The nature and state of health care financing and delivery in South Africa: Obstacles to realising the right to health care Di McIntyre, Health Economics Unit University of Cape Town

Overview n Focus on equity issues & obstacles to access: u Funding - according to ability to pay u Delivery (expenditure) - according to relative need n Public-private mix n Each sector - key regulatory issues

Financing flows General taxLG revenueEmployersHouseholds National Depts. Provincial Depts. Local Govt. Depts. Medical schemes Insurance Firms Households Public ProvidersPrivate Providers 43%1%17%39% 38% 34% 18% 58% 42% 4% >2% 2% 1% Sources Financing Intermediaries Providers

Equitable financing ? n Government revenue: u National level general tax - income tax progressive, but VAT regressive  proportional tax system? u Local government - progressive n Private sources: u Schemes - contributions not income- related and coverage limited u OOP - most regressive form of financing; level dependent on accessibility & quality of public services

PPM in delivery n Expenditure - roughly 60:40 private:public n Personnel: u 3/4 doctors & pharmacists and >90% dentists & psychologists in private practice u Vast majority located in urban areas n Private hospitals: u Annual growth in beds 9.5% and 8.9% (despite moratorium) u Urban and provincial bias

Medical scheme challenges Real expenditure per beneficiary

More recent trends n Sustained annual increases in schemes expenditure and in contributions (private hospitals, medicines and administration) n Declining coverage n Shift of membership to schemes with personal savings accounts (limited cross-subsidies) n Increasing co-payments

Other private sector trends n Declining coverage by on-site services at workplace - growth in unemployment n OOP payments: u ‘Schemes gap’ growing rapidly and well in excess of R4 billion per year u Non-scheme also growing rapidly and >R2 billion per year (OTC medicines 37%; prescription medicines 11%; doctors & dentists 26%)

Key regulatory issues n Private hospitals: u Certificate of need (including doctor shareholding or other perverse incentives) n Doctors: u Dispensing u Certificate of need n Medicine prices n Medical Schemes Act amendments and related regulations - Addressing key challenges?

Public sector funding issues n Overall funding levels: u Initial increases post-1994; more recent stagnation in real per capita funding u Loss of local government funding with narrow municipal health services definition n Equitable use of limited resources?: u Spend 12 times more purchasing medical scheme cover per civil servant than on public sector services per dependent n Free care: u Removed some obstacles, created others

Impact of fiscal federalism n Two key factors in provincial health budgets: u Allocation of overall resources to provinces u Provincial level budget negotiations

“Equitable shares” ?? Red bar: Pre-fiscal federalism expenditure level Blue bar: Current allocation from national level using equitable shares formula Green bar: Potential allocation if relative provincial deprivation included in equitable shares formula

Geographic distribution n International experience: u High % of health (and other social) service expenditure at lower levels funded via special purpose/conditional grants and/or u National policy guidelines or mandates è Norms and standards for SA? n Absorptive capacity: u Recent allowances may assist

Quality of care issues n Key obstacles: u Lack of supplies u Generic medicines perceived as ineffective u Preference for direct access to doctor n But …. private low-cost clinics have nurse as first contact & use generics: u Health worker morale and attitudes u Shorter waiting time and comfortable, cleaner waiting areas etc.

Level of care reprioritisation n Definite relative shift towards PHC, but threatened when budgets cut è Need for focus on hospital efficiency gains n Conditional grants constrain shifts: u CGs as percentage of health budget: Western Cape = 41%, Gauteng = 34% n Balance between stable funding for ‘national assets’ and ability to address priority service requirements  move to highly specialised service grant

PPM revisited n Some progress, but remaining challenges, in each sector n But … public-private mix deteriorating and overall health system inequities and inefficiencies is key remaining challenge: u Relatively stagnant public funding, but rapid growth in scheme & OOP spending u Increased demands on public sector - declining coverage (unaffordable), main provider of HIV/AIDS services

Social Health Insurance n Key goals of early proposals: u Address private sector cost spiral u Extend coverage of population covered by insurance through cross-subsidies (extend access to financial and other resources currently located in private sector) n But, two-tier system; vision of moving to national health insurance asap n Key question of new proposals: u Will they help to address PPM inequities?

Key issues n Relatively piecemeal policy and regulations on private sector: u Linkages NB, e.g. restrictions on dispensing by doctors and dispensing fee proposals n Need comprehensive view of overall health system: u Developments in one sector have knock-on effects for the other u Need clear vision of respective roles and potential for PPIs

Early SHI proposals Expand the pool (SHI) Medical scheme plus other employed Increased high- to low-income cross-subsidy Covers at least the cost of public hospital fees Increased cross- subsidy from insured to public sector $$

(Lack of) progress on SHI Limited high- to low-income cross-subsidy SHI fund covers the cost of public hospital fees Limited cross- subsidy from insured to public sector Medical schemes Other employed: SHI fund Two separate pools $$