High Aspirations for Universal Healthcare in South Africa

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Mike van Rensburg, Partner, Leana Engelbrecht, Senior Associate, Tanya Seitz, Associate, Healthcare Industry Group, Baker McKenzie Johannesburg

On 21 June 2018, the Minister of Health published the draft National Health Insurance Bill, 2018 (NHI Bill) for public comment. The NHI Bill aims to enable access to free, universal, high-quality healthcare for all, by creating a single national health insurance fund; and would centralise procurement of medical supplies by the State.

The NHI Fund

A key feature of the NHI Bill, is the establishment of the National Health Insurance Fund (NHI Fund). Membership of this fund will be mandatory for all South African citizens. Although the NHI Bill is silent on this, it has been suggested that everyone that can afford to do so (in theory, current taxpayers), will be liable to contribute towards the NHI Fund (in addition to paying medical aid scheme premiums, if they should choose to remain members of a private scheme as well). Thereafter, all healthcare would be accessed free of charge through the NHI Fund. President Cyril Ramaphosa was reportedly quoted as saying that the envisaged universal healthcare coverage meant that the financially fit must help subsidise those who are not, and that this was the trend across the world.

The NHI Fund will purchase comprehensive healthcare services on behalf of its registered users (SA citizens and permanent residents ) from certified and accredited private and public healthcare service providers. As services are bought by the NHI Fund on behalf of its members, patients who want their medical costs to be covered by the Fund will not be able to approach specialists or hospitals directly, but will have to follow the referral route determined by the NHI Fund.

Further, the purchasing power of provincial health departments would be removed and the procurement of medical supplies on behalf of the State will be the prerogative of a central procurement office.

Pricing

One of the most controversial aspects of the NHI Bill, is the annual recommendation by a health benefits pricing committee (reporting to the NHI Fund board and the Minister of Health) (Pricing Committee), of the rates to be paid to private healthcare service providers when contracting with the NHI Fund. Given its substantial purchasing power, this is likely to lead to a one-sided price negotiation between the Fund and healthcare service providers. It also shows a clear desire to move towards price regulation in the healthcare industry and may be subject to challenge.

Closely related, is the Competition Commission’s provisional report on its Market Inquiry into the Private Healthcare Sector.

This report has been anticipated for some time, with the delay in its publication (and the inquiry itself) resulting from the complexities and sensitivities surrounding the nature of the information that the inquiry had to process to conduct its assessment. It is anticipated that the report (now due for publication on 5 July 2018), will deal with the issue of price regulation of private healthcare, which was triggered by the above-inflation increase in private healthcare costs. Prices in the sector were previously semi-regulated by the reference price list, which ensured that the cost of private healthcare was kept at a reasonable level and in line with industry standards.

However, the reference price list was abolished by the Competition Commission several years ago on the basis that it constituted price fixing. There is thus some irony in the fact that the Pricing Committee may now be allowed to propose price regulation to protect end consumers in the private healthcare market.

Funding

Most importantly, it is unclear how NHI will be paid for. The Minister of Health has suggested that it would be the responsibility of the National Treasury to find a solution,  and the expectation seems to be that NHI will have to be funded by taxpayers. This begs the question whether the already overburdened  South African tax payer can afford this highly aspirational new system.

Medical Schemes Amendment Bill

Other expected reforms to the healthcare industry could follow from the introduction, also on 21 June 2018, of the draft Medical Schemes Amendment Bill. Noteworthy changes would include the abolishment of co-payments, requiring medical aid schemes to make full payment of the patient’s bill, and the removal of brokers. If these amendments are passed into law, it should see immediate benefits for all medical aid scheme members who have raised concerns about above- inflation premium increases, and about exposure to co-payments. Again, these proposed  changes which may potentially cause medical schemes to raise member contributions to cover its increased obligations, raise questions on the financial viability of the draft Bills.

The Bills are open for public comment for a period of three months from date of publication. While a substantial amount of detail is still to be worked out in regulations to be prepared and promulgated under the proposed new legislation, implementation of NHI is currently targeted for 2025.