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National Health Insurance

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The National Health Insurance (NHI), for which membership will be compulsory, is a funding scheme that aims to address healthcare inequity in South Africa. The scheme will do this by creating a fund that the government will use to buy healthcare services at set fees from accredited public and private health providers. The NHI Bill was passed in the National Assembly in June 2023. It has to go to the National Council of Provinces for approval.

HomeSpecial ReportsNational Health InsuranceRight of reply: “It’s far more complex” — the health department responds...

Right of reply: “It’s far more complex” — the health department responds to one of our NHI op-eds

  • Will the proposed National Health Insurance (NHI) scheme make things worse rather than better, asks Dave Martin, a rural development specialist who lives in Nqileni village in the Eastern Cape, in an op-ed.
  • In his response, head of the NHI, Nicholas Crisp, says that the reforms the NHI aims to address are complex.
  • Here’s why tinkering at the edges alone will not fix the health system but instead lead to a worse fate than scepticism about the future, he says.

On 10 August, we published an opinion piece, “NHI: The problem with trying to kill two birds with one stone”. The article was authored by Dave Martin, a rural development specialist who lives in Nqileni village in the Eastern Cape, about 30 kilometres from Coffee Bay.  

He’s used public healthcare for most of his life and lives within reach of two well-run state hospitals: about 20 kilometres from both Zithulele and Madwaleni district hospitals, and has seen first hand that public sector healthcare can be fixed. 

But he’s concerned that the government’s proposed National Health Insurance (NHI) scheme will worsen things for people, because it’s trying to fix two problems at once: poorly run public health facilities and redistributing the money available for healthcare in the country in a more equitable way.

The head of the NHI, Nicholas Crisp, responds:

The proposed NHI aims to reform the entire health system, and in so doing indeed solve the two problems Martin raises: how to improve badly run, under-resourced public health facilities, and how to divide the money available for healthcare in the country in a more equitable way among South Africa’s people. 

But the view that “the NHI’s approach seems to avoid dealing with the difficult questions as to why some hospitals work well, and some don’t” minimises the challenges that the reforms aim to address.

Here’s why.

1. Health budgets aren’t allocated nationwide using the same formula

Provincial governments use their provincial equitable shares for their health budget. [Provincial equitable shares are funds from the national purse given to provinces.] But the legislatures are not obliged to keep to the functional allocations [meaning that provinces can decide themselves how much each department should get].

Treasury funds many extra health costs in the provinces through conditional grants, which are channelled through the national health department. This is to overcome the inequity in health allocations [because different provinces get different amounts of money from Treasury based on their population and economic development], to pay for interprovincial care (because not all provinces have the same means for providing complex services, [such as special surgery for correcting heart or skull defects in children, managing spinal injuries or bone marrow transplants]) and to support national priorities [such as training health staff and dealing with HIV and TB]. Health grants amount to more than in any other department, both in number and value.

Provinces also don’t spend their health budgets the same way. This is because they look at how they spent their money the previous years and adjust it based on the currently available funds (so-called “incremental budgeting”). But the groups being served change all the time: people move away, age groups change and the burden of disease varies.

2. Quality is not always about management

While there are clear differences in “quality between successful and failing state health facilities”, it’s not always “due to the manner in which they are managed”. It is far more complex, because of things like centralised decision-taking, longstanding infrastructure neglect, other departments being in control of parts of the health spending and inequitable allocations.

The NHI Bill speaks to how hospital management will be decentralised and how establishments [that is, providers of healthcare services, such as doctors, dentists, dietitians and so on] will be paid from the central Fund for their work. There is a specific provision for the 10 national (central) hospitals to be formally made into independent entities within the public service. This will place greater responsibility on the boards and will give direct authority to the management. 

But there is no specific provision for other hospitals to be similarly autonomous, so provincial health departments will likely still run the remaining hospitals. The difference is that this will not be a primary assigned function in law but a delegated function [and so they will not be able to make decisions themselves, but will have to abide by what their governments decide].

3. The NHI is only one component of getting a single health system in place

Money currently spent in private healthcare establishments, whether through prepaid medical schemes or through out-of-pocket payments, will not be redirected to public establishments as is inferred.

The NHI will not be a provider of any services, but will manage the bulk of the money to buy the bulk of the benefits for every person in the country. This is an important principle, which is referred to as a “purchaser/provider split”. 

It is different from having the current 10 public budgets [nine provincial budgets plus a national one] and 72 medical schemes with 308 options for buying health services in a haphazard and inequitable manner. The NHI agency will have to purchase from all accredited public and private providers.

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What will change over time in the privately funded environment, is that medical aid schemes will only be allowed to pay for services the NHI does not cover. 

The plan is that the Bill will have a “phased implementation”. The first phase has started and will run till the end of 2026. It is meant to be a time for getting systems and structures in place to run and manage the NHI as an agency, which will include appointing staff and buying health services for “vulnerable groups such as children, women, people with disabilities and the elderly”.

The second phase, which will run through 2027 and 2028, is aimed at making additional resources available where necessary and starting to contract private health service providers for their services. In other words, the complexities of moving funds received from provincial equitable shares and conditional grants, as well as other, smaller amounts from other departments (for example, correctional services), into the control of the NHI agency will mostly happen from 2027.

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Martin states that “the end point [of the proposed NHI] seems to be clear: a redistribution of funds from private healthcare into the public system and a similar redistribution of patients between public and private health facilities.” 

The reality is far more complex. 

The aim is to pay providers equitably for the services that they provide, and to refer patients to the nearest facility where their health needs can be attended to. There will be a gradual realignment of both patient flows and funding flows. This is what universal health coverage is about, and a single NHI fund will aim to prevent individual financial hardship in accessing healthcare.

4. The NHI is not about “redistributing resources between the public and private health sectors”

The scheme’s goal is to achieve universal access to healthcare [giving everyone access to the same set of basic health services for free, regardless of their income], and for that we need to use every resource as efficiently and as effectively as we can. We need to get rid of waste, duplication, fraud, theft and whatever other structural inefficiency in the system. In the end, the goal is a systematic improvement in equitable access to healthcare.

Those who expect that public sector funding will increase simply because the state will be in charge of how money for health services is spent may well be disappointed. If an establishment doesn’t offer the healthcare benefits that it’s accredited to provide, it will not be paid — and some may see reduced budgets as a result. Managers will be forced to manage more effectively. 

Reforms like these do not happen overnight. The transition period is designed to help us change management systems, develop monitoring and evaluation mechanisms and realign current budgets. Incompetent or corrupt managers and dysfunctional administrative departments will find themselves with fewer “resources to squander”. Being cynical about corruption is distasteful: we must all abhor fraud and corruption and ensure that the reforms are designed to get rid of risk as far as is possible and identify early any elicit actions that cannot be designed out.

If we want to “fix public healthcare to a decent standard that is possible within the existing financial framework” we need to acknowledge that a public system that has one fifth of the funding of the private system will need serious investment (read: more tax — now). By the same token we need to recognise the embarrassing revelations in the Health Market Inquiry report into the private health sector and be as enthusiastic about rectifying those structural problems too. The parallel systems are both in trouble, albeit for different reasons. But that only means that we, the users of the health system, are the ones that are really in trouble.

It is good that Martin is sceptical. But thinking that tinkering at the edges alone will fix our very broken health system may lead us to a worse fate than scepticism about the future.

Nicholas Crisp is the deputy director general in the national health department responsible for implementing the country’s National Health Insurance scheme.