Step aside govt, let private sector build capacity in the health sector – Martin van Staden

Many Western countries that are dealing with an explosion of coronavirus cases have found out that even their well-funded national health services could not provide the number of hospital beds and ventilators that is needed to ensure that every sick patient is cared for. In Italy, doctors described the wards as reminiscent of a war zone as they sometimes had to choose which patients will get the short supply of ventilators. It raises the question how South Africa, that has the added responsibility of millions of HIV/Aids patients who are more vulnerable, will cope with a large surge in patients needing intensive care. Martin van Staden writes that the government’s insistence on central planning for hospitals and that it should decide whether more capacity is needed in the health sector, has limited the supply of health care facilities, which is going to be needed if the outbreak of the coronavirus in South Africa follows the pattern of other countries in the West and China. He says ‘the government… must step aside”, as it is not competent in central planning. – Linda van Tilburg

How legislation could hamper the response to coronavirus

By Martin van Staden*

The coronavirus is spreading around the world at an increasing rate. Of no surprise to some of us, and a cause for considerable concern today, is that the South African government sowed a seed of disaster some years back. Our healthcare system’s ability to respond to this crisis was seriously jeopardised when government passed the National Health Act of 2003.

The key to stopping the spread of the coronavirus is what healthcare experts call “flattening the curve” of the pandemic. The way to do this is to practice self-isolation and social distancing so that fewer people are infected. Drew Harris, a researcher at Thomas Jefferson University, notes that through self-isolation and social distancing, the healthcare system can “adjust and accommodate all the people who are possibly going to get sick and possibly need hospital care”.

It is calamitous if too many infected inundate a healthcare system with inherently limited capacity. Italy, one of the worst hit countries, has already depleted its intensive care units. There are even concerns in the United States, which has the greatest capacity worldwide, that its existing systems might not cope should the virus’ spread accelerate.

If younger, more resilient patients fill up hospital beds, there is obviously less space for those who are at the greatest risk of succumbing: the elderly and those with pre-existing conditions.

To the uninitiated, it is surprising that government policy is the cause of much of our misery. The accepted theory is that governments exist to serve the common welfare and aid the most vulnerable members of society. Most people cling onto this theory through thick and thin, regardless of the reality we experience on the ground: that governments, particularly the South African government, more often than not turn out to cause or exacerbate the very problems they are supposed to solve.

The National Health Act requires that healthcare providers must acquire a so-called “certificate of need” (CoN) before they can establish new healthcare facilities, increase the number of beds, or acquire additional healthcare technology at new facilities. These certificates are essentially supply-side controls: they put the power in government’s hands to decide whether more capacity is “necessary”. Whether a healthcare provider is willing and able to build such additional facilities is irrelevant.

The thinking behind CoNs is that if healthcare providers “over-invest” in infrastructure, the cost of medical care will rise.

As the Mercatus Centre at George Mason University noted in a 2015 study, however, CoNs “do little to increase access to health care for the poor, but they instead limit the supply of such services”. In American states where CoNs are required, there are 131 fewer hospital beds per 100,000 persons and fewer hospitals offering specialised diagnostic services compared to states without CoN requirements. Many American states have repealed their CoN regulations as a result.

South Africa already has a capacity problem in its healthcare system. Government’s threats of nationalising healthcare through such interventions as the National Health Insurance scheme do not contribute to an environment of entrepreneurship in the healthcare system. Its insistence on CoNs and other central planning measures have certainly hamstrung South Africa’s ability to respond effectively to outbreaks of viral diseases.

Government suffers from what Friedrich von Hayek identified as the knowledge problem. The breadwinner of a nuclear family has sufficient knowledge about the needs and wants of every member of the family to centrally plan the economic and social affairs of that family. The same might be said, although to a lesser extent, of the chief of a small village, who keeps in touch with every individual villager.

When we graduate to an entire country of millions, however, the notion of central planning, despite its unfortunate popularity, is nothing but a pipedream. At the risk of oversimplification, this is essentially the reason why communism was largely abandoned at the end of the 1980s. Planning the affairs of many people misses most of the relevant information that only those people themselves possess. The free market largely puts the power to plan and make decisions in the hands of individuals, companies, and communities.

Our government believed in the late 1990s that it could centrally plan labour relations between employees and employers, and today there are over ten million unemployed as a direct result. The belief that electricity supply could be centrally planned by government through a single monopoly provider has also proven disastrous.

Since the National Health Act was enacted, the supply of healthcare capacity has been kept lower than it could have been today. This might prove devastating for those who are particularly vulnerable to the coronavirus, should the virus start spreading uncontrollably in South Africa.

The South African government and public need to face an incredibly uncomfortable reality: government is not competent to engage in central planning. The failure to face this reality has been detrimental to all South Africans and will be particularly detrimental to the most vulnerable in this context: the elderly and those with pre-existing conditions.

For the future, the solution to this government-created problem is simple: allow private healthcare and medical groups to build as many hospitals and install as many beds as they want or can afford, without restraint. For this, the National Health Act should be amended.

The Chinese managed to build new hospitals within a matter of days but here, in South Africa, it might be too late to expand our healthcare capacity to respond to the coronavirus. But something has to change: the coronavirus is neither the first, nor will it be the last, international contagion that will require generous healthcare capacity to mitigate and eliminate. Government, as in many other aspects of our lives, must step aside.

  • Martin van Staden is Head of Legal (Policy and Research) at the Free Market Foundation. He is pursuing a Master of Laws at the University of Pretoria and is author of ‘The Constitution and the Rule of Law: An Introduction’ (2019). The views expressed in this article are those of the author and not necessarily those of the Free Market Foundation.