NHI ‘collaboration’ means different things to the government and the private sector

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The government and the private healthcare sector have a different understanding of what it means to collaborate over National Health Insurance (NHI).

After Parliament passed the NHI Bill, Business Unity South Africa and Business for South Africa were among the organisations that lobbied President Cyril Ramaphosa not to give the Bill his assent. This was unlikely considering the upcoming general election, where the ANC faces losing its majority, and overwhelming support for NHI among the party’s MPs and its alliance partner, the Congress of South African Trade Unions.

Media reports this week suggested that Ramaphosa can still be persuaded to change the legislation in way that is amenable to the private sector.

The Sunday Times and the Daily Maverick quoted the president’s spokesperson, Vincent Magwenya, as saying that Ramaphosa is “giving thought to a mechanism that will allow for more engagement and collaboration with business, labour, and other social partners as we begin to roll out the implementation of the NHI”.

He was also quoted as saying: “Our legal framework also allows for amendments to be made if necessary. Therefore, the president will be looking for those opposed to the NHI to rise to the occasion and be part of a collaborative effort to make it work for the benefit of all South Africans. We already have successful case studies of collaboration between government and business, particularly in the energy and transport and logistics sectors. Therefore, we can collaborate to ensure that NHI truly delivers to the vision and commitment of universal access to quality healthcare.”

Busisiwe Mavuso, the chief executive of Business Leadership South Africa, said the private sector is being forced out of the medical sector at the same time as it is being brought in to solve the electricity and water crises. “This is schizophrenic.”

The amendments to the Electricity Regulation Act will result in the unbundling of the grid operator from Eskom and the establishment of an open market for electricity, radically transforming how electricity is generated and sold. Producers will compete to sell electricity into the grid, potentially reducing the cost of electricity for the first time in many years and consolidating the end of loadshedding, Mavuso said in her weekly newsletter.

The National Water Resources Infrastructure Agency Bill should be able to crowd in private sector funding, driving critical investment that is needed to fix and build new infrastructure.

Mavuso said the NHI Act is “a stark contrast” to the abovementioned legislation. “Instead of yoking the best of public and private, it poses a major threat to the health sector as it stands.”

On the same day, Ramaphosa rejected claims that NHI will signal the end of private healthcare.

In his weekly newsletter, he said NHI aims to use “the respective strengths and capabilities of the private and public health sectors to build a single, quality health system for all”.

The NHI Fund will procure services from accredited public and private service providers.

South Africa’s private health sector has world-class expertise and is a major source of domestic and foreign investment. He also praised the public sector, “which also has numerous centres of excellence and is staffed by well-trained and experienced personnel”.

Ramaphosa said: “Working together in partnership, as both the public and private sectors, we can make the dream of quality healthcare for all a reality.”

NHI is ‘a public-private collaboration’

The NHI Fund, which has yet to be established, will procure services from accredited public and private sector healthcare providers, such as hospitals, specialists, and general practitioners.

The NHI Fund will create a monopsony – a single buyer will substantially control the country’s healthcare market. As the only buyer, the Fund will set the demand and therefore control the price. So, NHI will impose price controls over the private healthcare sector, but it will not nationalise it.

Thus, from the government’s perspective, the continued existence of private healthcare providers that will contract with the Fund means NHI is a public-private collaboration. And it will certainly welcome the private sector’s input and resources to bring NHI to fruition – on its terms.

But this is not the type of public-private collaboration the private sector has in mind. The main sticking point is that the Act will prohibit medical schemes from offering services that are not paid for by the NHI Fund.

Section 33 of the NHI Act states: “Once National Health Insurance has been fully implemented as determined by the Minister [of Health] through regulations in the [Government] Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.”

Since the NHI Bill was introduced in Parliament in 2019, the government has refused to amend the legislation to enable medical schemes to offer more than complementary cover to non-reimbursable services. This is despite extensive lobbying and proposals by medical schemes and other stakeholders that would provide for schemes to co-exist with or within NHI.

In speeches before he signed the NHI Bill, and in an interview with Radio702 on Monday, Ramaphosa gave no indication that he believes the legislation should be amended to provide for a continuing role for medical schemes.


Can we talk about the funding?

And, in the Radio702 interview, Ramaphosa did not provide a straightforward answer to a question about whether or not NHI will result in higher taxes.

He responded: “We’ve got to find a way of funding NHI, and that is still to be determined, and that is why NHI is going to be implemented on a phased basis. Now people want to use scare tactics, and say, yes, they’re now going to tax us higher and higher, and so forth, and we are saying we should embrace this, all of us, and make sure that the NHI is implemented.”

The Sunday Times article quoted Finance Minister Enoch Godongwana as saying the estimated implementation cost of R200 billion was “a scarecrow”.

“People must wait for us and the Department of Health to develop the plan of implementation and the cost of each phase, and then they can start asking us those questions about affordability. We have not outlined the phases of implementation. People are just throwing numbers. Where does the R200bn come from? It’s a scarecrow by people opposed to NHI,” he reportedly said.

In response to a question in Parliament in March, Godongwana said National Treasury will find a way to fund NHI – and tax changes are not off the table.

The NHI Act specifies that payroll taxes and a surcharge on personal income tax could be considered as sources of funding.

According to the Council for Medical Schemes’ latest Industry Report, members paid gross contributions of R232.49bn to their schemes in 2022. Proponents of NHI believe this amount can be raised in taxes and added to the existing public health budget, to provide about R500bn.

Michael Settas, the chairperson of the Free Market Foundation’s Health Policy Unit, told Moonstone this notion is based on several misconceptions.

First, once the R500bn is divided among the entire population, the per capita expenditure will be far lower than it is in the private healthcare sector. Therefore, NHI will not provide the “Rolls-Royce” level of healthcare touted by Ramaphosa in his speech before signing the NHI Bill.

Second, no feasibility studies have been conducted to ascertain how higher taxes will impact the country’s tax base. Many economists are of the view that South Africa is either approaching or has already hit the Laffer Curve, where additional tax increases result in lower compliance and collections.

The idea that what is spent on medical scheme contributions can simply be raised as taxes is a “thumb-suck”, particularly considering South Africa’s thin and shrinking tax base, Settas said. It also disregards that people who have the means will emigrate to access quality healthcare, further reducing the tax base.

Settas called into question the assumption that NHI is necessary because the main reason for the poor outcomes in the public healthcare sector is inadequate funding.

According to research by the Free Market Foundation, the per capita healthcare budget in the public sector today is double, in real terms, what it was 20 years ago. This has enabled the public sector to employ more doctors, with the result that the doctor-to-population ratio is better across 25 out of 28 clinical disciplines than it was 20 years ago.

The reason outcomes in the public healthcare sector have worsened is poor governance and mismanagement. This view was “validated” by reports by the Auditor-General, the Office of Health Standards Compliance, and the former Health Ombud, Settas said.