National Health Insurance- where are we?

Val BeaumontExecutive Director Innovative Medicines SA

“WE KNOW WE MUST REFORM THIS SYSTEM –

THE QUESTION IS HOW.” 9 September 2009

DoH Ten Point PlanGovernment Plan of Action 2009; Human Development Cluster: Health

10. Strengthen Research and Development

DoH Ten Point PlanGovernment Plan of Action 2009; Human Development Cluster: Health

DoH Ten Point PlanGovernment Plan of Action 2009; Human Development Cluster: Health

DoH Ten Point PlanGovernment Plan of Action 2009; Human Development Cluster: Health

1. Strategic Leadership & Social Compact for better health outcomes.

2. Implementation of National Health Insurance (NHI)3. Improving the Quality of Health Services

4. Overhauling health care system - improve management5. Human Resources Planning, Development & Management6. Revitalisation of infrastructure

7. HIV & AIDS and Sexually Transmitted Infections National Strategic Plan 2007-11 and increase focus on TB and other communicable diseases8. Mass mobilisation for better health for the population9. Review of Drug Policy

DoH Ten Point Plan: NHIGovernment Plan of Action 2009; Human Development Cluster: Health

2. Implementation of National Health Insurance (NHI)• Finalise policy proposal on the NHI

Policy document released for public Comment [Nov 2009]

Revised Policy document incorporating public comments produced and presented to Cabinet [April 2010]

• Finalise draft legislation [July 2010]• Set up National Quality Management and

Accreditation Body [Mar 2010]• Perform an audit of Health Information

Communication Technology (ICT) at all levels of the National Health System (public sector only) [final report Nov 2009]

• Draft the National ICT Strategy for Health [final Mar 2010]

NHI proposalsBrief history & progress update

Confidential ANC proposals (Feb & June 2009)• Handed to DoH in June 2009 (not in public domain)

Many rumours of a public report or White Paper in 2009,but none forthcoming and no official publication date set• Deputy Minister of Health: “legislated by April 2010” DoH NHI policy proposal presented to Human

Development Cluster on 23 September 2009 Ministerial Advisory Committee announced on 7

November 2009 to receive input and to consider comments on White paper, once released

The Presidency’s Green Paper on National Strategic Planning published on 4 September 2009 (Minister Trevor Manuel)

“Decisions on social security reform require long-term perspectives […] …getting the design wrong can bankrupt countries intwo or three generations.”

ANC NHI promises2009

Source: Proff. Servaas vd Berg and Heather McLeod, August 2009

“All South Africans (i.e. universal access) will be equally covered to access comprehensive

and quality health care”

“No upfront payment…” (at point of service)

Everyone above the tax threshold

will contribute through a national payroll or income

tax

All of this will be done within the current funding envelope -

“requiring no increase in total health care spending as a % of

GDP”At an individual level, “Contribution will be

less than what members and their employers currently

pay to medical schemes”

South Africans may choose to continue to contribute to private

medical schemes, AFTER they have contributed to

the NHI Fund

Comprehensive benefitsNHI benefit package

What is meant by “comprehensive benefits”? What is the burden of disease? (and what will it be in

future?) What will it cost? (and what can the country afford?) The benefit package will depend on what is needed

versus what the State can afford and deliver. This depends on:• Population and disease projections (by age,

gender, province)• Funding• Infrastructure• Resources

For a more complete picture, also add• Non-CDL chronic diseases• The burden of violence• Infectious diseasesSource: IMSA NHI Policy Briefs 1-7

Chronic disease, cancer and HIV/AIDS1985 - 2025

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

12,000,000

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Nu

mb

er

of

Peo

ple

Year

South Africa 1985 to 2025Stage 4+6: AIDS or Discontinued ARVs

Stage 5: Receiving ARVs

Pre-AIDS Population

Cancer: all sites but skin (new cases)

CDL Chronic Disease excl. HIV

The national health system is having to cope with much higher levels of chronic disease than before 1994

