Financial Mail and Business Day


Will NHI kill SA health care?

Rob Rose

With the National Council of Provinces set to sign off on the National Health Insurance Bill, the government is ready to run with its plan for state-run health care. But critics — including the doctors who’ll have to deliver the service say the system will fail to deliver even the most basic of health-care services

Caroline Corbett is that rare breed of doctor. As a specialist anaesthetist, she also gets business. In 2019, she won the Tech Entrepreneur of the Year award for SmartBlade, a start-up she cofounded that has developed a new smartphone-enabled way to manage patients’ airways.

Yet when she describes a dystopian South Africa of the future, in which all doctors in the country are contracted to a state-run National Health Insurance (NHI) fund that will be the only route for people to access medical treatment, she

sketches a landscape of a slowly choking economy.

“Just as we speak about critical illness and respiratory failure, where you just stop breathing, there will be an inevitable failure of the health sector to deliver even basic services if this is implemented in its current form,” Corbett tells the FM. “The system is already nonfunctional in many areas ... but if this goes ahead as it’s drafted, we will no longer be able to deliver quality health-care services at all.”

And then, she says, there’s likely to be a far wider social fallout in the country.

Corbett says there’s “not a tea room or doctors’ room in any of our hospitals that isn’t discussing this right now ”— and most of the doctors, specialists, nurses and professionals are deeply unsettled.

This isn’t a fringe view. Corbett is the president of the South African Society of Anaesthesiologists, which represents 2,400 people. And it’s a view shared by the newly created South African Health Professions Collaboration, which includes Corbett’s society and represents 25,000 doctors, dentists and other professionals.

“We feel an immense frustration,” says Simon Strachan, a paediatrician and CEO of the Private Practitioners Forum. “We’ve engaged with the government and just haven’t been heard. This group, which represents most health-care professions in the country, is absolutely pro universal health care — but we just don’t think this bill will deliver quality health care for all. It’ll actually do the opposite.”

It’s a standoff that speaks volumes about South Africa’s ham-fisted quest for health-care reform. The principle is noble, dating back to the 1955 Freedom Charter, which specified that “a preventative health scheme shall be run by the state. Free medical care and hospitalisation shall be provided for all.”

But it was only in 2011 that a green paper was published on a “national health insurance”. Soon after, the governing ANC resolved at its elective conference that an NHI fund “be set up urgently using state revenue by 2014”.

That deadline whistled past, and many assumed it was yet another well-intentioned but ultimately unimplementable idea trotted out at election time to win the ANC more votes.

But with the ANC’s majority under siege, an NHI Bill was introduced in parliament in July 2019. Only, it was full of holes: it proposed no clear way to raise the estimated R500bn needed, it effectively terminated medical aids, and proposed a design in which all health-care spending would be corralled into the single NHI fund, administered by a board appointed by the health minister. Effectively, all medical professionals will need to contract with that fund.

Doctors panicked. A survey last year by the South African Medical Association said 38% of its 12,000 members planned to emigrate because of NHI, with 17% of doctors “unsure”. In a survey of its members in recent months, the Radiological Society of South Africa said 36% were “likely” to emigrate, while 23% were “uncertain”

“Of this, 80% cited safety and security as a reason, while 70% cited NHI as a factor. Of concern is that it seems to be mostly the younger radiologists, between 35 and 45 years old, who are going,” says Dr Richard Tuft, executive director of the Radiological Society.

Despite this panic, the National Assembly voted in June to accept the bill as it was. Or, more accurately, the ANC majority shoved the bill through, despite objections from the DA, EFF and others.

Busi Mavuso, the CEO of Business Leadership SA, says while everyone wants universal health coverage, this NHI Bill isn’t that. “[This version] would leave all South Africans worse off, in a system in which state provision becomes impossible, and private health provision is effectively closed down.”

Still, there was hope it might be

stopped. The business sector rallied to halt the bill in the second and final house of parliament, the National Council of Provinces (NCOP).

Last week, this hope seemed to evaporate, as the NCOP’s select committee on health took all of 50 minutes to accept the bill as it is, setting it up for a rubber stamp vote in that chamber in the coming days.

Health minister Joe Phaahla tells the FM it’s “unlikely” that we’ll see any vote derail the bill at this stage. “It’s a big step towards NHI being implemented,” he says.

