National Health Insurance update

Posted on - May 14th, 2019

OVERVIEW

The following high-level independent view and summary document aims to provide more detail as to how the NHI is expected to impact on the current healthcare benefits landscape, predominantly underpinned and provided via non-profit and privately funded Medical Schemes.

The NHI Fund, for the next several years (at least until 2022), will focus on funding critically-needed services for defined vulnerable groups, including the elderly, mental health patients and cancer patients.

One of the critical elements of the NHI system will be the benefits it provides. However, the Bill provides no detail on these benefits and these details are expected to be developed through a Benefits Advisory Committee, which will be appointed by the Minister of Health; and who will develop proposals for the NHI Benefits over the next few years. The Bill indicates that in order to qualify for NHI benefits at no cost, patients will need to follow the NHI’s referral pathways and use its contracted providers.

Those patients who elect not to do so, will not be able to claim from NHI, and will be able to fund their services directly, or via medical schemes or other forms of health insurance.

This is an important point – as it confirms that medical schemes will continue to exist alongside the NHI system and that patients with medical scheme cover will retain freedom of choice in which doctors and hospitals they wish to use.

This also makes it clear that for an extended period into the future, it will be critical for employers to make provision for the healthcare of their employees, either through a medical scheme, or through a primary care product that provides adequate day-to-day cover for employees and their dependants.

We believe that for an extended period into the future, the benefits covered by the NHI will expand gradually, and will be focused on high-priority services for defined vulnerable populations. In its completed form, NHI will fundamentally alter consumer purchasing behaviour towards health benefits.

While the services covered by NHI will expand, those who belong to medical schemes will still have the choice of bypassing NHI referral pathways and the choice to use their own providers, and will also then be able to claim from their medical scheme.

It is therefore clear that medical schemes will continue to operate alongside the NHI system, and will be able to cover all services currently covered.

BACKGROUND

From the outset, it should be noted that the NHI is intended to replace the current Public Health System and, over time, some parts of the Private Health Funding arrangements.

The NHI will be a State-run health financing system providing “Primary Health Care” and aims to pool funds to enable access to quality health services for all South Africans regardless of their economic status.

The NHI will enable South Africans to receive free services at the point of care in public and private quality-accredited health facilities.

To achieve its purpose of yielding far-reaching improvement in economic and social benefits for all South Africans, the implementation of NHI will require a substantial overhaul of the current healthcare system.

The Department of Health is driving the NHI proposals and the Government is expediting legislative reform prior to the 2019 elections. The initiative is due to be implemented in phases over a 14 year period, which commenced in 2012.

President Ramaphosa has facilitated industry conferences for all stakeholders to establish consensus on the way forward and indicated in his recent State of the Nation Address (“SONA”) that in 2019, Government will take a significant step towards universal health coverage that will bring quality healthcare to all South Africans.

In line with this declaration the Health Minister Aaron Motsoaledi confirmed that the NHI delivery model will be based on a Primary Healthcare Approach, emphasising the importance of providing preventative, promotive, curative and rehabilitative services.

To that end, three areas of healthcare service delivery will be focused on:

  • Primary Health Care
  • Hospital and Specialised Services
  • Emergency Medical Services

Health Minister Aaron Motsoaledi subsequently gazetted both the NHI Bill and the Medical Schemes Amendment Bill respectively. The Medical Schemes Bill is aligned to the NHI Bill and underscores the elimination of duplication of cover and benefits.

The following aspects of the NHI Bill are important:

Although President Ramaphosa stated in the SONA that Government has a “funded” national quality health improvement plan to improve every clinic and hospital contracted by the NHI, the reality of the timing of this endeavour needs to considered together with the fiscal considerations vis-à-vis the streamlining of benefits and services between the current private funded Medical Schemes landscape and the NHI.

  • Expect pressure on Government employer subsidies (R31bn). Over time, the NHI will replace the current Provincial equitable share for the health component and represent all / majority of public health expenditure.
  • Expansion to cover all /part of current private sector beneficiaries and benefits will depend on how the definition of “Complimentary” cover plays out.

Yet, the single biggest challenge facing the implementation of NHI is how it will be funded. Recent increases in VAT, the Fuel Levy and other indirect taxes are likely to put disposable household incomes under more pressure and negatively impact savings which in turn have a negative impact on the projected growth rate (NHI White Paper assumes 3.5%) and this will result in the actual shortfall in funding being substantially larger than the estimates. We believe that key elements of the realisation of a sustainable, efficient and equitable NHI system lie with National Government’s plans to stimulate economic growth and to find the right balance and mix in its NHI funding arrangements.

