Investigation calls into question the narratives used to support NHI

Research commissioned by the Board of Healthcare Funders (BHF) has called into question some of the assertions made about private healthcare to support National Health Insurance (NHI).

Central to the NHI Act is the idea is that healthcare is a “public good”, suggesting all healthcare funding should exclude medical schemes and should be government-funded.

The BHF’s managing director, Dr Katlego Mothudi, says healthcare is more accurately described as a “social good”. A public good, like military services, is one that the government must provide and from which no one can be excluded, regardless of payment. Although healthcare is essential, it is not feasible to provide it as a public good.

The BHF, concerned about the numerous misconceptions propagated by government representatives since 2009, commissioned Professor Alex van den Heever, chair of Social Security Systems Administration and Management Studies at the Wits School of Governance, to investigate these claims.

“Despite their hyperbolic nature and lack of systematic research, these statements have significant weight due to their endorsement by influential individuals. Van den Heever’s report identified frequently repeated assertions that he concluded were unsubstantiated and untrue,” Mothudi says.

The findings of Van den Heever’s investigation are set out below.

Assertion 1: Medical schemes are ‘headed for collapse’ because their financial models are unsustainable

In 2009, claims suggested that many medical schemes were headed for collapse because of unsustainable financing models, with 18 schemes reportedly nearing insolvency.

Finding: The evidence does not support the assertion that the medical schemes system is not viable and is failing financially. Between 2005 and 2022, medical schemes maintained their stability across all relevant variables:

• The number of medical scheme beneficiaries increased by slightly more than one million from 2009 to 2022.
• Although the number of medical schemes has been decreasing because of consolidation, the number of beneficiaries increased from 2005 to 2022.
• In 2022, medical schemes had consolidated reserves equivalent to 49.2% of gross contribution income, or R114 billion, which significantly exceeded the required reserve ratio of 25%.
• The cost of brokers has never been reported as a systemic concern.
• Total non-healthcare costs per average beneficiary per month for all medical schemes declined by 34.7% in real terms from 2005 to 2020 The decline for open schemes was 32.9%, and it was 22.1% for restricted schemes.
• There has been no significant adverse change in the average age of medical scheme beneficiaries from 2005 to 2022. The average age in 2005 was 32, and 34 in 2022.
• The reduction in the number of schemes has resulted in an improvement in the number of beneficiaries per scheme, from 52 138 in 2005 to 127 398 in 2022, while overall beneficiary numbers increased from 6.8 million in 2005 to 9 million in 2022.
• Medical scheme expenditure as a percentage of GDP has remained stable despite an increase in coverage. From 2016, public sector expenditure overtook medical scheme expenditure, and it has been increasing since. In 2005 the public sector spent about 2.6% of GDP on health compared with 3.5% by medical schemes. By 2021, public health expenditure moved to 4% of GDP, while medical scheme expenditure declined slightly to 3.4%.

Assertion 2: Commercial imperatives are fatal to health systems

In 2011, the then Minister of Health, Dr Aaron Motsoaledi, was quoted as calling private healthcare a “brutal system” and “a monster that will swallow us whole”. His then deputy, Gwen Ramokgopa, said there was a need to deal with the “uncontrolled, unregulated commercialisation of healthcare”, which undermined the principle of healthcare as a public good.

Finding: The evidence does not support the view that private and commercial features of health systems are incompatible with universal health coverage.

Many countries have established regulated private health financing arrangements that are characterised as social health insurance, because they involve a combination of regulatory measures, pooling mechanisms, and government subsidies that guarantee the right of access to healthcare. In the developing world, these can be found in countries such as Columbia, Chile, China, India, Brazil, Mexico, and Thailand. Industrialised countries that incorporate private financing into their systems include Germany, Israel, Belgium, Ireland, the Netherlands, France, Israel, Japan, the United States, and Australia.

3. Healthcare is a ‘public good’

Also in 2011, Motsoaledi said the use of a public good for excessive profit was unacceptable.

Finding: This assertion is mistaken. “Public good” is a technical term used in economics to refer to product markets where the exclusion principle cannot be applied. In other words, where you cannot exclude access to the product in exchange for either payment or other eligibility criteria.