Yet it was clear many of the lawmakers simply hadn’t engaged with the issues — and had largely ignored the views of those with real concerns.

Delmaine Christians, the DA representative on that committee, describes it as a “disgrace” that the NCOP committee produced just a single-page report.

“Lots of comments were made during the last meeting that are not included in this report. It can never be that the report is a onepager,” she says.

South Africa’s business community is equally outraged, with Business for South Africa (B4SA) sending a heated letter to deputy president Paul Mashatile and the chair of the NCOP to try to halt the vote on the bill.

Unconstitutional and unimplementable

Martin Kingston, the chair of B4SA, tells the FM the way the legislation sailed through parliament was unconstitutional.

“All input was disregarded — that’s the upshot. A number of provinces wanted to submit detailed comments, but they weren’t afforded the chance. It means that what happened here wasn’t constitutional, as lawmakers are obliged to consider input,” he says.

Already in June, trade union Solidarity said it would take the government to court over NHI, saying “we cannot deliver our medical professionals to [the government] and trust our health to their hands”.

In particular, Kingston says there’s no clarity on how NHI will be financed. And you’d still need to create an entirely new institutional framework for NHI, at a time when many state institutions don’t have capacity or skills, and the existing state funds — like the Road Accident Fund — are either bankrupt, or in crisis.

“All we have is the vague proposition of an NHI, which alienates large parts of the health-care sector,” he says.

A cynic might say, maybe this is all the ANC needed to campaign on: that it has “passed” a law enabling NHI, even if it’ll never actually be delivered, since it’ll be stopped in court. The ANC could tell voters: “We’ve passed the law, but it’s being held up by the private sector, who are only in it for themselves”.

But the fact that it got this far is alarming, given the gaping holes.

Cas Coovadia, CEO of Business Unity South Africa, says that if the government worked with the private sector to “tweak” the legislation so that the private sector could collaborate and so there’s not just a single fund, “NHI can work”.

But if the politicians ignore that reality, the bottom line is that they can’t fund NHI. “In its current form, it’s unworkable. It sends out a message to investors that we are actually crowding out the private sector, and we’re not understanding our fiscal situation,” he says.

If it’s never going to happen practically, however, as it’ll be tied up in legal cases for years, does this not mean the threat has effectively been averted?

Not at all, says Kingston.

“Some people say to us: ‘Why are you worried, it’ll never happen.’ But it’s about the message it sends out. If you want to establish a business in South Africa, and you’re not confident you can offer your workforce the requisite health care, you’ll think again. It’s as bad as not having reliable power or logistics,” he says.

Certainly, that view is echoed by the doctors interviewed by the FM.

“Many younger doctors are leaving the country,” says Philip Matley, a vascular surgeon and chair of the Private Practitioners Forum. “That’s a real problem, since the average age of our specialists is well into their 50s. We’re desperate for young specialists, but this is driving them away.”

Corbett agrees: “It takes 14 years to train up a specialist, so when they leave, that investment is gone. As it is, a large number of high-income countries are trying to poach our junior employees,

because the government is freezing posts.”

Kingston says this is an entirely rational response to being told you’ll soon be obliged to offer your services at a specific rate, determined by a state fund chaired by a government nominee, which will be your only “client”.

“This has provoked tremendous anxiety among practitioners and medical schemes. It doesn’t help to tell them, ‘don’t worry, it probably won’t happen’, because they’re taking what they’re seeing as official pronouncements from the government at face value. And they’re reconsidering their future,” he says.

The business bogeyman

Phaahla seems undaunted by these concerns. He told the FM this week that this sort of intense anxiety is to be expected from the private sector.

“The direction which the bill takes is a completely different one, which looks at health more as a public good [rather than a service commodity]. It’s disruptive, and it does bring risk to those who’ve invested in the future of commodified health service, especially on the health insurance products,” he says.

And yet Phaahla argues that the private sector isn’t being excluded from NHI. “Anyone who says this excludes private business can’t be correct. Part of the reason the EFF wouldn’t support NHI is because we emphasised that services will be procured from both public and private [providers],” he says.

It’s a curious argument, given that the NHI end game envisages medical aids being largely reduced to bystanders. The hotly contested section 33 of the bill says that “once NHI has been fully implemented ... medical schemes may only offer complementary cover to services not reimbursable by the fund”.

