Comment on the National Health Insurance for South Africa · the NHI is to succeed in an...

THE AMERICAN CHAMBER OF COMMERCE in

SOUTH AFRICA

Comment on the National Health Insurance for

South Africa

White Paper

May 2016

Comment on the National Health Insurance for South Africa

1

President’s Message

As the representative voice of American business operating in South Africa, the American Chamber of

Commerce is pleased to submit this Comment Paper. It aims to communicate our perspective on the

National Health Insurance in South Africa, to make specific goal-oriented policy recommendations that

address some of the challenges facing South Africa, and to contribute to South Africa’s position as a

competitive and world leader of sustainable healthcare.

Amcham believes that universal health care should be available for all in South Africa, but guards against

government moving into the NHI too quickly whilst the public health sector is beset with structural and

resource problems. It is our considered opinion that these challenges should be addressed before the

NHI can be envisaged to ensure that NHI principles are sown on fertile ground.

The White paper is the start of a long journey in providing universal health care and we pledge that the

American companies who do business in South Africa, and who contribute more than 10% of SA’s GDP

and employ nearly 200 000 South Africans, will actively engage on this ideal.

In order for South Africa to achieve the goals set out by government for economic growth, job creation

and poverty alleviation the country needs to ensure that efficient and performance based structures and

processes are in place to support policy changes. It is important that the private sector contributes to

these policy discussions and that this collaboration creates specific tangible benefits for all stakeholders

involved. We look forward to engaging as we travel this journey together.


2

INDEX

1 Introduction

2 Background

3 The NHI in the context of the NDP

4 Service Delivery Design

5 Fiscal Capacity

6 The NHI Fund and Contribution Mechanisms

7 The Future Role of Funders under the NHI

8 District Health

9 Partnership Towards NHI

10 Matters Outstanding and Conclusion

11 Recommendations

12 Bibliography

1 INTRODUCTION

The American Chamber of Commerce in South Africa (Amcham) consists of 250 American

companies who are invested in South Africa for the long term. 10 of the biggest U.S. companies

in South Africa contributed R115 billion to the South African economy in 2015, and employed

56 000 South Africans directly.

Amcham strives to make a positive contribution to position South Africa as a country with a

sound healthcare system, to serve both the public as well as the private sector. Amcham

applauds the objectives of both the National Health Insurance (NHI) and the National

Development Plan (NDP) to achieve healthcare and recognises the role of private and public

sector partnerships in accelerating social and economic development.


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2 BACKGROUND

The publication of the White Paper calling for comments on the proposed NHI is welcomed. We

note at the outset that the White Paper is very ambitious in terms of its stipulated timelines

particularly in the current global and local economic environment. Many countries have

followed a much slower evolutionary approach, focusing on high impact target areas, as

reported in a recent publication on child health and nutrition in Peru within an antipoverty

political agenda: A Countdown to 20151 which SA would be better advised to consider. This

example of best practise may certainly be more affordable and achievable.

3 THE NHI IN THE CONTEXT OF THE NDP

According to the National Development Plan

(NDP2), the financing of a health care

system does not depend solely on its cost

projections; it is intrinsically related to the

prioritisation of different sectors (policing

and education), the ability of the health care

sector to deliver value, the fiscal position of

the country and the strength of its

economy.

The NHI should be directly aligned to the goals of the NDP. Such alignment would provide a

broader context for the NHI than if it were aligned only to the World Health Organisation (WHO)

health systems approach. In addition to health systems, the NDP factors in demographic trends

as well as environmental and social determinants of health. This broader approach is crucial if

the NHI is to succeed in an environment of complex challenges as found in South African health

care.

1 Child health and nutrition in Peru within an antipoverty political agenda: a Countdown to 2015 country case study

2 National Development Plan, Chapter 10

Britain’s NHS is 98.8% funded by general

taxation and National Insurance

contributions, the balance from patient

charges. The UK spent 8.5% of GDP on

health care in 2013, 83% of which was

public health expenditure. It is a single

payer system.


4

The intention of chapter 10 of the NDP, Promoting Health, is to provide affordable access of

quality care while promoting health and wellbeing. This requires strengthening of the primary

health care (PHC) services and broadening the access to care. Various steps are suggested to

achieve this objective. The following segment compares eight NDP goals with the White Paper:

1 Increase in life expectancy – according to the NHI, in order for life expectancy to

increase, the NHI must be well implemented. The White Paper, however, provides

almost no detail on how to improve implementation and service delivery.

2 The improving of Tuberculosis (TB) management – the White Paper does not give

enough attention to National Priority Programmes that include improving outcomes

and putting in place additional resources to be placed in a separate fund.

3 The reduction of child and maternal mortality – this is a complex systemic problem

that is still posing challenges. The system is challenging as it can’t be implemented

without additional manpower and substantial training. Linked to the outcomes is a

high risk for medico-legal liability in cases where the system fails, as reported in the

South African Medical Journal of May 20163. The NHI makes no proposals on how to

fix the underlying causes of the systemic problems.

4 The reduction of non-communicable diseases (NCD’s) and focus on outcomes – the

NHI is vague in dealing with lifestyle causes as well as the structure for prevention is

not well articulated in the White Paper.

