How South Africa Plans to Fix an Ailing Health System

(Bloomberg) -- The South African Constitution’s Bill of Rights accords everyone the right to health care. Yet 84% of the nation’s 58.8 million people have no medical insurance and rely on a public health system with too few doctors and dilapidated facilities, resulting in delayed or inadequate treatment. In 2007, the ruling party agreed to enact universal national health insurance, or NHI, but its implementation stalled while funding and operational details were being ironed out. Now the government has proposed a program to be phased in by 2026, but serious doubt remains about whether it will be the panacea for the country’s health-care woes.

1. What’s the public health system like?

The country’s poorest people have access to free treatment at about 3,800 public clinics and hospitals, but these facilities are all too often plagued by broken equipment and shortages of medicine. Only five of 696 facilities covered in the Office of Health Standards Compliance’s most recent report met 80% of their required performance criteria in areas such as drug availability and proper infection control. South Africa also has insufficient medical personnel, with a doctor-patient ratio of 0.9 per 1,000, lower than in Brazil, Russia, China and Mexico. The biggest reason cited by doctors leaving the public sector is poor working conditions.

2. What’s the plan to fix this?

The goal of NHI is to provide universal access to health care, with a centrally managed state fund buying services and medicines from public and private providers. All South Africans will have to contribute up front to the fund, with the wealthy subsidizing the poor, and in exchange will receive free treatment for a range of conditions determined by the state. The National Treasury initially assessed the cost of the program at 256 billion rand ($17 billion) a year by 2026, a figure that’s now being revised upward. Funding is supposed to come from additional taxes and the government’s coffers, including money reallocated from provincial health departments.

3. Who’s backing the plan?

Besides the ruling party, the plan’s supporters include the Congress of South African Trade Unions, the country’s biggest labor group. They see NHI fixing a dysfunctional system and making access to treatment more equitable in a country where the roughly 16% of the population who can afford private insurance collectively spend almost as much on medical plans as the government does on health care for the rest of the populace. Hospital companies such as Life Healthcare Group Ltd. and Mediclinic International Plc have voiced backing for the plan and say they could provide the state with additional capacity.

4. Who’s worried about it?

Some private insurers and administrators. Once NHI has been fully rolled out, the role of companies may be reduced to offering coverage for treatment that’s not offered by the state. And if the NHI ends up being administered by the government or just a handful of companies, many private administrators will be left out in the cold. The main opposition Democratic Alliance says NHI will effectively nationalize health care, and funds allocated to it will be “vulnerable to grand corruption at the expense of the nation’s entire health system.” The Free Market Foundation, a think tank in Johannesburg that advocates economic freedom, has warned that the advent of NHI will spark an exodus of doctors and nurses.

5. What about taxpayers?

Most aren’t going to be happy. They won’t be able to opt out of NHI, which will limit their treatment options and likely require a personal income tax surcharge as well as a levy on business payrolls. The government has also said it intends to scrap tax credits for private medical insurance. The health department says new taxes will only be required in the final stages of the implementation of NHI.

6. Can the government pull this off?

It’s a tall order. Pilot sites have provided no evidence that NHI will deliver improved health care. The program’s critics say the government should focus on making sure existing facilities work effectively before embarking on a massive system overhaul. Other state entities, including the national power utility and airline, have been crippled by losses and rocked by corruption allegations and management upheaval, while the state education system has left many without the skills needed to get a job, contributing to a 29% unemployment rate.

7. How will the plan move forward?

A bill that lays the groundwork for the implementation of NHI has been referred to parliament, which will hold public hearings. Lawmakers may recommend changes before approving it and referring it to the president to sign into law. Other legislation must also be changed, and regulations will have to be drafted to facilitate the implementation of NHI, while new systems will have to be put in place -- processes that could take several years. The Treasury also has to issue revised cost estimates, which will have a bearing on how quickly NHI can be implemented and the services it will be able to offer.

The Reference Shelf

• The Department of Health’s National Health Insurance Bill.
• World Health Organization statistics on South Africa.
• Results of 2016-17 audit of public health facilities by the Office of Health Standards Compliance.
• South African Medical Journal study on why doctors are leaving the country and why they are opting out of public-sector work.

--With assistance from Renee Bonorchis, Janice Kew and Prinesha Naidoo.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Andy Reinhardt

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