Source: IMSA NHI Policy Brief 6: Costing and long-term modeling of NHI

Universal accessfor all South Africans

Study by Prof Servaas van den Berg, Dept. Economics, Stellenbosch University:% of respondents who declared they were ill and consulted a health worker in past

month by wealth decile, and reasons for those who did not:

Universal access has virtually been achieved,although at low quality levels

Quality carefor all South Africans

The NHI proposal requires a proper analysis of its costs, fiscal consequences and affordability

Improving the quality of health care requires more real resources that do not automatically follow funds, but depend on management and incentives in the public health system

• doctors, nurses• hospitals, equipment

History teaches us that improving such management is difficult to achieve in a moderate time frame

Indeed “(t)he most urgent need is to ensure that the public sector is well-capacitated to deliver the envisaged services at all levels” – and this is not mainly a question of money

Source: Proff. Servaas vd Berg and Heather McLeod, August 2009

Initial costings of NHI 2009

Preliminary work, excludes administration and managed care costs. Needs adjustments for effect of benefits becoming mandatory, anti-selection effect and evolution of HIV epidemic on NHI population.

Efficiency assumption

Medical Scheme Prescribed Minimum

Benefits (PMBs)

Basic Benefits: PMBs+ Primary

Care

High Cost Benefits: PMBs+

all In-Hospital

Core Benefits: PMBs+ Primary

Care+ In-Hospital

Fully Comprehensive:

all healthcare benefits

Medical schemes efficiency: 100% of cost

156 251 224 319 334

Moderate improvement: 80% of cost

125 201 179 255 267

Presumed public sector cost: 70% of cost

109 176 157 223 234

Staff model efficiency: 50% of cost

78 126 112 160 167

Cost in Rbn (2009 terms) of Benefit Package Offered by NHI

Source: Proff. Servaas vd Berg and Heather McLeod, August 2009

Public-Private coveragecurrent SA statistics

Private Health Insurance

14.9%

Some Private + Public20.9%

Public Sector64.3%

30.2m people using public clinics and hospitalsR1,300 per person pa

7.0m people in voluntary Medical Schemes using private primary care and private hospitalsR9,500 per person pa

9.8m people using private primary care out-of-pocket and public hospitalsR1,500 per person pa

South Africa 200547.0m people

Source: McIntyre D, van den Heever A. 2007. Social or National Health Insurance. In: Harrison S, Bhana R, Ntuli A, eds. South African Health Review 2007. Durban: Health Systems Trust.

Phased Introduction of NHISouth Africa

Even if all earning an income and their insurable families are covered, only 51.1% of population would becovered

Source: IMSA NHI Policy Brief 2: Health Insurance Coverage

7,816,834 16.0%

4,503,463 9.2%

2,382,993 4.9%

4,040,079 8.3%

6,205,067 12.7%

23,906,777 48.9%

Phased National Health InsuranceCoverage: Insurable Families

Population 2009: 48.855 million

Voluntary Medical Schemes

Additional if Mandatory Tax Threshold

Additional if Mandatory LIMS Threshold

Additional if Mandatory Formal Wage Earners

Additional if Mandatory Informal Workers

Additional if Total Population Covered

Time to full coverageExamples

Twenty seven countries have achieved universal coverage through social health insurance (SHI). The development from the start of SHI legislation to universal coverage is an incremental process. • Germany: 1854 to 1988 (127 years)• Austria: 1888 to 1967 (79 years)• Belgium: 1851 to 1969 (118 years)• Luxembourg: 1901 to 1973 (72 years)• Israel: 1911 to 1995 (84 years)• Costa Rica: 1941 to 1961 but only 83.4% coverage by

1991.