5 The reduction of injuries, accidents and violence – the NHI views social and societal

issues only from the psychology care as a medical condition.

6 Reforming the system into broadly accessible services and linking it to the primary

healthcare team – the NHI describes the components of the primary healthcare system

but fails to describe the actual functioning of the system.

7 Universal health coverage – the NHI fails to acknowledge that South Africa already has

a universal coverage, although it is a two tier system. The intention of the NHI is to

create a single system by shifting resources from the private sector. It is difficult to

3 Maternal deaths from bleeding associated with caesarean delivery: A national emergency.


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envision whether this is a sustainable option to support service delivery as it infringes

on the constitutional right of the individual to choose4.

8 The NDP makes mention of skilled committed and competent staff – the NHI White

Paper makes mention of the district specialist teams, which are already insufficiently

staffed. According to the NHI, staff will be taken from academic centres for training

and development, and they will also make use of private practitioners. This has had

limited traction as the Department of Health (DoH) wants to coerce certain sectors to

buy in. There is insufficient information in the White Paper on the structure as well as

how to maintain the training standards and the quality of the staff.

The NHI fails to mention which international benchmark will be used to compare the outcomes

of the NHI.

4 SERVICE DELIVERY DESIGN

In terms of the service delivery design, the NHI should be in alignment with the NDP. According

to the NDP, quality is required as the starting point for service delivery design whereas in the

NHI, it needs to be according to the National Protocols. Furthermore – the NDP states that

audits will need to be done by the Office of Health Standards Compliance (OHSC), whilst the NHI

White Paper states that the ideal clinic project has a checklist but the current checklist contains

only infrastructure criteria. The NHI does not, therefore, measure clinical outcomes other than

indirectly. In addition, the current data model does not comply with the WHO new reporting

requirements. Manual collection of all of the required data is onerous and puts a strain on an

already stretched system. There would need to be substantial restructuring as the NDP places

emphasis on community and primary care.

While the NHI has new models, as well as new organisational structure borrowed from other

countries, it does not appear to have been adapted to the unique situation in South Africa with

its burden of disease. Current proposals will also increase managerial layers – adding to

additional costs, which may not translate into better health care for individuals. Limited

sustainable, innovative modelling is presented in the NHI, and no supporting evidence is

provided that it will translate into actual improvement of clinical outcomes. We recommend

4 The Constitution, Section 27


6

that the DoH revisit the data on South African disease burden, and that a unique model is

adapted in conjunction with healthcare practitioners in order to have an impact.

In terms of human resources, the NDP requires that there be competence and numbers. While

the NHI aims to increase the number of training facilities, there is no plan on how to staff them

with competent trainers and there is no indication of how a student’s competence will be

measured. The lack of benchmarking of standards is of concern.

With regard to health information systems, the NDP states that synergy and integration are

required to produce credible data. To achieve a national health information system fit-for-

purpose, which is clinically beneficial to the individual, modern robust platforms that are web

based and mobile enabled are required. Good design with horizontal and vertical integration

across the technology stack has the potential to modernise collection and ability to use

information. Use of information technology to leapfrog improvements is an investment in data

quality5. With regards to the above, according to the NHI, healthcare IT is complex and the

current proposal is vague and not linked to existing policies. The use of local contractors to write

duplicate programmes of existing world class scalable proven technologies has not heeded

international best practice currently in use. The National Health Service (NHS) in the UK wasted

a lot of money doing this before they contracted international health IT specialists who have

world-class products. Overall this is not an integrated and comprehensive plan and does not

seem to be a sustainable option for the long term. The NHI White Paper does not assist with the

perception that it has poor implementation and fragmented services; it is also a very expensive

option to re-invent the electronic register platform from scratch.

The NHI seems to have omitted critical points in its White Paper – in this paper seven of these

points will be highlighted:

1 The NHI fails to give information of how the patients benefit (undefined basket) as

well as how much the benefits will cost.

5 Veeam: Data Availability at the Heart of Health

We recommend that more thought be given to the role of information technology as a

tool to facilitate ‘leapfrogging’, and that leveraging the expertise of all stakeholders be

part of a transparent and inclusive process.


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2 The NDP ties our approach to health behavioural programmes in schools and in

companies as key to success; however the NHI does not.

3 It is evident that the ambitious targets of the NDP will not be reached in its stipulated

timeframe (of 2030).

4 The NHI can be considered to be underpinned by an implementation timetable that

extends too late to allow the NHI to meaningfully contribute to the NDP objectives.

5 Relevant information is not given in the White Paper such as when the 15 year

period will commence.

6 The lack of this information seems to be as a result of a disjoint between what was

initially planned to be achieved by now and what has been achieved.

7 The Paper further declines to address how the provincial health departments will be

feasible.

It is vital to take into account that neither the NDP nor the NHI aligns with the leapfrogging

programme that government has, based on the experiences of other economies and other

universal health care providers. Although leapfrogging may not be sufficient as the sole tool

supporting implementation of the NHI by 2025, leapfrogging is the key to bringing the NHI

materially close to its 2025 implementation deadline.

5 FISCAL CAPACITY

It is unusual for middle income countries to spend more than 6% of Gross Domestic Product

(GDP) on healthcare. Wealthier countries such as the United Kingdom (UK) spend up to 8%. The

quadruple burden of disease that SA experiences, makes it a substantial contributor to the off-

benchmark expenditure of 8.5% of GDP.