Two months ago, Adrian Gore, the

CEO and founder of the country’s largest medical scheme administrator, Discovery, effectively pleaded with the government to allow them to keep doing business.

“If you take a very, very hard view, to say that you don’t need private sector collaboration and you look at the numbers, it would not be possible to make NHI a success. You can’t provide health care at the level that is comprehensive enough that your employee sector will be happy with,” he said.

In the “changes” to the NHI Bill suggested by the business lobby, it proposed changing section 33 to allow medical schemes to keep operating. But the government ignored this.

Perhaps this was to be expected, since the ANC-led government has framed NHI as its effort to deliver “nationalised health care”. Any version in which the private sector retains leverage would be anathema to the ANC’s ideological statists.

This gulf was underscored last week during an alarming rant by minister in the presidency Khumbudzo Ntshavheni, in which she flayed the business sector for having “no interest in the development of the country”, and “wishing for” the country to fail.

“What she said was unfortunate and untrue,” says Kingston. “The business sector has put a huge amount of resources into assisting on logistics, power and crime, which we’ve done in the spirit of patriotism and partnership. But what she said calls into question the integrity of everything we’d done on that score.”

Ideology aside, it’s the lack of funding for NHI — which will cost R400bn a year by government’s estimates, and R700bn a year by trade union Solidarity’s estimates — that may ultimately determine the fate of the plan.

Tax shock ahead

If there’s anyone who could be described as the architect of NHI, it is Nicholas Crisp. A public health specialist and medical doctor, Crisp has worked for 10 health ministers — from Cornelis van der Merwe in the 1980s, to Phaahla today.

“I was retired, sitting at home with the occasional contract coming my way,” he tells the FM. “But I was recruited because I have a reputation for fixing things, and putting in place complicated new systems. So I drew up the business case for NHI in 2019, and have now been put in charge of making sure it happens.”

As Phaahla’s deputy director-general of national health insurance, Crisp flatly rejects the business sector’s alternative vision for NHI.

“I’ve seen their plan many times, but it’s simple: they’re trying to protect the medical schemes and their administrators, and our brief is to protect the public. They want to keep their profit margins up, and their shareholders happy. But that’s not my job,” he says.

What they’re suggesting isn’ ta “tweak”, he says, but a fundamental overhaul which would create something that isn’t a single-payer system like the NHI.

But surely it’s overly simplistic to ascribe their opposition entirely to greed? Even if you assume every business acts in its own “enlightened self-interest”, surely it’s squarely in their interests to have a stable, well-serviced population?

“It’s true that there are honourable and dishonourable players everywhere. I’ve worked well with the hospital groups and doctors, but I don’t have anything in common, philosophically, with the medical schemes and administrators. I look at the patient first, and they look at it as: money first, patient second.” he says.

(It may not surprise you to learn that Crisp doesn’t have a medical aid, but does have a hospital plan.)

And yet, getting a handle on the money is crucial to NHI.

In a near-bankrupt state, where trade-offs have to be made, how do you create an entirely new health-care system that will cost, at its most conservative reckoning, R400bn every year — a sizeable chunk of South Africa’s nominal R7-trillion GDP?

The unavoidable answer is higher taxes.

This, conspicuously, isn’t something you’ve heard from the government, amid the promises to its electorate about “quality free health care”. And yet, even according to the health department’s own 2017 white paper, there’s a need to hike taxes to find the extra R200bn or so to fund NHI.

“The most preferred option [would be] general revenue allocations, supplemen

ted by a payroll tax payable by employers and employees, and a surcharge on individuals’ taxable income,” that white paper says.

B4SA puts some scary numbers to this: to finance NHI, it would require an increase in VAT from 15% to 21%, or an increase in personal taxes of 31%, or an increase of 60% in corporate taxes.

“Raising more taxes from a shrinking tax base is not feasible or sustainable. Even if the R200bn could be raised, the NHI Fund would only be able to provide very basic health care,” says Roseanne Harris, an actuary working for Discovery who is helping craft B4SA’s submissions.

Nor is this chump change.