Only two countries achieved full coverage in under 40 years:• Japan: 1922 to 1958 (36 years)• Republic of Korea: 1963 to 1989 (26 years)

Source: World Health Organisation, January 2004

Nature of the debateQuestions we should ask

Source: Heather McLeod, 2009

The benefit

package for NHI

Affordability for

the country

Fiscal and

economic

consequences

Quality of care

and resourcing

Single vs Multiple

Purchasers

Will patient/

consumer choice

be compromisedThe role of Medical Schemes

•Substitute and Supplementary cover•Principle cover and supplementary cover (Exempt from NHI if employer or union based)•Duplicate cover and supplementary cover (too expensive for many medical scheme members)

Be prepared to take part in the public debate

IMSA and the NHI project

IMSA is funding the work on the website and hosting the website

IMSA is funding the academic work on the NHI Policy Briefs, but Prof. Heather McLeod retains complete academic freedom

IMSA will continue to provide new links to• Government documents on NHI• Other organisations that release statements on

NHI• Academic papers on analysis of the proposed NHI

system

Web-address: http://www.imsa.org.za/

Free subscription to Email updates on additions to the website

The Role of Private Health Insurance

7 December 2009

National Health Insurance Policy Brief 7

The Future Role Existing Medical Schemes

South Africans may choose to continue to contribute to medical aid schemes but ONLY after they have contributed their share to NHI Fund (mandatory contribution)

Source: National Health Insurance Policy Proposal. Presentation to Cabinet Human Development Cluster 23 September 2009

% of respondents who declared they were ill and consulted a health worker in past month by wealth

decile, and reasons for those who did not (GHS2002-2007)

Source: Prof Servaas van der Berg, Dept of Economics, University of Stellenbosch

Universal Coverage

• June 2009 NHI proposal: “The goals of the national health insurance include... providing universal coverage for all South Africans, irrespective of whether they are employed or not”.

• Confusion in the debate between universal coverage for healthcare and universal coverage for health insurance.

• It is estimated that only some 16.4% of South Africans had health insurance cover in 2008.

• However everyone in the country has access to healthcare, either in the public sector or through medical schemes, bargaining council funds or other employer-based arrangements.

Public and Private Spend

• R11,300 pbpa for those belonging to medical schemes (this includes both medical scheme spending of R9,600 and estimated out-of-pocket payments of R1,700);

• R2,500 pbpa for the middle group (includes out-of-pocket payments to private primary care providers and government spending on hospital care); and

• R1,900 pbpa for those using government primary care and hospital services.

• But this mixes Government spend from public money and purely private spend. Need to compare Government spend in the public sector and the subsidy from Government to the private sector.

Source for figures: Health Economics Unit, UCT, Information Sheet: The Public-Private Health Sector Mix in South Africa

Tax Subsidy for Medical Schemes

• The Ministerial Task Team on Social Health Insurance estimated the tax subsidy to be R10,1 billion in 2005 .

• In 2005 this was equal to some 20% of the public health budget.

• At that stage the tax subsidy amounted to about R120 pbpm for medical scheme members (and very unequally distributed), while the public sector spend was R96 pbpm.

• This is patently unfair. Since 1994, successive groups of researchers and commissions have strongly recommended that this tax subsidy be scrapped.

• An alternative was proposed that every citizen receives an equal per-capita subsidy for healthcare, equivalent to the amount spent per person in the public sector.

Remove Tax Break and Replace with Per Capita Subsidy

Source: McLeod and Grobler, The role of risk equalization in moving from voluntary private health insurance to mandatory coverage: the experience in South Africa, 2009.

This has a dramatic impact for those earning below the tax threshold. The proportion of income may still be too high to be affordable but with some help from employer cover is now within reach.

120%

60%

44% 44%

33%

27%

15.4%

6.2%

120%

60%

44%41%

28%24%

12.9%4.8%

56%

28% 28%33%

25% 22%13.0%

5.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

Informal workers

Formal farm and domestic

workers

Formal workers below tax threshold

Worker just above tax threshold

Low-paid civil servants

Clerical and service

Supervisory and managerial

Professional

Per

cen

t o

f In

com

e

Income Group

Effect of Per Capita Subsidy on Affordability

Benefit package chosen according to income

Contributions after tax break

Tax break replaced with per capita subsidy

Transition from no Financial Protection to Universal Coverage

Source: Kirigia et al (2006) Health financing patterns and the way forward in the WHO African Region.

