PREMIUM FREE TRIAL

War of attrition on private healthcare stepped up – IRR’s Jeffery

CAPE TOWN — Read this analysis by IRR policy research head, Dr Anthea Jeffery, and decide whether you’d prefer government dictates and funds allowing a limited package of health services in order to increase access for everyone (aka dumbing down), or whether you’d prefer to continue paying for a wide range of privately-funded healthcare options. Health Minister Dr Aaron Motsoaledi says we cannot afford not to have universal healthcare coverage, funded by the State via its better-off citizens, and that it’s a moral imperative, given our quadruple burden of disease and huge income disparities. But, Jeffery asks, at what cost? The impending legislation will curtail the wide range of and relatively cost-effective currently-available private healthcare options. Our private healthcare sector, for all its systemic vulnerabilities to patient and doctor abuse, is world class. If these bills succeed, there won’t be much left on which already hard-pressed medical aids can survive. Which may be one of the unpublished reasons why Discovery, SA’s dominant healthcare provider, is entering the banking sector.  – Chris Bateman

By Anthea Jeffery*

This Friday (21st September 2018) is the deadline for public submissions on the National Health Insurance (NHI) Bill and the Medical Schemes Amendment Bill (the MSA) Bill.

Dr. Anthea Jeffery is Head of Policy Research at the IRR and author of Patents and Prosperity: Invention + Investment = Growth + Jobs, published this week by the IRR and available on the IRR website.
Dr Anthea Jeffery

The NHI Bill seeks to establish the highly bureaucratic and yet to be costed NHI Fund. This is the vehicle through which the state plans to control every aspect of health care, from the health services to be covered to the fees to be paid to health professionals, the medicines to be prescribed, the blood tests to be allowed, the medical equipment to be used, and the prices to be paid for every item, from aspirins and ARVs to sutures and CAT scanners.

Right now, however, the MSA Bill is even more important, for this measure is the latest salvo in the ANC’s long war against the private health-care sector. If passed by Parliament in its current form, it is likely to deal a death blow to the country’s medical schemes. Once most of these schemes have been pushed out of existence, South Africans will have little choice but to accept the NHI proposal – irrespective of how inefficient, costly, and corrupt the new system is likely to prove.

Read also: Crunching SA’s healthcare numbers paints a dismal picture

Getting rid of medical schemes is thus important in reducing public resistance to the deeply flawed NHI proposal. Already, of course, the government has done much to push up the cost of medical scheme membership and price this beyond most people’s reach. Now the MSA Bill is intended to go further by making it virtually impossible for medical schemes to survive.

Over the past 20 years, the government has already:

  • introduced an arbitrary reserve requirement (25% of annual contributions) which is unnecessarily high for many medical schemes;
  • insisted on open enrolment and community rating, which makes it harder for schemes to hold down costs by attracting the young and healthy;
  • insisted that all medical schemes ‘pay in full’ for some 300 ‘prescribed minimum benefits’ (PMBs), irrespective of whether members want this cover or not;
  • reduced the tax benefits which help make medical scheme membership more affordable and vowed to eliminate these over time; and
  • barred the introduction of low-cost medical schemes which (having been spared the PMB obligation) could have made membership available to 15 million people at premiums averaging R200 per person per month.

Now the MSA Bill will tighten the regulatory stranglehold on medical schemes in various ways:

  • medical schemes will no longer be allowed to offer different benefit options and will instead have to cover a single package of primary and other health services, as decided by the government;
  • medical schemes will have to ‘pay in full’ for this package and will be barred from seeking co-payments from their members;
  • contributions will be based on income and the better off will pay significantly more to subsidise the poor;
  • medical schemes will have to admit all those who apply to join, though people who have not belonged to medical schemes in the past 90 days will have to wait three months before they can access their benefits;
  • medical schemes will be able to terminate the membership of those who fail to pay their contributions, but will have to take back these non-paying members if they re-apply for admission; while
  • the only penalty medical schemes will be able to impose on those who fail to pay and then apply to rejoin is an ‘administrative penalty’, equal (it seems) to one month’s contribution.

The proposed rules will encourage many low-income households to join ‘open’ medical schemes (those open to all, rather than restricted to company employees, for instance). The monthly contributions of these new members will be low, in line with their incomes. Higher-income households will have to pay substantially more to subsidise these new entrants, but may be unhappy with the sole package of benefits now available to them. This could encourage high-paying members to withdraw. Medical schemes will then have larger and larger numbers of low-paying members, with few high-paying ones to help bear the financial burden.

Medical schemes will have to pay in full for all the health services accessed by this larger pool of low-paying members. People who anticipate a major health event – an operation, or the birth of a baby, for example – will have incentives to join schemes four months in advance (given the three-month waiting period), pay premiums for five months, say, and then exit once again. This will put medical schemes under even more financial pressure.

Read also: Prepare for accelerated looting, doctors emigrating amid NHI’s implementation

In addition, people may soon realise that they cannot be refused re-admission if their membership is terminated for a failure to pay contributions. They will have to pay administrative fines on re-admission, but for low-income families with small monthly contributions, this would not be much of a disincentive. Medical schemes may then find themselves with large numbers of members who, in practice, barely pay any contributions at all, yet are entitled to comprehensive health services that schemes must pay for in full. This will put even more pressure on their sustainability.

These proposed rules are a canny move by health minister Dr Aaron Motsoaledi. Many people who now find it hard to afford medical scheme membership – and who resent the co-payments they often have to make – will welcome these new controls. They will also benefit substantially from them for a period, as the benefits they receive will far outweigh the contributions they have to make.

Minister Aaron Motsoaledi briefs the media on National Health Insurance White Paper, June 29, 2017.

In the longer term, however, medical schemes will find it increasingly difficult to survive. By the time the NHI takes effect, many medical schemes may already have disappeared. This will reduce resistance to the NHI, as people will have few other options on which to rely.

This will help Dr Motsoaledi achieve his aim of ‘collapsing’ all medical schemes ‘into a single state-run medical aid plan’: ie, the proposed NHI Fund. However, this new state monopoly is unlikely to be any more efficient or any less corrupt than Eskom, for example.

The ANC is determined to nationalise health care under the NHI so as to increase state control, deepen dependency on the government, and put an end to inequality by levelling health services down (since it has proved unable to level them up).

Will South Africans see through the false promises of the MSA Bill? Unless they wake up to its risks, most will realise too late that this supposedly benign intervention is not benevolent at all. Rather, its real purpose is to help destroy the private health care system and leave the public at the mercy of yet another floundering state monopoly.

  • Dr Anthea Jeffery, Head of Policy Research at the IRR, a think tank which promotes political and economic freedom. If you agree with what you have just read, please SMS your name to 32823.
  • In an earlier version, in our context to this article Biznews incorrectly referred to Discovery as the parent of the Discovery Health Medical Scheme. The sentence has been removed. DHMS belongs to its members, is regulated by the Council for Medical Schemes and is overseen by an independent board. As such it is independent from the Discovery Group.   
Make Better Decisions. Start your Biznews Premium FREE TRIAL today.