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Fix the issues, don’t fight them

There is a particularly apt old African saying: When elephants fight, it is the grass that suffers.

In his opening address at the 2022 Board of Healthcare Funders annual conference, the Minister of Health, Dr Joe Phaahla, made a compelling case for a major overhaul of the healthcare system.

“Our two-tier health system, with one for the rich and the other for the poor, does not augur well for future prosperity of the country. The public health system is struggling with under-funding, depletion of health professionals – all of whom have been trained in the very same public health system – inadequate equipment and consumables.

“On the other hand, the private health system, which relies on the members of your medical schemes, is flush with cash, with shareholders counting better dividends than farmers, retailers, mining and manufacturing companies.

“If you want to talk about ‘change in strengthening the health system’, you cannot avoid talking about the need to accelerate the creation of a more equitable health system.

“We are aware that the passing of the (National Health Insurance) Bill is not in itself going to be the silver bullet to transform our health service, but we believe that it will lay the foundation through which we can timely start to fundamentally transform our health services towards equity.”

The fact of the matter is that it is going to take many years before it will be implemented. Those deprived of its benefits today simply cannot wait that long.

Interim solutions

Matters came to a head in the recent spat between the Council for Medical Schemes (CMS) and Christoff Raath from Insight Actuaries and Consultants as a result of comments in his presentation at the same conference.

In a Business Day opinion piece, Michael Settas, in his capacity as a member of the Freedom Foundation, notes that Raath had lamented the incredibly slow pace and prevarication by the CMS in developing lower-cost medical scheme options that could introduce millions more members to the private health sector.

“The registrar of medical schemes, Sipho Kabane, has rebuked Raath for his comments in a press release, calling them a publicity stunt, and then threatened punitive action against him. It appears what especially irked was Raath’s mention of widely believed speculation in the industry that Kabane is under instruction from the ANC to prevent the introduction of these new products, called low-cost benefit options (LCBOs), to ensure broader support for the party’s highly contentious National Health Insurance (NHI) proposal.”

Settas notes that, in April 2017, new insurance rules (commonly termed demarcation regulations) restricted and defined the type of health services that could be covered by insurance companies. Five categories of health insurance were permitted – gap cover, hospital cash plans and travel insurance among them – but not the low-cost health insurance products.

The CMS and National Treasury jointly agreed not to include low-cost products in the demarcation regulations as an additional sixth product type, but for the council to include them in the LCBOs framework.

“This would then require development of low-cost benefit options, followed by a migration of the members on the low-cost insurance products into low-cost benefit option equivalents and closure of the low-cost insurance products.”

Settas says from April 2017 these low-cost health insurance products were technically illegal. The council was compelled to issue a temporary two-year exemption, under what was termed the exemption framework.

In early 2019, the council extended the exemption until March 2021 and issued a discussion document, “Development of low-cost benefit options within the medical schemes industry”.

However, in December 2019, the council released circular 80, stating that by 31 March 2021 the exemption framework would cease, and all existing low-cost health insurance products would need to be wound up. Due to this ruling, all low-cost health products were gone – the existing insurance types and the future LCBO medical scheme versions. Settas notes that circular 80 has still not officially been withdrawn.

“The reality is that the existing low-cost insurance products could easily have been included as a sixth allowable product type under the demarcation regulations as far back as April 2017. This would have provided much-needed regulatory certainty for the past five years that would have resulted in providers and insurers committing capital to grow the sector.”

He says there is no reason not to have LCBOs within medical schemes and allow insurers to compete in this sector.

“The demarcation regulations copied the ground rules from the Medical Schemes Act, so health insurers and medical schemes operate under the same regulation. However, neither sector will commit capital or resources to this market unless there is regulatory certainty.”

CMS response to Raath’s comments

“The CMS remains resolute in ensuring that low-income earners have access to quality healthcare that is regulated effectively and complies with provisions of the Medical Schemes Act.

“Contrary to what was presented, the work of the advisory committee is continuing in earnest and is by no means complete. Once the framework and position paper has been finalised, it will be sent to CMS Council and then to the national Department of Health for approval. The framework is expected to pronounce on the future of the currently exempted primary insurance products and respond to the need to provide a low-cost option by medical schemes. This framework will also spell out the exceptional circumstances that will be considered in formally allowing these products into the market under the auspices of the Medical Schemes Act.

“CMS’s consultation of all stakeholders should neither be vilified nor undermined, as it is in the quest to ensure that the final outputs enhance the quality of care for members and that no stakeholder is left behind. Over the duration of the project, the CMS has received inputs from consumer groups, doctors, unions and brokers, amongst others. It would be amiss of the CMS to scupper those who contribute meaningfully to the process just to appease the loudest voice in the room.”

If my reading of Raath’s presentation is correct, he did not criticise the objectives of the advisory committee, but the pace at which it is working.

As Settas correctly points out, the medical schemes industry is more than capable of developing meaningful, affordable products quickly. Like so many other problems in South Africa, it is red tape and a fear of losing control (and the fear of being shown up?) by the authorities that is hampering progress. Inevitably, it is those who can least afford it who suffer the consequences.

But then, as another old saying goes, you cannot see the writing on the wall if you have your back against it.

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