Health Reform in South Africa– some perspectives IRF Conference Alex van den Heever September 2010

Corruption and health and education outcomes... “The empirical analysis shows that a high level of corruption has adverse consequences for a country’s child and infant mortality rates, percent of low-birthweight babies in total births, and dropout rates in primary schools. In particular, child mortality rates in countries with high corruption are about one-third higher than in countries with low corruption; infant mortality rates and percent of low-birthweight babies are almost twice as high, and dropout rates are five times as high. The results are consistent with predictions stemming from theoretical models and service delivery surveys.” Gupta et al, 2000.

Performance relative to benchmark countries? South Africa Compared to Peers (15 above and below per capita GNI in PPP US$): Government Expenditure on Health and Maternal Mortality Maternal mortality is an indicator of service quality rather than socioeconomic need

Health systems need to distinguish between... Goals – Improving health status – Income protection Rationing imperatives – Supply-driven – Demand-driven

Tier 4 Private Tier 3 Supplementary earnings/income- related protection Tier 2 Basic earnings/income-related protection Pooling, income smoothing, limited redistribution Tier 1 Minimum and targeted protection Funds constrained by macroeconomic considerations Decreasing social returns for additional protection provided by Government Lowest Income Groups Highest Income Groups

STRATEGIC GOALS: INCOME PROTECTION AND MINIMISE AVOIDABLE SOCIAL REVERSALS STRATEGIC GOALS: INCOME PROTECTION AND MINIMISE AVOIDABLE SOCIAL REVERSALS STRATEGIC GOAL: MAXIMISE HEALTH STATUS STRATEGIC GOAL: MAXIMISE HEALTH STATUS Low income High income Low priority High priority Strategic Goals...

SUPPLY rationing DEMAND rationing LowHigh Low Base system Discretionary insurance and OOP Rationing approaches are very different Creates entitlements to reimburse conditions and services leaving supply to adjust Creates service access entitlements but limits the availability of services The more supply is increased, the more it approximates the access of demand-driven entitlements Creates service access entitlements but limits the availability of services The more supply is increased, the more it approximates the access of demand-driven entitlements Shifting toward self- funding – consequently demand is related to ability to pay on an OOP basis (i.e. no rationing) NHS/NHI Ancillary system Social insurance

Income cross- subsidies (vertical equity) Risk cross subsidies (horizontal equity) LowHigh Low Tier 1 Tier 2 Tier 3 Tier 4 Tiers 1 and 2 can converge over time with economic growth and reduced income inequalities Contributory Non-contributory Finance: Subsidy options

Degree of Compulsion Degree of Centralization Tier 3b Tier 2a Tier 2b Tier 3a LowHigh Low Tier 4 Tier 1 Central pooling and provision Central Pooling but decentralized provision Institutional options: delivery

The logic of health insurance... Self-insurance even if funded through a medical scheme True insurance possible Risk pooling needed only where large unpredictable (at the individual level) variations in claims occur Government induced risk-pooling needed where large predictable variations in claims occur – Community rating, PMBs No risk pooling possible where claims are small and at the discretion of the beneficiary

Ancillary system System for achieving universal access Voluntary System NHS NHI? Decentralized operations Accountability Responsiveness Competing models ?

Base System Redistributive funding (universal access) Base System Redistributive funding (universal access) Resource allocation Macroeconomic Constraints Prioritised on basis of relative social return Rationing Budget and Reimbursement Ancillary System Social Pooling Ancillary System Social Pooling Minimum package + Non-discriminatory contributions + Income cross-subsidies + Integration of multiple pools + Default state fund Minimum package + Non-discriminatory contributions + Income cross-subsidies + Integration of multiple pools + Default state fund

What needs to be done... Base system – Population and patient focus through governance and accountability reform (downward accountability) – District and hospital system must be implemented – Restructured financial model – Providers able to access multiple revenue sources Ancillary system - – Stabilise risk pooling – Stabilise costs – Stronger governance and accountability Universal access to common standard of accident-related emergency care

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