1. Costing and Long-term Modelling of NHI
National Health Insurance Policy Brief 6
Costing and Long-term Modelling of NHI
September 2009

2. Costing
Pricing
Raw price from cleaned historic data.
Margins and adjustments depending on quality and applicability of raw data, including IBNR.
Inflation to period of use.
Adjustments including contracted delivery, negotiated contracts, managed care efficiency, non-healthcare costs, investment earnings, solvency margin.
Demographic correction for expected target market.
New benefit package correction.
Spread price across cells using allowable rating factors
e.g. adult/child, income bands
Allows some groups to be excluded from contributing
Contribution Table
Source: IMSA NHI Policy Brief 6: Costing and Modelling NHI

3. Pricing of National Health Insurance
Need to determine a table of amounts or a formula relative to some definition of income, payable by defined contributors and incorporating income cross-subsidies and an equitable Government subsidy.
The total amount needed would be determined from historic data, population projections, other inputs and assumptions.
The total amount needs to be set to cover a defined package of benefits for the entire population (or a phased target population), with an expected dispensation of efficiency in healthcare delivery. There would be loadings for administration and managed care costs but probably no loading for solvency as money in would equal money out.

4. Benefit and Contribution Cycle
Applicable year: 2010
Historic data: 2008
Current year: 2009
Data extraction, tariff changes, final design, pricing.
Assess enrolment, close non-viable options, assess competition.
Previous year’s results. Broad design concept, contracting with providers.
Board approval, rule changes, marketing, enrolment.

5. Benefit Package Cost Curves
Preliminary work. Needs adjustments for effect of benefits becoming mandatory, anti-selection effect and evolution of HIV epidemic on NHI population.
Source: Heather McLeod and Pieter Grobler, as used by Servaas vd Berg and Heather McLeod, August 2009

6. Forms of Healthcare Rationing
Government: by means of budget constraints; by long queues (at clinics or for getting certain elective surgery); by availability (limited ICU beds or surgical beds); and by denial (no dialysis after a certain age and no resuscitation of very low-birth-weight babies).
Health funders (like medical schemes or NHI): by means of limits, co-payments, deductibles and thresholds or by means of volume (like one pair of spectacles every two years).
Patients and their families: by means of affordability (choice to have private insurance, level of savings account or degree of out-of-pocket spending) or conscious choice (choice to refuse care in terminal illness).
Doctors: by prognosis typically but also by affordability in some cases (differential treatment or prescribing based on patient income).

7. Long-term Modelling of Disease for the Future NHI
National Health Insurance Policy Briefs 3, 4, 5 and 6
Long-term Modelling of Disease for the Future NHI
September 2009

8. Estimate of Incidence of Cancers 1985 to 2025
Estimate of number of new cases of cancer in each year due only to the changes in the age and gender of the population. In 1994 estimate 53,000 new cases. By 2025 this increases to 93,000 cases a year.
Assumed same prevalence by age and gender for all cancers as
reported in GLOBOCAN 2002 for South Africa. Have not assumed any change in the incidence of cancer by age and gender.

9. Treatment for Chronic Disease 1985 to 2025
Estimate of number of people needing to be on treatment for 25 key chronic diseases due only to changes in age and gender of population. In 1994 estimate that 3.0 million people needed treatment. By 2025 this increases to 5.1 million people.
Assumed same prevalence by age and gender for 25 CDL diseases
as found in medical schemes.

10. Estimate of Future Chronic Disease
Shows sensitivity to higher and lower rates of chronic disease by age and gender. The aging and growth of the population dominate.
Source: IMSA NHI Policy Brief 3: Chronic Disease and Future NHI

11. Treatment for Chronic Disease and ARVs 1985 to 2025
Estimate of number of people needing to be on treatment for chronic disease and HIV. Rising burden of disease on funders of healthcare – whether public or private or future NHI.
Used Actuarial Society of SA 2003 model of people needing to be on ARVs.

12. Treatment for Chronic Disease HIV and Cancer 1985 to 2025
The national health system is having to cope with much higher levels of chronic disease than before 1994.
Possibly some overlap of CDLs and HIV+ but chronic diseases beyond the 25 CDL diseases that must be covered in medical schemes not yet added.

13. Staging of the HIV/AIDS Epidemic
Using WHO staging of the disease, with two added stages in ASSA2003 model: on ARVs and discontinued ARVs.
Source: IMSA NHI Policy Brief 4: HIV and Future NHI

14. Implications for NHI
The key issue remains for planning in South Africa – that the number of elderly people is expected to increase rapidly and that chronic disease and cancer prevalence and need for hospital facilities are strongly related to age. While the extent may be difficult to quantify precisely, there is no doubt that there will be an increasing burden on the health system in future.
Add to this the well-documented and modelled HIV/AIDS epidemic and related epidemics of sexually-transmitted infections and tuberculosis, and the immense challenges for a sustainable National Health Insurance system become apparent.

15. Implications for NHI
Combining the 25 CDL chronic diseases (including hypertension, hyperlipidaemia, asthma and diabetes), cancer and HIV, the numbers with these diseases are projected to have increased as follows:
from 2.3 million in 1985
to 3.6 million in 1994
to 9.9 million in 2009
and could rise to 11.3 million by 2025.
The non-CDL chronic diseases, the burden of violence and infectious diseases needs to be added for a more complete picture.
The resourcing requirements in terms of staff needed in the health system become particularly stark when compared to the burden of disease in the national health system.

16. 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

17. Professor Heather McLeod
Material produced for IMSA by
Professor Heather McLeod