South Africa’s Covid-19 vaccine rollout has been unhurried, to put it politely. The country has already missed numerous (self set) vaccine targets, with less than 300,000 healthcare workers receiving the inoculation (out of a targeted 1.2 million). Although the first phase of the vaccine rollout hasn’t been carried out in an ideal manner, Jonathan Katzenellenbogen notes that the second phase looks “promising”. Last week, online registration commenced for over-60s and those with comorbidities. Phase two is planned to commence in May. Katzenellenbogen asks how medical insurance companies will be charged by government for the vaccination of its members. While that price is yet to be announced, he writes “If the schemes pay double the costs of the vaccines incurred by the government, the insured will ultimately pay for their own vaccine and that of an uninsured person.” This article was first published on the Daily Friend. – Jarryd Neves
The state’s vaccine heist on medical schemes
By Jonathan Katzenellenbogen*
South Africa’s Covid-19 vaccine roll-out is at least six months behind much of the world, including many African countries.
The immunisation of healthcare workers has proceeded at a snail’s pace, but Phase II looks promising, with online registration for the over-60s and those with comorbidities having started last week, ahead of a planned kick-off in mid-May.
Yet there are still big unknowns about the programme. One is the extent to which medical schemes will be charged by government for the vaccination of their members.
The online registration form on the Department of Health’s Electronic Vaccine Data System, launched last week, asks whether one is a member of a medical scheme and, if so, to give its name and one’s membership number. And the form says that the medical scheme will be directly charged for the vaccine.
This might be about solidarity, but it is also inherently unjust as a form of hidden double, if not possibly triple, taxation. And ultimately the cost will have to be borne by South Africa’s medical scheme members.
As the government has not yet decided on the price it will charge health insurers, there are only rough estimates of the cost to insurers at this stage. The assumption behind these estimates is that there are about 7.1 million adult medical scheme members in the country and that health insurers will be charged for the inoculation of a similar number of uninsured. Under these assumptions, the total cost to the medical schemes is estimated by Discovery and Profmed at between R6 and R7 billion, amounting to two to three percent of members’ annual contributions.
As the periods for which the current Covid-19 vaccines are effective are still unknown, and further mutations in the virus are possible, there has to be vast uncertainty over the long-term cost. Annual mass vaccination programmes against Covid-19 will be necessary. As the government has effectively forced the medical schemes into subsidising the roll-out in the first year, it has created a precedent and the health insurers could face annual vaccination charges.
The mechanism to coerce the medical schemes, and ultimately the members, to cough up is as follows: immunisation to lower the risk of Covid-19 infection has been declared a prescribed minimum benefit, which means all members have a right to this and the medical schemes will pay.
Yet to be announced
Schemes will be charged a Single Exit Price, a price determined by government, for the cost of the vaccines. The Single Exit Price that the government will impose has yet to be announced, but it could be double and possible triple the price at which the state purchases the vaccines, and incurs logistics and administration costs. It will also depend on the extent to which government wants medical scheme members to subsidise the uninsured.
If the schemes pay double the costs of the vaccines incurred by the government, the insured will ultimately pay for their own vaccine and that of an uninsured person. And as taxpayers they will also be paying for the vaccine to which they would be entitled if they were uninsured. Therefore, they will pay three times what they should pay if the extra charge were not in place for medical scheme members.
The medical schemes industry seems to be going along with the government’s plans for a hidden tax with deafening silence. Profmed is the only scheme whose CEO, Craig Comrie, has dared to utter word of protest. Comrie has stated that ‘where the actual cost of the vaccines is doubled or tripled to create surplus funds in government to fund uninsured people remains unethical, as it strips reserves from medical scheme members paid for by their contributions’.
In short, this is a raid on members’ reserves and thus an abrogation of property rights. In this case, membership of a scheme is proving to be a disadvantage, although the existence of health insurance helps lift a burden off the state’s health system.
As with the uninsured, those on medical aids should have the right to free immunisation. The government is intent on taking control of the entire process and thus the insured cannot benefit from their membership. There is no valid argument that they should be compelled to subsidise it for others. Besides, the state could have diverted expenditure from multiple other uses, notably the repeated attempts to save the failing state airline, SAA, to this emergency.
Individuals and firms should be free to donate to a fund which might contribute to the vaccination roll-out, but compelling medical scheme members, not all of whom are hugely wealthy, is an outrage.
Judging from the Frequently Asked Question section on Covid-19 on the Discovery website, the country’s biggest health insurer seems to be fully on board with the government plan, and supports insurers paying an ‘inflated’ price.
‘This is a moment in time where solidarity in the healthcare sector is of paramount importance to the country. As a result, all roleplayers need to play their part,’ Discovery says.
Led by the state
And although government has come late to the game in planning, procurement, and roll out, Discovery insists the vaccine effort ‘must be led by the state, with strong collaboration from the private sector’.
The vaccination roll-out is a dry run for the National Health Insurance, the government’s grand plan for universal free healthcare, which will involve drastically narrowing the role of private medicine and insurance.
The government exercises immense power over medical schemes through the Council of Medical Schemes, the industry regulator whose members are appointed by the Health Minister. Under the thumb of the Council and with their role, if not existence, unclear under the National Health Insurance, the medical aids must be nervous about provoking the state. This is similar to the silence of the country’s commercial banks on expropriation without compensation and the Expropriation Bill, which if aggressively implemented could result in massive loan impairments.
It is clear that the entire private health sector did not want to push the idea of doing a roll-out themselves.
Discovery says on its site that the pharmaceutical companies will not sell vaccines to private parties. However, if the private parties were to obtain government authorisation to buy Covid-19 vaccines, they might well be able to buy supplies, and collectively they would have been able to obtain liability indemnities.
In an affidavit in response to a legal challenge from Solidarity and AfriForum, the government has said there is no legal prohibition on their purchase of vaccines. This would have allowed massive bulk buying and a fast private sector roll-out. But in the end it is doubtful the private clinics, pharmacies, and insurers wanted to confront and potentially embarrass the government over its own tardiness.
Had the private sector led the roll-out we would probably have been months ahead. There would have been no reason not to charge health insurers and the state could have picked up the tab for the uninsured. That might well have been the price of the government’s wanting to prove the viability of National Health Insurance.
- Jonathan Katzenellenbogen is a Johannesburg-based freelance financial journalist. His articles have appeared on DefenceWeb, Politicsweb, as well as in a number of overseas publications. Jonathan has also worked on Business Day and as a TV and radio reporter and newsreader.
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- The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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