Updated: Aug 19, 2019
The newly tabled NHI Bill is a major shake up to the private health care industry. Our news feeds remain clogged with speculation over NHI, some positive but on balance largely negative.
The ramifications of NHI will affect all in SA (and friendly health brokers everywhere!).
Herewith our view…
Medical aid is going to change
This is inevitable as NHI specifically states that medical schemes will be relegated to providing a complementary role, providing cover for services not covered under NHI. This raises several immediate questions:
NHI has not yet defined what services they will provide under their basic service package. We believe it will be a scaled down version of the current PMB legislation as this is the only way they can reduce costs. Bear in mind that the medical schemes have been to court a few times complaining that PMB costs had to be covered in full (and lost), which was driving the costs of private health cover.
The Bill states that certain high cost treatments or those with a poor prognosis will not be covered. This is definitely an area for private cover e.g. certain cancers or treatment protocols.
As Discovery Health have pointed out, the Bill states that where a person does not follow the preferred pathway to treatment (i.e. seeing your registered health practitioner first) there will be no NHI funding. Does this mean that a medical scheme can then provide this service? They are actively engaging the Minister of Health for more clarity.
Who will look after the NHI Fund?
Government is looking to create the largest SOE ever. At twice the size of Eskom, they intend to centralise all health spending under the NHI. The fund will be administered by a board appointed by the Minister of Health and reporting to him directly. This comes at a time when Pres. Ramaphosa has acknowledged that Eskom is too big to manage effectively as one entity, with plans to break it down into three manageable, functioning divisions.
A fact that we have not seen reported yet, is that the medical aid market is already strictly controlled via the Council for Medical Schemes (who approve all plans annually) and Medical Schemes Act. All schemes are therefore non profit making with the government dictating how they must run, even to the point of dictating the solvency levels they must maintain. The schemes are managed by independent boards of trustees, elected from the membership, to administer benefits on behalf of all. They are audited annually and present their financial results in their AGM’s to all members. They also report the full workings of the scheme back to the Council for Medical Schemes to be incorporated into an annual report of all schemes. Each scheme manages its own risk pool, and although expensive, it works.
So who makes the money?
The profit being made is by the administrators, who charge the schemes a monthly fee per member to run the entire shebang on their behalf (e.g. Discovery, Medscheme, MMI). Those administrators with insurance arms then leverage off the health data they have collected to design competitive products. And bolster their bottom line. But that is a free market and I prefer that. The schemes will often renegotiate this non healthcare expense and look at alternatives to keep this cost as low as possible.
What NHI effectively does is take most of the private medical aid spend and place it into national risk pool. They then become the sole administrator of this fund. It is no longer independent and there is no competition containing costs. And it definitely won’t be transparent. Given the delays in presenting the Eskom financials, we should not expect to see annual financial statements at an AGM!
When will this happen?
Fortunately, the Bill provides for an incremental implementation strategy. This means that before the next building block of cover is initiated, the previous block should be functioning. The published time frame to have a centralised fund and running is 2026. This does raise eyebrows for a few reasons:
The first steps to assess feasibility were the NHI pilot projects rolled out in 11 health districts countrywide between 2012 and 2017. These were not successful, mainly due to a lack of management and viable data. The projects were plagued by short staffing, budget deficits, lack of stock, poor IT systems etc. etc. Less than half of the health facilities attained “ideal clinic” status by the end of 2017/2018. Despite this, Min. Mkhize has pushed on to the next phase.
How can South Africa possibly afford it? This is the crux of the matter. Government intends to redirect the medical aid tax credit, to raise additional income tax AND introduce a mandatory payroll tax. And this comes at a time when the country is staring down a downgrade due to the Eskom hole! The lowest income earners, those that are currently benefiting from the medical aid tax credits will fare the worst in all of this as they end up paying tax for the first time and lose their medical aid cover.
Where will we find the doctors? Research published by Solidarity, which has previously warned that the introduction of the NHI could lead to a mass exodus of doctors from the country, found that 83.2% of healthcare workers believed that private health professionals will leave the country if the NHI is implemented. 43% of the respondents said that they themselves would consider emigrating.
The DA are not satisfied that the Bill will pass constitutional muster and have requested Parliament to seek a comprehensive legal opinion as to the constitutionality of the Bill in its current form – particularly in terms of Schedule 4of the Constitution. They have vowed to oppose the Bill to the highest court.
Unfortunately, with the limited detail provided in the newly tabled NHI Bill, it is impossible at this time to interpret the implications for private health cover. In the short term, we carry on as is. The medical schemes will launch their 2020 benefits in September / October, and it will be business as usual for the time being.
We firmly believe that there will be a private health solution made available, as it is in virtually every other country where a national health system exists.