Few would doubt that economic growth outlook over the next ten years is unlikely to yield

sufficient returns to the fiscal budget to support the financial capacity required for a programme

of the magnitude of the NHI. To worsen the outlook, other priorities are rising in competition for

fiscal support: drought relief, social support, and the Public Sector Wage Bill.

In addition to the financial challenges, the White Paper shies away from the fundamental

problems that exist at present and as outlined above, and presents restructuring health care

system as the solution. A case in point is the dire need for additional professional capacity:


8

In the context of fiscal and resource constraints painted above, the gap between what is

desirable and what is possible is stark. Below we outline what is desirable and what is likely to

occur according to the fiscal and resource constraints presented above. What would be

desirable includes:

good economic growth;

availability of quality Healthcare Resources (Financial, Healthcare Practitioners (HCP’S));

endorsement of innovation and funding support;

good healthcare infrastructure/IT that supports primary, secondary, tertiary and

quaternary care.

What is likely to occur is that there will be limited economic growth as well as limited healthcare

(Financial, HCP’s). In addition to the above, drug access will be governed by the Essential Drug

List (EDL) as well as the Health Technology Assessments (HTA) principles. The healthcare

infrastructure would most likely support basic care and the focus would be on a primary

healthcare approach (with limited, if any, attention to health promotion/preventative care).


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6 THE NHI FUND AND CONTRIBUTION MECHANISMS

The NDP looks at donor funding and borrowing

but this is unlikely in increasingly constrained

economic circumstances both domestically and

internationally. The precarious position of our

sovereign rating (imminent junk status) and

the lack of comprehensive planning and

outcomes to support the establishment of a

successful NHI in SA is of concern. In respect of

the latter, the White Paper does not review the

impact of the 11 NHI pilot sites established in April 2012 and makes little progress on articulating

a practical action plan.

The funding focus has, since the Green Paper and now in the White Paper, been firmly fixed on

PAYE

VAT

PAYROLL TAX (fixed rate on employer +/− employee)

It does not account for a number of current realities. SA consumers are expected to continue to

experience substantial pressure on their disposable income in the short to medium term

thereby yielding little to no capacity of supporting additional contributions to the fiscus. A form

of “Tax resistance” such as the recent e-toll debacle is a real possibility. Although the NDP is

opposed to user pays, this may resolve the funding challenge when additional (disproportionate)

charges are levied on those who wish to access “superior” services. It is essential to retain some

form of user fee/co-payment even if this remains dependent on affordability.

A further reality that was not considered is that the four main revenue contributors for 2015/16

were:

Personal income tax where the total collections were R389.3bn. This is R35.3bn (10%)

higher that the R353.9bn outcome of the previous financial year.

“Obamacare” requires all Americans to

have health insurance and established

insurance exchanges that offer a choice

of regulated health plans. These plans

are subsidised by state and federal

taxes. The US spent 16.4% of GDP on

health in 2013, of which 48.2% was

funded by the government


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Corporate income tax of which the total collections were R193.5bn. This is R6.9bn

(3.7%) higher than the R186.6bn outcome of the previous financial year.

Value added tax (VAT) of which the total collections were R280.8bn. This is R19.5bn

(7.4%) higher than the R261.3bn outcome of the previous financial year.

Customs and excise duties of which the total collections were R151.8bn. This is

R15.2bn (11%) higher than the R136.7bn outcome of the previous financial year.

Given that average economic growth rate is expected to be around 3% to 2025, none of these

revenue streams show the potential to raise the additional revenue of R256bn required for NHI.

This stands in contrast to the required growth rate of 7%, and before consideration is given to

the dampening effect that a further levy or tax will have on economic activity. Even if it is

assumed that the R140bn currently spent on medical schemes, the R21.7bn out-of-pocket

spending on private healthcare and the R4bn spent on health insurance is re-directed into the

NHI, the unassailable fact is that the local economy simply cannot afford the NHI by 2025.

Further, the demand side perspective of the per capita value derived from the NHI is concerning.

The R250 billion cost of the NHI in the service of a population of 50 million would yield an all

inclusive per capita allocation of R5 000. When compared to the average cost per admission in

the public sector of R8770 and in the private sector of R9284 in 2010, concerns arise as to the

ability of the NHI to provide an affordable service for each individual6. This simplified analysis

acknowledges that hospitalisation may not be required by every individual every year but the

data does emphasise the concern that the current NHI fund modelling is inadequate. The

upward trend of healthcare costs and increased demand of expectations has the potential to

swamp even the most optimistic supply of resources.

The mechanisms and measures to address risks relating to misappropriation of funds remain a

matter of concern. Although there is provision for the establishment of a Risk and Fraud

Prevention unit, it is unclear how this unit will address challenges relating to fraud and

corruption that currently pervade many institutions in SA. The White Paper does not heed

existing centralised mechanisms for this purpose in the form of the office of the Chief

Procurement Officer (CPO).

6 Comparing the Cost of Delivering Hospital Services across the Public and Private Sectors in South Africa


11

The ongoing work of this existing structure could do much to inform the Risk and Fraud

Prevention unit once it is established.