Universal Elements of Social SecurityTier 3

Private

(consumer protection)

Tier 2Social Insurance

(pooling and income smoothing)

Tier 1Redistributive System

(basic non-contributory protection)

Industrialized Countries combine tiers 1 and 2

Developing Countries have different strategies for each

Source: Van den Heever, September 2009

Tiered Healthcare Financing

Source: Van den Heever, November 2009

StrategicDimension

Tier 1 Tier 2 Tier 3 Tier 4

Revenue General tax Payroll taxMandatory contributions

Private contributions

Privatecontributions OOP

Pooling and resource allocation

Income CS take priority with RiskCS secondary

Risk CS take priority with some Income CS to maximize inclusion

Risk CS only Ordinary actuarial insurance principles apply

Package Predominantly supply rationed

Predominantly demand rationed

Demand rationed and ability to pay

No rationing –ability to pay predominates

Purchasing Conventionalbudget planning and allocation with residual private contacting

Social insurance funds, regulated approved funds

Regulated approved funds

Regulatedunapproved funds, employers, and households

Provision Predominantly public entities with residual contracted private entities

Private providers with residual contracting of public sector services

Private providers Private providers

Potential Role of Medical Schemes

Source: Private Health Insurance in OECD Countries, 2004. As amended.

Potential Role of Medical Schemes• Primary PHI: only available access to basic health cover; do not

have public health insurance. – Principal: where social security scheme does not apply. Could be

employer or union-based compulsory schemes.– Substitute: substitutes for public cover or employer cover.

• Duplicate cover: cover already included under public insurance. Does not exempt individuals from contributing to public health insurance. Can offer access to different providers or levels of service.

• Complementary cover: covers all or part of the costs not otherwise reimbursed (e.g. co-payments).

• Supplementary cover: cover for additional health services not covered by public scheme. May include services not covered by public system such as luxury care, elective care, long-term care, dental care, pharmaceuticals, rehabilitation, alternative or complementary medicine, or superior hotel and amenity hospital services.

Source: Private Health Insurance in OECD Countries, 2004

NHI Policy Proposal June 2009

• The future role existing medical schemes

• “While the NHI calls for mandatory membership for all South Africans through mandatory contributions and social solidarity, it is up to the general public to continue with voluntary medical schemes cover after they have contributed to the NHI Fund.”

Source: ANC Task Team NHI Proposal to NEC, 13 July 2009

Proposal is for medical schemes to offer Duplicate cover.

Possibly Supplementary cover but depends on definition NHI package. Non-EDL drugs, for example ?

Implications of Current NHI Proposals

• The February and June 2009 proposals on NHI from the ANC effectively relegate existing medical schemes to a “duplicate” role.

• Those covered by medical schemes could fall well below 1 million people from the currently 8 million people covered.

• Debates around this issue tend to become politically and ideologically heated but there are strong economic arguments for looking at the public-private mix in technical terms and playing to the strengths of each sector.

Implications for NHI Debate

• The February and June 2009 proposals on NHI from the ANC effectively relegate existing medical schemes to a “duplicate” role.

• The ANC Health Plan of 1994 envisaged the creation of a National Health Service, not a National Health Insurance system. “A single comprehensive, equitable and integrated National Health System (NHS) must be created.”

• NHI (as opposed to NHS) merits less than 1 page of that 77 page document.

• Thus what was envisaged initially seems to be a multi-tier system: a public National Health Service, alongside of which is a mandatory contributory environment for formal sector workers.

• This suggests that the ANC Health Plan envisaged a “substitutive” role for medical schemes under NHI.

• This early thinking needs to be revisited in the NHI debate in 2010.

Innovative Medicines South Africa (IMSA) is a pharmaceutical industry association promoting the value of medicine innovation in healthcare. IMSA and its member companies are working towards the development of a National Health Insurance system with universal coverage and sustainable access to innovative research-based healthcare. Contact details: Val Beaumont (Executive Director) Tel: +2711 880 4644 Fax: +2711 880 5987Innovative Medicines SA (IMSA) Cell: 082 828 3256PO Box 2008, Houghton, 2041. South Africa val@imsa.org.za www.imsa.org.za

Material produced for IMSA by

Professor Heather McLeod

hmcleod@iafrica.com

www.hmcleod.moonfruit.com