Transcript Integrating Healthcare Financing in South Africa

SOCIAL HEALTH
INSURANCE POLICY
DIRECTION
AIDS LAW PROJECT
10 February 2004
Presentation
Brief context
 Taylor Committee proposals
 Departmental position
 SHI Description
 Work plan

Policy Context cont.
SA - Health System 2002/2003
Public sector
R33.2 billion
Serves 37.9 m
Pcap = R875.98
R72.99 pm pp
Serves 6.9 m
Private sector
R43 billion
Pcap = R6231.88
R519.32 pmpb
Policy Context
Public sector
Private sector
Cover
Indigent
(pop. growth)
Low-income (pop. growth)
High
Burden of
disease
HIV/AIDS
HIV/AIDS
Infectious
Communicable
Chronic
Providers
Medical
Nursing
Pharmacy
income (no change)
Good risks (no change)
Poor risks (decrease)
(limit cover)
Infectious (na)
Communicable (na)
Chronic (reduce cover)
Key Strategic Challenges

Inequity in access to health care

Ensuring that public health system remains backbone
of SA health system care

Address systematic cost increases

Develop low-cost market – address high private
hospital costs

Reduce financial risk to individuals at the time of
accessing health care
Concept of social security
Three basic pillars
 Pillar 1:
 basic social endowment for all citizens
 Pillar 2:


contributions from those able to contribute over and
above pillar 1
Pillar 3:

social security-type benefits that are more discretionary
in nature
Health interventions
Pillar 1
Free health care for children <6
 Free health care for pregnant women
 Free primary health care services
 Free health care for disabled

Pillar 2: Social health insurance
Pillar 3: Voluntary medical schemes
Characteristics Of NHI and
SHI

Mandatory contributions for entire population or
certain groups like (public sector employees)

Usually employment related, payroll deductions

Contributions from employers and employees

Premiums are income related and benefits are
standardized

Creates large risk pool and avoids adverse selection
NHI versus SHI

National health insurance
Benefits for contributors and non-contributors
 Cross subsidies, dedicated health tax


Social Health Insurance
Benefits contributors only
 Can increase resources available for public
heath care

Key departmental objectives
Strengthen public health care system by
increasing revenue
 Obtain prepaid contributions from those who can
pay
 Reduce inequities in health care financing
 Improve access of lower income groups to
quality health care

Taylor Committee proposals
Four key policy proposals:
 Move towards NHI
 State medical insurance, risk equalisation,
social health insurance
 Tax subsidy reform, cross subsidisation
 Recentralisation of health budget
Departmental position
We still require significant tax funding for
public health sector
 Need to compare progressivity of tax
funding versus NHI
 For the medium term,will only commit to
SHI

State medical insurance
Taylor Committee proposals:
 State-sponsored medical scheme



Low cost for low income earners
Sets benchmark price for minimum benefits
Benefits in differentiated amenities in public hospitals
plus private primary care
State
medical insurance
Taylor Committee proposals
 Civil service medical scheme cover
Dedicated low cost restricted scheme
 Compulsory under employer mandate
 Benefits similar to state-sponsored scheme
 Could evolve into state-sponsored scheme

State medical insurance
Taylor Committee proposals
 Risk equalisation
 Below average risk schemes contribute
above average risk schemes receive
 Enlarges risk pool, schemes compete on
cost and quality rather than risk selection
 Aims to stabilise medical scheme market
Mandatory medical scheme cover
Taylor Committee proposals
 Mandate to begin with high income earners
/qualifying employers
 Voluntary membership for others
 Out of pocket fees for public hospital
treatment in basic amenities abolished
 Low income mandates after high income
mandate
Department response
Endorse general approach
 One state scheme, should evolve from civil
service scheme
 Support SHI, not ready to commit to NHI
 Accept abolition of out of pocket fees,
except possibly bypass fees

Departmental response
We endorse:
 SHI plus tax funding
 Incremental mandates for medical scheme
membership
 Civil service medical scheme as starting
point
 Civil service scheme to evolve to statesponsored scheme

Departmental response
Basic minimum floor of benefits should be
established
 Mandatory benefits = Prescribed minimum
benefits plus primary health care services

SHI in SA context
Government mandated health insurance
 Income cross-subsidies among contributors
 Risk-related cross-subsidies among
contributors

Risk Related Cross subsidies
MSA requires all schemes to provide PMB for all
scheme members
Scheme have different risk profiles, resulting in
different cost structures
Research done by CARE found that price of PMB in
one scheme was 17% cheaper while for another
scheme 130% more expensive than industry
average, just because of different age profiles
Clearly, schemes have incentive to risk rate in order
to reduce their costs
Risk Related Cross subsidies


Risk equalisation should ensure that all medical
scheme members face the same community price
for PMB’s
It should:
 remove the incentives for medical schemes to
select preferred risks, by ensuring that each
scheme must bear the cost of a risk profile
equal to the risk profile of all covered lives.
 Create incentives for schemes to improve its
efficiencies and cost controls, by not incorrectly
penalising efficient schemes.
Income Cross subsidies





In most countries with social insurance systems,
contributions tend to be based on income
High income earners cross-subsidise low income
earners
In SA, medical scheme contributions are
community rated
Income related cross subsidies difficult to achieve
Need to change tax subsidy to improve income
cross subsidies
Income Cross subsidies
Tax deductions on medical scheme contributions,
and the tax deductions on medical expenses in
excess of 5% of income estimated at R7,8 billion
Impact is regressive b/c of link to contributions
Out of pocket expenditure may be more progressive,
but depends on submission of tax returns
Need to restructure this subsidy to achieve greater
subsidies for lower-income earners
Income and risk-related cross
subsidies
Support restructuring of tax subsidy, but
with greater subsidies for lower-income
earners
 Support risk equalization to stabilize
medical scheme environment and prevent
schemes from profiting via risk selection

Budget Centralisation
Budget centralisation to follow a political
process
 Will enlist Treasury support for
implementation of revenue retention
framework in all provinces

Supporting policies
Preparation of public hospitals
 Hospital revitalisation project
 Designated provider network pilot
 Civil service scheme development
 Revenue retention policy development

Programme of work 2004





Sign DSPN contracts with medical schemes 1
April 2004
Finalise technical work on Risk Equalization and
income cross subsidy issues
Support DPSA process to implement civil service
medical scheme
Obtain Treasury support for revenue retention
enforcement
Finalise policy decision on phasing of mandatory
cover