7 THE FUTURE ROLE OF FUNDERS UNDER THE NHI

Universal Health Coverage (UHC) has gained great attention among policymakers and academics

since the publication of the WHO’s World Health Report in 20107. It should be noted that

healthcare financing is typically only a complementary instrument for influencing quality –

reforms in service delivery, human resources/medical education, medicines, technology and

information play the leading role.

UHC can be a polarising topic. One view is that all aspects of health care belong in the domain of

the public sector, while another is that private markets and players offer solutions to address

the challenges and constraints of government-financed and government-provided healthcare.

The good news is that a middle ground has been emerging for some time now and it calls for

increased collaboration between the two sectors.

Governments’ efforts to raise revenue and provide social protection can be complemented by

the private health sector, where innovation, technical know-how, and efficiency are more

evident.

The International Labour Organisation (ILO) published a conceptual framework to describe

pathways for private health insurance to help countries achieve UHC 8. The analysis showed that

private health insurance could, and should, be designed and regulated to complement

7 Health Systems Financing: The path to universal coverage

8 Leveraging Health Microinsurance to promote Universal Health Coverage.

The CPO exists to provide support/guidance on best practice in a multi-

tiered/decentralised procurement system. Alignment could also save the NHI

duplication of effort in setting up its own monitoring (anti-corruption) mechanisms

and lend objectivity/independence to such mechanisms when compared to the

current “in-house” proposal for the NHI.


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government-sponsored insurance programs and other benefits made available to all citizens.

Achieving this in practice is a challenge. However, the pathway in the figure shown here depicts

the dynamic nature of public and private health insurance provision.

The WHO argues that UHC is a political process that involves negotiation between different

interest groups in society over the allocation of health benefits and who should pay for these

benefits. Table one, below, shows how political reforms have been aligned with the

implementation of UHC in a variety of countries.


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COUNTRY Year UHC reform Political timing/Reason

United

Kingdom 1948

Tax financed National Health Service with

universal entitlement to services

Welfare state reforms of new

government following the Second World

War

Japan 1961 Nationwide universal coverage reforms Provide popular social benefits to the

population

South Korea 1977 National health insurance launched Flagship social policy of President Park

Jung Hee

Brazil 1988 Universal (tax-financed) health services Quick-win social policy of new

democratic government

South Africa 1994 Launch of free (tax-financed) services for

pregnant women and children under six

Major social policy of incoming African

National Congress Government

Thailand 2001 Universal coverage scheme extends

coverage to the entire informal sector

Main plank of the populist platform of

incoming government

Zambia 2006 Free health care for people in rural area

(extended to urban areas in 2009)

Presidential initiative in the run up to

elections

Burundi 2006 Free health care for pregnant women and

children

Presidential initiative in response to civil

society pressure

Nepal 2008 Universal free health care up to district

hospital level

Flagship social policy of incoming

government

Ghana 2008 National Health Insurance coverage

extended to all pregnant women Leading up to a Presidential election

China 2009 Huge increase in public spending to increase

service coverage and financial protection

Response to growing political unrest

over inadequate coverage

Sierra Leone 2010 Free health care for pregnant women and

children

Presidential initiative which was a major

factor in recent elections

Georgia 2012 Extending health coverage to all citizens Key component of new Government’s

manifesto

USA 2012 National health reforms designed to reduce

number of people without health insurance

Major domestic social policy of the

President

Table one: Political reforms to support universal health care


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The core challenge that most countries will face is how to pay for services to incentivise quality.

All payment mechanisms involve trade-offs and may lead to unintended consequences – making

it challenging for practitioners and policymakers to assess whether a specific payment

mechanism can be refined to achieve health system goals, or should be replaced in favour of a

different approach. There is little evidence to help guide policymakers and practitioners through

this challenge, and there are no "gold standards" or perfect payment systems to use as

benchmarks, although accountable care programs are being rolled out in various countries.

The Joint Learning Network for UHC – an innovative, country-driven network of practitioners

and policymakers from around the globe who co-develop global knowledge products that help

bridge the gap between theory and practice to extend coverage to more than 3 billion people –

has developed a practical guide for countries attempting to implement UHC and is titled

“Assessing Healthcare Provider Payment Systems”. It assists countries to address the ‘how’ of

designing provider payment systems that improve the quality of healthcare and satisfy providers

within a limited budget9.

According to the WHO, the way healthcare is paid for is of fundamental importance with regard

to UHC. In considering their financing options, governments need to consider three main

functions of the health financing system:

The raising of sufficient financial resources to cover the costs of the health system

The pooling of financial resources to protect people from the financial consequences of

ill-health, such as loss of income and having to pay for health services

The purchasing of health services to ensure the optimal use of available resources

Joseph Kutzin, coordinator of Health Financing Policy at the WHO has noted that all countries,

be they rich or poor, can make improvements in each of these areas in order to improve the

performance of their overall health systems10.

9 Assessing Health Provider Payment Systems –A Practical guide for countries working toward Universal Health

Coverage 10

Alternative Financing Strategies for Universal Health Coverage


15

If voluntary mechanisms do not work and compulsory sources are not suited to SA,

could it be asked if we then have to recommend a postponement until the economy

progresses to point where compulsory sources become relevant?