Theuns du Buisson, a researcher at the Solidarity Research Institute, says if you’re paying R5,000 in income tax now, you’ll pay R7,000 in future. And minimum wage workers who aren’t paying tax now will have to pay tax of 14% to fund NHI, even though they “already qualify for free health care in state hospitals” today.

Asked by the FM if people can afford to pay higher taxes, Phaahla dodges that question. “I don’t look at it as [creating a need] for a tax hike. The idea is to actually reduce what people actually spend,” he says.

He says under NHI, the total amount that people spend on medical services should drop, as there’d be no need to have a private medical aid. You’d pay higher taxes, sure, but ultimately you’d spend less.

“You can call it a ‘tax’ because what we’re looking at is not a voluntary prepayment, but a mandatory prepayment. But at a much reduced rate than what the majority of us who have income are contributing into private schemes,” he says.

In principle, you can see where Phaahla is coming from. In practice, you’re eliminating the ability of people to choose their doctor and treatment, and hoping that inefficiency and corruption in the NHI fund don’t swallow all the money.

More pointedly, no tax hikes can happen without the National Treasury introducing a money bill to parliament, which must be voted on. And up to this point, finance minister Enoch Godongwana has been distinctly cool on NHI.

Speaking two months ago, Godongwana said the NHI Bill was “missing a lot of things” and “the mechanics of it are difficult”.

“I would rather we invest more in upgrading our hospitals and our infrastructure to make them more attractive to everybody,” he said.

Yet Phaahla is adamant that the Treasury is on board with what needs to happen. “Treasury is part and parcel of this administration”, and is mandated to implement this policy, he says.

Crisp concedes that there are people in the Treasury who “agree with us, and people who are very much free-marketeers, who believe health care is an industry that should be grown to generate revenue. We don’t ascribe to that view, so we’ll argue.”

Crisp’s argument — which is philosophically at odds with the structure of

South Africa’s health-care industry and economy — is that health care can’t be a free market, and hence it requires government intervention.

“There can’t be a free market in health care, because you don’t know what will happen. As a consumer, you have absolutely no control of what you get; you don’t know if you need it; you don’t know if you’re getting quality. The average person in the public has no-one fighting for them — it’s not a free market; it’s a public good.” As a result, Crisp says “price controls” will be implemented in the next few years.

“We’re definitely going to start regulating prices in the private sector, no question. The prices that doctors charge, that physios charge, that hospitals charge, that must be regulated.

We’re just figuring out with the Competition Commission and Council for Medical Schemes how to do it,” he says.

As if the prospect of NHI isn’t troubling enough ...

Finding the pot of gold

Part of the flawed economics around NHI is the double counting.

Right at the start, NHI’s advocates framed the problem as this: 51% of the R542bn spent last year on health care in South Africa went to service just 9-million people in the private sector, leaving 49% to service the other 51-million.

That sounds deeply lopsided.

Yet as Wits School of Governance professor Alex van den Heever told the FM recently, this fails to recognise how this is being funded already. “Medical scheme members are already paying twice — first for private health care, then, second, through taxes to support the public health-care system,” he said.

Discovery Health CEO Ryan Noach underscores this. “We calculate that private medical scheme members already fund about 80% of South

Africa’s public health-care needs through the taxes they pay, since they earn higher incomes, and largely comprise the taxpaying population,” he says.

Quite how willing these higher earners will be to continue paying for the bulk of South Africa’s health-care needs, if they’re corralled into a system where their choice of treatment is so radically curtailed, remains to be seen.

The FM asks Crisp if this isn’t double counting?

“That may be, and we may have to put up tax rates. But I’ve just been in Copenhagen, where they pay 55% general tax and 25% VAT, yet they don’t pay

for health care, or education, and so forth. That’s where we want to go,” he says.

Crisp says if you’re paying R4,000 to a medical aid now, under the new NHI regime, your taxes might be higher by that amount, but you wouldn’t then need to pay a medical aid, for medicines, or for hospital care.

“What would I rather have? Would I rather pay a larger contribution, through a tax mechanism into the NHI fund, and know that the day I have a problem I’m not going to have to suddenly find a bunch of money I hadn’t bargained on?” he says.

But will people be willing to pay that extra amount of tax?

“Look, it’s the same money you’re paying now, but the difference is a large part of it is going to pay Adrian Gore and other executives a fat salary. For me, I’d rather pay the tax,” he says.

