of respondents who declared they were ill and consulted a health worker in past month by wealth decile, and reasons for those who did not (GHS ) Source: Prof Servaas van der Berg, Dept of Economics, University of Stellenbosch

Universal Coverage June 2009 NHI proposal: “The goals of the national health insurance include... providing universal coverage for all South Africans, irrespective of whether they are employed or not”. Confusion in the debate between universal coverage for healthcare and universal coverage for health insurance. It is estimated that only some 16.4% of South Africans had health insurance cover in However everyone in the country has access to healthcare, either in the public sector or through medical schemes, bargaining council funds or other employer-based arrangements.

Public and Private Spend R11,300 pbpa for those belonging to medical schemes (this includes both medical scheme spending of R9,600 and estimated out-of- pocket payments of R1,700); R2,500 pbpa for the middle group (includes out-of-pocket payments to private primary care providers and government spending on hospital care); and R1,900 pbpa for those using government primary care and hospital services. But this mixes Government spend from public money and purely private spend. Need to compare Government spend in the public sector and the subsidy from Government to the private sector. Source for figures: Health Economics Unit, UCT, Information Sheet: The Public-Private Health Sector Mix in South Africa

Tax Subsidy for Medical Schemes The Ministerial Task Team on Social Health Insurance estimated the tax subsidy to be R10,1 billion in In 2005 this was equal to some 20% of the public health budget. At that stage the tax subsidy amounted to about R120 pbpm for medical scheme members (and very unequally distributed), while the public sector spend was R96 pbpm. This is patently unfair. Since 1994, successive groups of researchers and commissions have strongly recommended that this tax subsidy be scrapped. An alternative was proposed that every citizen receives an equal per-capita subsidy for healthcare, equivalent to the amount spent per person in the public sector.

Remove Tax Break and Replace with Per Capita Subsidy Source: McLeod and Grobler, The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa, This has a dramatic impact for those earning below the tax threshold. The proportion of income may still be too high to be affordable but with some help from employer cover is now within reach.

Transition from no Financial Protection to Universal Coverage Source: Kirigia et al (2006) Health financing patterns and the way forward in the WHO African Region.

Universal Elements of Social Security Industrialized Countries combine tiers 1 and 2 Developing Countries have different strategies for each Source: Van den Heever, September 2009

Tiered Healthcare Financing Source: Van den Heever, November 2009

Potential Role of Medical Schemes Source: Private Health Insurance in OECD Countries, As amended. Health services covered by PHI Individuals do have public cover Individuals do not have public cover PHI covers medically necessary curative services typically covered in public system Duplicate PHI (Parallel PHI) Primary PHI Substitute or Principal PHI covers cost-sharing (co-payments, deductibles, amounts above limits) applicable to public system Complementary PHI PHI covers only top-up health services not included in public systems or primary PHI Supplementary PHI (Top-up Insurance) Eligibility to public health insurance

Potential Role of Medical Schemes Primary PHI: only available access to basic health cover; do not have public health insurance. –Principal: where social security scheme does not apply. Could be employer or union-based compulsory schemes. –Substitute: substitutes for public cover or employer cover. Duplicate cover: cover already included under public insurance. Does not exempt individuals from contributing to public health insurance. Can offer access to different providers or levels of service. Complementary cover: covers all or part of the costs not otherwise reimbursed (e.g. co- payments). Supplementary cover: cover for additional health services not covered by public scheme. May include services not covered by public system such as luxury care, elective care, long-term care, dental care, pharmaceuticals, rehabilitation, alternative or complementary medicine, or superior hotel and amenity hospital services. Source: Private Health Insurance in OECD Countries, 2004

NHI Policy Proposal June 2009 The future role existing medical schemes “While the NHI calls for mandatory membership for all South Africans through mandatory contributions and social solidarity, it is up to the general public to continue with voluntary medical schemes cover after they have contributed to the NHI Fund.” Source: ANC Task Team NHI Proposal to NEC, 13 July 2009 Proposal is for medical schemes to offer Duplicate cover. Possibly Supplementary cover but depends on definition NHI package. Non-EDL drugs, for example ?

Implications of Current NHI Proposals The February and June 2009 proposals on NHI from the ANC effectively relegate existing medical schemes to a “duplicate” role. Those covered by medical schemes could fall well below 1 million people from the currently 8 million people covered. Debates around this issue tend to become politically and ideologically heated but there are strong economic arguments for looking at the public-private mix in technical terms and playing to the strengths of each sector.

Implications for NHI Debate The February and June 2009 proposals on NHI from the ANC effectively relegate existing medical schemes to a “duplicate” role. The ANC Health Plan of 1994 envisaged the creation of a National Health Service, not a National Health Insurance system. “A single comprehensive, equitable and integrated National Health System (NHS) must be created.” NHI (as opposed to NHS) merits less than 1 page of that 77 page document. Thus what was envisaged initially seems to be a multi-tier system: a public National Health Service, alongside of which is a mandatory contributory environment for formal sector workers. This suggests that the ANC Health Plan envisaged a “substitutive” role for medical schemes under NHI. This early thinking needs to be revisited in the NHI debate in 2010.

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