Important lessons that have been learned from both theory and practice that provide useful

principles to guide progress are as follows:

Countries should seek to move toward predominant reliance on compulsory funding

sources (general tax revenues, earmarked payroll taxes, or a combination), as voluntary

mechanisms suffer from serious shortcomings. Indeed, no country has attained universal

population coverage based on a system organised around voluntary prepayment.

Moving toward compulsory sources is a major challenge for fiscally constrained

countries that are typified by large shares of the population who are not in regular

salaried employment.

Countries that have made significant progress toward UHC have the benefit of a strong

political commitment to UHC, reflected in the prioritisation of health in their national

budgets. All potential government revenue sources for the health sector have potential

consequences for other sectors in the broader economy, The efficiency and equity

impacts of alternative tax instruments (e.g., income tax, corporate tax, value-added tax)

are highly context-specific and arise from the combined impact of all tax measures.

There is a general trend toward greater diversification of revenue sources, including a

diminishing role for payroll tax funding. This is a practical consequence of the “ideology”

of UHC. With the move toward UHC, entitlement to health coverage is being delinked

from employment and from direct contributions more generally. On the practical side,

wage-linked contributions cannot generate a sufficient revenue base, both in high-

income countries (because of aging populations and macroeconomic concerns regarding

increasing wage-based taxation) and also in low- and middle-income countries (LMICs),

because of low participation rates in formal sector employment.

Whatever the level of prepaid funds, countries should seek to maximise the

redistributive capacity of these funds by reducing or eliminating fragmentation in

pooling arrangements to the extent possible.


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Countries cannot simply spend their way to UHC; the way the funds flow through the

system and whether spending can be matched to priority programs, populations, and

services also matters. Attention to addressing inefficiencies is essential to sustain

progress, with purchasing/provider payment the central instrument in the health

financing armamentarium to achieve this purpose.

Effective reform requires policy coherence, meaning a focus on alignment of policy

measures across the financing system as well as alignment with the rest of the health

system. A narrow focus on single-instrument “magic bullets” such as social health

insurance, user fee introduction or elimination, results-based financing, diagnosis-

related groups, insurance competition, etc. will be inadequate and may do more harm

than good.

Strategic purchasing for efficiency and results

While mobilising sufficient public resources and organising pooling to maximise redistributive

capacity are essential for achieving equitable and affordable health care access for all, it is of

equal importance that collected resources be efficiently used in order to maximise and sustain

the provision of benefits for the population11. Strategic use of the purchasing function is the key

health-financing instrument for this purpose.

Historically in many LMICs, the government directly funds government- run/owned health

facilities by paying for their inputs such as personnel, medicines, supplies and equipment

through line-item budgets, often reflecting bureaucratic inertia. Little attention is given to how

financial incentives or other mechanisms might be used to motivate providers to improve

quality or efficiency, as their accountability is for inputs, not for delivering specific outputs or

outcomes. In contrast, strategic purchasing involves proactive and explicit selection of

predefined outputs and outcomes based on some combination of demand and population need,

linking payment to information provided on the delivery of these pre-defined products and,

where choices of providers exist, selecting the most qualified and efficient to purchase from. In

doing so, the purchaser seeks to improve efficient allocation of resources and effective service

delivery in order to maximise population health and reduce financial risk.

11

Alternative Financing Strategies for Universal Health Coverage


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The primary responsibility of the purchaser is to purchase on behalf of the people or enrolled

population. Because of asymmetry of information in the healthcare sector, individuals do not

possess the knowledge and information to be an effective purchaser. An entity should therefore

have explicit responsibility for purchasing. More specifically, this entity should be empowered to

make evidence-based decisions on:

(1) What services to purchase;

(2) Which providers to purchase from; and

(3) How to purchase

Such entities can take a variety of organisational forms and ownership — for example,

government health ministries, local health authorities, public autonomous agencies, private

health insurers (whether commercial or not-for-profit) or non-governmental organisations

(NGOs). In some countries in which governments do not have the capability to take on this role

within their core line ministries or government departments (either due to lack of relevant skills,

the rigidity of public finance systems that do not allow movement away from rigid line-item

budgets, or a combination), they have either established public autonomous agencies (e.g.,

Moldova’s National Health Insurance Company, Ghana’s National Health Insurance Agency) or

have contracted out the purchasing function to NGOs or private insurance companies (e.g.,

India’s Rashitriya Swasthya Bima Yojana (RSBY) government-sponsored health insurance scheme

for persons below the poverty line). In either case, it is essential to strengthen government

capacity to ensure that purchasing practices are aligned with policy priorities, either to manage

the contracts with external purchasers or to take on this role within some form of public agency.

Thailand established the National Health Security Office (NHSO), a quasi-public organisation, as

the purchaser, with a board chaired by the Minister of Public Health and comprised of key

stakeholders including members of local government, civic society groups, professional bodies

and technical experts. The board is responsible for setting the benefits provided by the Universal

Coverage Scheme, making the policy rules and guidelines that govern the NHSO, and

determining the providers’ reimbursement mechanism. In this way, it has the capacity to ensure

that the NHSO aligns with government objectives. More generally, the lesson is that the

incentives and accountabilities of purchasing agencies need to be aligned with public policy


18

objectives as part of the process of moving toward more strategic purchasing in the health

system as a key instrument for sustaining progress toward UHC8.