Assertion 4: Medical scheme benefits run out

Medical scheme cover runs out around the middle of the year, and private hospitals turn patients away, and medical scheme members are forced to go to public hospitals, adding to the burden on public healthcare.

Finding: The assertion that medical scheme members are being systematically dumped on public hospitals is false.

• Medical schemes must cover the Prescribed Minimum Benefits.
• Where members use public hospitals, medical schemes must reimburse the public sector.
• Oncology benefits cannot be exhausted.
• There has been a systematic decline in medical scheme beneficiaries’ use of public hospitals.
• Intensive Care Unit services cannot run out – cover is required so long as the service is clinically indicated.

Assertion 5: Out-of-pocket payments account for a significant part of total health expenditure

The National Department of Health (NDOH) has posited that out-of-pocket payments, in the form of co-payments or direct payments to the private sector, are significant and are even required by medical scheme members with full coverage.

Finding: The assertion that out-of-pocket expenditure (OOP) constitutes a significant portion of total health expenditure is assessed is false. It is not based on any empirical evidence or systematic study that can be located.

According to the World Health Organization, out of 187 countries, South Africa has the 11th lowest OOP expenditure (WHO, 2000 to 2020), with expenditure at less than 1% of GDP.

Assertion 6: The distribution of financial resources for healthcare is inequitable

In 2011, the NDOH said the amount spent in the private health sector relative to the total number of people covered was not justifiable and defeated the principles of social justice and equity. Per capita annual expenditure by medical schemes was estimated at R11 150, compared to R2 766 in the public sector.

Finding: The disparity in per capita health expenditure between the public sector and medical schemes does not, on the face of it, reflect health inequity. It also does not offer a clear instance of harm to users of the public healthcare system.

Assertion 7: The distribution of health professionals is inequitable

The NDOH asserted in 2020 that the private sector’s profit motive and higher spend poaches professionals from the public sector.

Finding: The assertion that medical schemes act as a constraint on the supply of health professionals to the public health system has no evidentiary foundation. First, the NDOH lacks the information systems to make such a claim. Second, the NDOH has not performed any systematic analysis to support such a claim. Third, official health workforce reports make no such claim. Fourth, the available information contradicts the assertion.

Assertion 8: The subsidies provided to medical schemes are unfair

In 2020, the NDOH asserted that medical schemes are subsidised by R46.7bn by the fiscus. If it were not for this subsidy from the state, medical schemes would have ceased to exist. People who are not on medical aid do not have access to this subsidy.

Finding: The assertion that the medical tax credit provided to medical scheme households is inequitable is not supported by any systematic analysis. It is contradicted by the official documentation that outlines the basis for the subsidy and involves a lower per capita allocation than the per capita value of public sector services. The subsidy is 75.4% paid for by medical scheme households.

Assertion 9: Most medical scheme beneficiaries are white

Last year, Olive Shisana, an honorary professor at the University of Cape Town and special adviser to President Cyril Ramaphosa, stated that the private sector predominantly serves the privileged white population.

Finding: The assertion that most medical scheme members are white is factually incorrect. According to Statistics South Africa’s 2022 figures, the breakdown of medical scheme membership by population group is 50.2% black African, 9.8% coloured, 7.6% Indian/Asian, and 32.3% white.

Assertion 10: Medical schemes are risk-rated

It has been asserted that medical schemes recruit younger, healthier members who are employed and need less medical attention, only to dump them or charge them more when they get sick, grow old and cannot afford the premiums.

Finding: This assertion is false because the Medical Schemes Act prohibits risk-rating.

Assertion 11: Patients’ perceptions of the quality of care in the public and private sectors are the same

Last year, Shisana said the evidence suggested no significant difference in the perception of healthcare quality between the public and private sectors.

Finding: The assertion that public and private sector healthcare users have equivalent perceptions of service quality is assessed as false with reference to the same information used to make the assertion. Whereas 97.6% of users were “very satisfied” (92.6%) or “somewhat satisfied” (5%) with private healthcare facilities, 80.3% were “very satisfied” (53.8%) or “somewhat satisfied” (26.5%) with public facilities.