Sewn up: The ­private sector has built up ­sophisticated ­administration ­systems that the NHI
Sewn up: The ­private sector has built up ­sophisticated ­administration ­systems that the NHI

"Private medical administrators' skills should be regarded as a national asset from which the National Health Insurance (NHI) can greatly benefit and not as something that can't be used outside of the private sector," said Humphrey Zokufa, managing director of the Board of Healthcare Funders, an umbrella body representing medical schemes and administrators in Southern Africa. 

According to Zokufa, the "sophisticated funding and administration skills" built up over the years by the private healthcare industry "can't just be thrown away".  

The NHI, which will be phased in over 14 years, aims to provide free healthcare to all South Africans. The scheme is currently in its first, five-year implementation phase – during which health facilities are being upgraded and health workers recruited. 

Health Minister Aaron Motsoaledi has said the second phase will focus on the financing and administration of the scheme, which is likely to involve the introduction of either additional general taxes or compulsory salary deductions to fund the NHI. During this phase, final decisions on how the scheme will be administrated – how services will be purchased and claims and payments processed – will also be made. 

The health department has to decide whether it will implement a single purchaser system, in which a single fund purchases health services across the NHI, or a multipurchaser system, in which different funds – for instance district health departments or medical schemes – may also purchase medical services on behalf of the NHI.

The NHI green paper, which was released in August 2011, "envisaged a single NHI fund operating as a single purchaser but allowed for the possibility of a multipayer system to be explored", according to pharmaceutical association Innovative Medicines South Africa.

South Africa could therefore have a single NHI fund, or single purchaser, with multiple payers (the administrators managing the payments). This leaves open the option for the NHI to contract private medical administrators – companies that administer the claims and payments of medical schemes – to assist with the processing and management of claims.

A treasury document on NHI funding, which could provide more clarity on this matter, has yet to be made public. Motsoaledi says he is studying the draft NHI white paper, which will provide more information on the direction the government wishes to go, in preparation for its "urgent release".  

Private stakeholders 'nervous'
Andre Meyer, chief executive officer of Medscheme, South Africa's third-largest medical scheme administrator, said private "stakeholders are nervous about what will be proposed in case this will have negative implications for their future". 

Motsoaledi is critical of private healthcare costs. At a Bhekisisa critical thinking forum last month, he said most private healthcare services, including their administration, were "designed for the rich with exorbitant prices that are unaffordable to the NHI". 

The Actuarial Society of South Africa has estimated that the implementation of the NHI would cost R235-billion, but it could be as high as R336-billion if modelled on current private sector expenditure. 

But, according to Rajesh Patel from the benefit and risk department of the Board of Healthcare Funders, the cost of setting up a new NHI payment system "from scratch will be more expensive than using the private administration systems that have already been set up and proven to work efficiently". 

Meyer said administrators had built up "impressive IT infrastructure that effortlessly processes payments and, more importantly, actively manages a large number of lives to promote wellness and prevention". 

The Council for Medical Schemes says only 8.5-million, or 16%, of South Africa's 52-million people belong to a medical aid. Therefore, the NHI would have to administer healthcare costs of more than six times than what the private industry currently manages. 

Zokufa said: "The resources and skills required to administer the extreme amount of NHI costs is immense. I'm not even sure that large parastatals have a R200-billion turnover. What kind of infrastructure does the government have in place to manage that, mitigate the risks, and satisfy what patients need? It's clear to me that the NHI will need all the help and expertise currently present in South Africa and will have to bring it on board."

Negotiate lower prices
Patel said the NHI would be able to negotiate lower prices both with medical schemes and administrators should it decide to make use of their services. "Through a proper tendering system and economies of scale [a significant increase in the size of services currently provided by the private sector], prices should be going down."  

However, Meyer said that the NHI would also force private healthcare providers "to think much differently as to how services are provided" as it would not be business as usual for them under a public health insurance system. 

"The current infrastructure is just too expensive for the NHI environment and, in fact, also for private health. It's not sustainable. Hospital groups need to think about a different model with a cheaper infrastructure. A hospital in Sandton could not compete in the NHI environment, even at 100% occupancy," he said. 

Meyer said Medscheme was forced to find ways to lower its administration costs for the country's second largest medical scheme, the Government Employees' Medical Schemes (GEMS). Medscheme used technology to streamline and automate processes. It also allowed 230 staff members to work from home. "Measurement of productivity has shown that they are 30% more productive compared to when they worked from the office … and we save on space and related expenditure," Meyer said.  

As a result of this, the company managed to decrease the cost of the administration and management of GEMS members' claims to R58 a member per month as opposed to the average of R76 a member per month of other employer specific or company medical schemes.  

Discovery Health, the country's largest private medical scheme and administrator, has achieved noticeably lower hospital costs through the implementation of a tool known as "diagnosis-related groups". Patients admitted to hospitals are allocated a clinical code based on their diagnosis and the treatment required. These codes have an overall price tag attached to them, which prevents doctors from splitting up the procedure into different, smaller codes for which they charge separately. 

According to Discovery Health's  chief executive, Jonathan Broomberg, it "moves away the focus from hospitals generating itemised bills for every service and drug used within the admission [which creates an incentive to use many and expensive items]. Instead, the focus of the bill is on correctly capturing, by clinical coding, what is wrong with the patient, because the remuneration will depend on this."

At present, 70% of all hospital admissions funded by Discovery Health managed schemes are subject to reimbursement contracts using diagnosis-related groups.   

However, Motsoaledi said, despite the introduction of cost-saving measures, private medical schemes and administrators still charged "unacceptably high fees" that "punish the poor".  

"Medical aid contributions have increased with far more than the consumer price index [inflation-related increases]. Where does all the money go to? Who is getting it?" asked Motsoaledi. 

He said South Africa's private healthcare system did not need the NHI to force down its prices. 

"It will collapse by itself within the next two decades if it continues in this way. It's unsustainable. It has to change."