The pace and extent of the UHC in South Africa is dependent of how the benefits to citizens are

designed under the NHI. This requires

a clear definition and decision about

services that can be delivered in the

early stages of the NHI and those that

will follow over time based on

people’s needs, public opinion and

cost. This is not to suggest delaying

rolling out UHC, but ensuring that

benefits can reach the most

vulnerable population who often have

the worst health services and pay out

of pocket at the point of care.

In his Budget Vote Speech of 2016, Minister of Health, Dr Aaron Motsoaledi stated that a new

health care system is required to ensure that all South Africans benefit. However, the World

Economic Forum (WEF) argues that “building sustainable health systems in emerging economies

is one of the biggest challenges of our time. However, following the path of established health

systems in developed economies is not the answer. With so many different types of innovation

available today, emerging economies have an opportunity to bypass development stages that

were previously unavoidable and sidestep the pitfalls of entrenched systems. We call this

‘leapfrogging’.”

Purchaser-provider split

We welcome the initiative to separate the responsibilities of the purchaser and provider which is

critical to enhancing the relative comparative advantages enjoyed by the respective players. We

do however have concerns in relation to how this policy proposal and intervention will be

implemented.

In the Netherlands everyone is obliged to take

out health insurance. Health insurers are heavily

regulated so everyone pays the same rate for the

government-determined standard benefits

package; no-one can be turned away because

they are old or ill, and premiums cannot be risk-

rated — the same principles that underpin the

laws governing medical schemes in SA. People

can opt to take out additional insurance — for

example, for physiotherapy or optical care, but

this cover is not as tightly regulated. This is

known as a multiple payer system. The country

spends 11.1% of GDP on health.


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Treatment guidelines

Preference is understandably given to generic drugs for the realisation of “the most cost-

effective, evidence-based interventions should be provided, which can be ensured by

developing an essential list of generic drugs…”

Innovative pharmaceuticals play an important role in addressing current and emerging disease

areas as well as being the precursor to creating generic drugs; providing health care practitioner

and patient education; pharmacovigilance; as well as other economic development activities

which are critical to the successful functioning of universal health care. These are all critical

services that must be preserved within the NHI to ensure quality health outcomes.

The White Paper proposes that a formulary (of generic drugs, surgical supplies, prostheses etc.)

and standard treatment guidelines should be developed. This seems to exclude brand name

drugs. If this is the intention, we caution that there may not be generic drugs available for every

disease area and thus patients will be denied access to the medicines they need. The Essential

Drug (Medicines) List relies heavily on the WHO International Non-proprietary Name (INN)

approach. However, the INN approach does not preclude brand names. In fact, the WHO states

that, to meet the access to medicines needed countries should “stimulate development, testing

and use of new products, tools, standards and policy guidelines, emphasising a public health

approach to innovation, and on adapting successful interventions from high-income countries to

the needs of lower-income countries, with a focus on essential medicines that are missing for

children and for neglected diseases.”

We also recommend that in addition to the Essential drug list (EDL), a mechanism should

be developed to help government transparently assess which medicines are most

important and cost effective for our population whilst preserving patient freedom of

choice and encouraging market competition.

It is strongly recommended that brand drugs should also feature in ensuring universal

health care through the NHI.


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Fee-for-service

We agree that the “Fee-for Service” model is not sustainable. In this regard, we recommend the

consideration of alternative payment models that have been adopted by other countries that

implement universal health care.

Procurement of pharmaceutical goods

South Africa currently has no formal threshold for judging cost-effectiveness, in either the public

or private health sectors, and many analyses performed for the public sector make use of the

WHO choice suggested threshold of one to three times GDP per capita as a threshold.

According to the Council for Medical Schemes Annual Reports, the private sector medical

schemes have spent 17% of the total health spend on out-of-hospital medicines. This compares

well with the total OECD pharmaceutical expenditure, which is reported to be 19% of current

health spending. Given the value of medicine to treat and prevent disease, a key consideration is

whether sufficient budgetary allocation is made for medicines, as compared to other

expenditure line items. Should South Africa want to improve its health outcomes, consideration

should be given to increase the spend on medicine.

The WHO World Medicines Situation 2011 plots South Africa (“ZAF”) on pharmaceutical

expenditure below peer countries such as Russia, Brazil and Mexico, showing that South Africa

is, comparatively, not spending too much on medicines:

We recommend that the Department of Health establishes a standard payment rate for a

set of services following evidence-based protocols which can reduce unnecessary services

and achieve optimal patient outcomes with controlled costs.


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8 DISTRICT HEALTH

There are 52 districts in South Africa and in 2014/15 their expenditure was R64,1 billion which

makes up 45, 5% of the total healthcare expenditure.

8.1 The District Health Services are the Following:

a. District Management

b. Community Health Clinics – 3825

c. Community Health Centres

d. Community based Services

e. Other Community Services

f. HIV and AIDS

g. Nutrition


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h. Coroner Services

i. District Hospitals – 241

8.2 Challenges as per the Minister of Health, Minister Motsoaledi:

a. Human Resources

b. Financial Management

c. Procurement / Supply chain

d. Infrastructure

Since district health services take a big chunk of the budget (rightfully because these are at the

coal face), the following recommendations are made:

Employ a Chief procurement officer for District Health Services (DHS) at national DoH

Combine school and ward based health programmes

District specialist team to incorporate General Practitioners (GP’s)

Since the ward based team is led by a nurse, work closely with GP’s on a regular basis

The health team to work closely with other departments like Social Development and Home

Affairs

Draw up essential lists:

o Drugs

o Equipment

o Diagnostic tests

Ensure a proportional allocation of district hospitals.