BASKET OF NHI HEALTH SERVICES

It is still not entirely clear what the detailed NHI basket of services will look like other than as already stated by the NHI that it will be predominantly underpinned by a “Primary Care” derivative. The initial NHI White Paper refers to 15 different categories of care with the point of entry to access health services being at the primary healthcare level with subsequent referrals to higher levels of care.

As resources are limited, the range of services will need to be regularly reviewed using detailed treatment guidelines, based on available evidence as to the most cost-effective interventions.

Medicines and pathology services will be in line with essential drug and laboratory lists. It is clear from the information available that the NHI implementation agenda will take time and to that end prudent project management pertaining to all stakeholders including amendments to the coverage and benefits provided via existing registered medical schemes will be required.

BUDGETS AND TIMING

There is substantial fiscal pressure on budgets and the recent developments surrounding ESKOM and the funding requirements pertaining to the stabilisation of this entity will without doubt place further pressure on the available funding for the NHI. There is little likelihood of raising new tax money in the current environment and this will most likely add further delay in the NHI “roll-out” agenda. This agenda comprises 3 prominent implementation focus areas i.e.:

  • The strengthening of current health systems
  • NHI legislation, institutional development, purchasing of services for vulnerable groups (children, women, mental disorders, elderly etc.)
  • Additional resources (by Cabinet), selective private sector contracting to be finalised

These respective phases will have substantial financial impact on National Treasury as follows:

  • Expect tax expenditure subsidies to be lowered in real terms over time to funnel more funds to public health (R 26bn).

NHI IMPLEMENTATION CHALLENGES

Many challenges have been highlighted by various commentators. These range from potential constitutional problems, how National Government will secure the co-operation and accountability of Provincial Governments in re-organising health service delivery in the public health sector, through to how the NHI will secure the support and cooperation of private healthcare providers and the larger human resource challenge facing the public health sector.

South Africa is characterised by high unemployment, a relatively small pool of individual taxpayers who contribute disproportionately more to the fiscus and a very low forecasted economic growth rate (revised to less than 2%).

IMPACT ON MEDICAL SCHEMES / NHI / MEDICAL SCHEMES AMENDMENT BILL

The implementation of NHI will result that the role of Medical Schemes in the health system will change. Also worth considering is the fact that the Council for Medical Schemes has indicated that their intention is for all public servant medical schemes to merge. Polmed, Parmed and Transmed to merge into GEMS as a pre-cursor for the establishment of the NHI fund.

Medical Schemes will thus work in tandem with the NHI Fund to streamline healthcare entitlements and to eliminate duplicate cover and double dipping. This means that in future Medical Schemes will only be allowed to offer complementary cover for services that are in the NHI basket.

Accordingly, the full abolishment and /or substitution of the current privately funded Medical Scheme environment by the NHI as the only Medical Scheme is not envisioned. To that end, health cover via Medical Schemes will supplement (and not duplicate) the NHI suite of primary care benefits. In line with this architecture, the industry is anticipating phased adjustments and amendments to Medical Schemes benefit options as the implementation of the NHI Fund becomes effective.

This in turn will impact on the way in which employers’ structure and offer benefits to their employees in the future. EOH, via its participation in the industry stakeholder engagement process, will be keeping you informed, aware and protected.

References:

Document: Input on the Medical Schemes Amendment Bill Source: Government Gazette 41725, No, 636 – June 2018

Document: NHI & the SA economy, What the 2019 budget means for healthcare consumers Source: Bizcommunity

Document: NHI Bill, MSA Bill Report Update – August 2018 Source: Discovery Roadshow 2018 – Dr. Jonathan Broomberg

Document: Actuarial perspectives of NHI Bill & MSA Bill – November 2018 Source: Actuarial Insight (Pty) Ltd

Document: Ramaphosa: NHI Bill to come before Parliament Soon – February 2019 Source: Fin 24

Disclaimer

This document is purely for information purposes. EOH Advisory Services does not accept any liability to any person in connection with this document or its related enquiries. We accept no liability in respect of any matter outside the purpose for which the document has been prepared.


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