Yet it limits patient choice in a big way. Right now, private sector patients can choose to go to their choice of paediatrician, their gynaecologist, or any specialist, as long as they can pay. Under NHI, they’ll be forced to go to a GP first, who will have to then decide whether to refer them to a specialist.

Crisp says the existing structure is inefficient, and needed to be overhauled.

“Even in the current system there are limits. Even if you have a top medical aid, they’ll still tell you, we’ll pay R10,000 for the screws for your shoulder operation, not the R42,000 ones,” he says.

But why can’t people choose to spend their money, even waste it, as they wish?

“Because you create a service delivery space as it is now, which pulls all the resources out of caring for everyone, and gives it to just this small elitist group. There’s a finite set of resources, and we need to share them better,” he says.

On the funding issue, Crisp says even without the Treasury introducing a money bill, there are ways to find a whole lot of money to kick-start NHI.

“You’d first reallocate provincial health-care spending of R200bn to the NHI fund. There’s R37bn in medical schemes tax credits which you could use, as well as R41bn currently spent on administration in the private sector, and R70bn that the government spends on medical schemes contributions for civil servants,” he says.

Already, that’s nearly R350bn. And if you factor in how much money is wasted by buying inflated medical goods, you’d find most of the rest.

“The state pays about 10% of what you’re charged in the private sector for medicines and devices. A few years ago, I had a shoulder operation and was quoted R42,000 for the screws. When I said I couldn’t pay that, the surgeon came back to me within two hours, and said ‘don’t worry, I’ve got you an 80% discount’. What does that tell you?” he says.

Of all those who complain about NHI, Crisp says he doubts many of them have even read the bill. “I ask at every opportunity, and it ranges from 1% to 30%.

When I ask pointed questions about clauses, literally nobody even knows that clause is in the bill,” he says.

Wild promises

Crisp isn’t wrong about soaring medical costs. Where he might be wrong, however, is in thinking the state would be any more efficient.

Critics ask, given the country’s experience of corruption in state funds, surely this will only get worse when you have a single state fund buying all medical services, especially one run by people appointed by politicians?

William Oosthuizen, the head of legal at the South African Medical Association, says the precedent of mismanagement in state funds is ominous. “The worst-case scenario is something akin to state capture like health capture where money goes into a black hole and disappears,” he says.

The DA’s Michéle Clarke asks, if state clinics are already buckling under the volume of patients, with 69.8% of public hospitals deemed “unsatisfactory”, how will it manage 9-million more people from the private sector?

Crisp says he’s very well aware of the corruption and waste that have been evident in government in recent years.

“I’m as angry as anyone else over what’s happened. But that’s precisely why I’ve fought hard to make this as transparent, and as public, as possible. The governance has to be absolutely unimpeachable,” he says.

While money or the lack of it may determine the fate of NHI, there’s another immense issue that could be just as destructive: the gulf between the promises that the governing ANC has made on NHI, and what it can deliver.

Asked what Crisp does see as the biggest risk of NHI, he doesn’t hesitate.

“Overpromising. That’s my single biggest worry, even if I can’t stop it. I know things take time and are easy to write on paper, but it’s hugely difficult to get the right people in place. My worry is, the politicians don’t understand that,” he says.

Outsiders are even more outspoken. Discovery’s Harris, for example, tells the FM that the promises made of “comprehensive, private sector-level unlimited care to everyone” are wildly unrealistic. Trade-offs will have to be made, she says, but the public is being told they can have a top-quality system, for free, without any sacrifices.

Who wouldn’t go for that? Last week, the Social Research Foundation, a public policy think-tank, released the result of a poll of 1,412 people, of which 61% agreed the government should nationalise health care, and become the sole provider of services.

Yet, this binary choice failed to reflect any of the trade-offs required on quality, and on being able to access services to ensure there’s enough money. Corbett says that she, as someone who is meant to be a service provider in a new world of NHI, feels deceived by the way the government is presenting this to the public. “They may not be blatant lies, but it’s lies by omission. There’s no sense of the sacrifices that will have to be made to make NHI a reality,” she says.

Maybe, given the lacklustre debate in parliament about the implications, that’s because the politicians selling the dream haven’t grappled with the trade-offs. Or maybe they think that if it all goes to hell, it’ll be someone else’s problem.





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