9 PARTNERSHIP TOWARDS NHI

Amcham wishes to be a constructive and involved partner as the NHI gets introduced. In

addition to the substantive comments above, we also wish to be seen as an ally to the

procedural evolution of the White Paper into legislation.

We believe that in addition to the broader engagement on the White Paper, a task team

comprising officials from the National Treasury, and Departments of Health and Labour should

engage both local as well as international companies toward determining the impact that the

various NHI funding models will have on the conditions of employment for their employees.


23

Such engagement would not be intended to restrict the funding options for the NHI but rather

to more comprehensively inform the funding mix and can provide clarity on the actual services

that these companies could expect NHI to provide. Amcham could lead such a process amongst

its members but there is insufficient clarity in the current White Paper to support effective

engagement in this regard. Further, such process would point to legislative changes outside the

scope of the NHI (for example the Basic Conditions of Employment Act) that would not to be

affected in parallel with the introduction of the NHI if we were to avert legislative

contradictions.

According to Sibanda12, “whilst the objectives of regulations are highly appreciated and the

public interest they serve well understood, it is not always clear at what cost these benefits are

attained. Evidence, even though sometimes anecdotal, suggests that legislators do not always

factor in the cost of the regulations they impose on business and society at large. The cost of

regulation involves compliance costs borne by businesses and implementation costs borne by

government.” In the case of the NHI, government clearly stipulates that it is a “social investment

and therefore should not be subjected to market forces where it is treated as a normal

commodity of trade.” The assumption therefore is that there is no need for a cost-benefit

analysis because the benefit is taken as a given. However, we do not believe that such argument

is sufficient to subvert the case for a Regulatory Impact Assessment (RIA) which will inform the

understanding of all South Africans as to the basis for the NHI. The box below captures the

essence of the benefits of a RIA.

12

Regulatory excess: The role of regulatory impact assessment and the Competition Commission

A task team comprising officials from the National Treasury, and Departments of Health

and Labour should engage both local as well as international companies toward

determining the impact that the various NHI funding models will have on the conditions

of employment for their employees.


24

Adapted from Guidelines for the Implementation of the Regulatory Impact Analysis/ Assessment (RIA)

Process in South Africa published by the Presidency, RSA, 2012

We accept the point that the NHI is a “social investment and therefore should not be subjected

to market forces where it is treated as a normal commodity of trade.” However, in view of the

serious implications for the fiscus as well as its requirements for behavioural change, we

recommend that prior to creating legislation on the NHI, the South African government should

consider conducting a thorough RIA. Such a RIA should focus on the likely social and economic

impact of implementing the NHI. In relation to the social impact analysis, the RIA would be done

with the view of predicting the manner in which the NHI interventions, and how it is likely to

affect the way people live, work, interact and function as individuals and as members of

society11. It is envisaged that such a social impact analysis would result in a change management

plan that would ensure the buy-in and broader support by society for the NHI.

Moreover, Sibanda11 cautions that “past experience suggests that legislation is often developed

and implemented with little regard to its impact on the economy.” Beyond the economic impact

of the NHI, the biggest value of conducting a RIA would be its contribution to “better

governance, by improving transparency and the accountability of public decision making.”

Commitment to subjecting the NHI to a RIA, would, in addition to the post NHI commentary

engagement with the work streams, provide confidence that the comments submitted through

the public process would indeed be considered by government. It would also ensure that there

The RIA process helps to:

think through the full impact of proposals;

identify alternative options for achieving the desired policy change;

assess options (regulatory and non-regulatory);

ensure that consultation is meaningful and reaches the widest possible range of stakeholders;

determine whether the benefits justify the costs;

determine whether particular sectors are disproportionately affected; and

determine whether the proposed measure will address the objectives of government.


25

is a transparent monitoring and evaluation process in place in which all the stakeholders have

confidence.

In addition to a RIA, Amcham believes that a Situational Analysis and a Project Plan are key to an

enlightened path to the NHI. The Situational Analysis would provide an assessment of what has

been achieved in the pilot programmes and in the Ideal Clinics. It would also be cognisant of the

evolving economic environment and the challenges and constraints that such economic changes

present. With the Situational Analysis as its basis, a detailed project plan, populated not only by

timelines and responsible parties but also by stakeholders to be engaged, would bring clarity to

the ambitious goals of the NHI and define the various phases toward the NHI where such

definition is currently unclear.

We further await the proposals on funding the NHI and anticipate robust consultation and

debate on the funding proposals. Amcham will seek engagements with officials in both the DoH

and the National Treasury in the approaching months to seek further clarity on the matters

outlined in this paper as well as the matters outstanding listed below.

10 MATTERS OUTSTANDING AND CONCLUSION

Regardless of the approach

chosen, the NHI planners at the

DoH should engage with the

National Treasury to reach

understanding on the need for

flexibility in the use of funds in

the health sector, and should

combine this with an approach

The RIA would be done with the view of predicting the manner in which the NHI

interventions are likely to affect the way people live, work, interact and function as

individuals and as members of society. RIA would be its contribution to “better

governance, by improving transparency and the accountability of public decision

making.”

In Japan, the employed are required to take out public

health insurance, typically paid by the employer. They pay

20% of their medical costs at the point of delivery. The self-

employed are required to join the national health insurance

scheme, with premiums based on economic status. These

patients typically face co-payments of 30% of their medical

costs. Fees are waived for the poor and unemployed, and

are covered by the state if they rise above a specific

threshold. Japan spent 10.2% of GDP on health in 2013,

83% of which was state-funded.


26

to demonstrate new and better ways that health authorities can be held accountable for the use

of public funds.

Amcham considers the following matters as necessitating further clarity, investigation or

engagement through the mechanisms described in this Paper or through an alternate

consultation mechanism:

Healthcare tourism | Medical tourism: The global medical tourism industry is valued at

$20 billion per year, with nearly 7 million patients seeking healthcare abroad. South

Africa has emerged as the leader as a medical tourist destination on the African

continent. The White Paper fails to address how the NHI will continue to support the

contribution that medical tourism makes to the SA economy.

Contingency planning: South Africa has either averted or responded well to recent

global epidemic and pandemic threats. What contingencies would underpin the

construct of the NHI in the face of future epidemic and pandemic threats i.e. how will

the NHI respond to such threats?

The NDP ties our approach to health behavioural programmes in schools and in

companies as key to success. The NHI fails to address this in a meaningful way. Is a

NHI Vitality programme the answer?

Neither the NDP nor the NHI aligns with the leapfrogging programme that government

wishes to support and which is based on the experiences of other economies.

Although leapfrogging may not be sufficient as the sole strategy supporting

implementation of the NHI by 2025, leapfrogging is key to bringing the NHI materially

close to its 2025 implementation deadline. Is leapfrogging the answer to many of the

ambitious goals of the NHI programme and, if so, in what manner will leapfrogging

contribute to the programmatic goals of the NHI?

Responses to these and other concerns presented in this paper would go a long way toward

encouraging both local as well as international support for the NHI as well as pave the way for a

robust NHI model for SA.


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11 RECOMMENDATIONS

We recommend the following:

11.1 That the DoH revisit the data on South African disease burden, and a unique model is

adapted in conjunction with healthcare practitioners, in order to have maximum impact.

11.2 That the current public structures be audited to ensure they are properly resourced and

sustainably managed prior to embarking on a NHI.

11.3 That more thought be given to the role of information technology as a tool to facilitate

leapfrogging, and that leveraging the expertise of all stakeholders be part of a

transparent and inclusive process.

11.4 That in addition to the Essential drug list (EDL), a mechanism should be developed to

help government transparently assess which medicines are most important and cost

effective for our population whilst preserving patient freedom of choice and

encouraging market competition.

11.5 That brand drugs should also feature in ensuring universal health care through the NHI.

11.6 That since the “fee -for-service” model is not sustainable, alternative payment models

that have been adopted by other countries that implement universal health care be

investigated.

11.7 That the DoH establishes a standard payment rate for a set of services following

evidence-based protocols which can reduce unnecessary services and achieve optimal

patient outcomes with controlled costs.

11.8 That prior to creating legislation on the NHI; government seriously considers conducting

a thorough RIA on all facets of the proposed NHI, which is then made available to all

stakeholders.

12 BIBLIOGRAPHY

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1/fulltext?elsca1=etoc Date Accessed: 19 May 2016

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http://www.thelancet.com/journals/langlo/article/PIIS2214-109X(16)00085-1/fulltext?elsca1=etoc


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2. South African Government. (2012). The National Development Plan.

http://www.gov.za/issues/national-development-plan-2030 Date Accessed: 3 May 2016

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http://www.samj.org.za/index.php/samj/article/view/10821 Date accessed: 19 May 2016.

4. The Constitution: Chapter 2 – Section 27. Available at:

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2016.

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Coverage. International Labour Organisation. Microinsurance Paper Number 23. August

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12. Sibanda, F.K. (2014). “Regulatory excess: The role of regulatory impact assessment and the

Competition Commission”, Paper prepared for the Conference on “Pro-Poor Regulation &

Competition” hosted by the Centre on Regulation and Competition (CRC), University of

Manchester, UK and the School of Public Management & Planning, University of

Stellenbosch.

ANNEXURE 1

SA Healthcare at a Glance 2013 (unless otherwise stated)

SA GDP $350.6bn/ R4tn

Total health expend as % GDP 9%

SA population size 55M

THE per Capita $1121 (PPP)

Public health expenditure as % of total Govt spend 14%

Insured Population (Private / Public, Un-insured) 16% / 84%, 0%

Spend % Public / Private 48% / 52%

People-to-Doctor ratio 4024: 1 (2015)

# Hospital Beds (Public/ Private/ Total) 85362/ 31 067/ 116 429 (2014)

Pharmacies (Public/ Private/ Retail) 3,800, 0.08 (2015)

Quality of Healthcare System Global Ranking 175/ 200

Immunisation coverage of children under 1 year 90%

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