Transcript Slide 1
Social security and
healthcare reforms
MFP Professional Development Day
November 2011
Agenda
•
•
•
•
Social security reform
Health care reform
Challenges to making reforms reality
Looking ahead
Social security
reform
Rationale: challenges with current system
•
•
•
•
Low coverage
Low income replacement
Low preservation
High costs
Employees with pension contributions from
employer (by income, %)
(%)
100
90.6
86.7
87.5
80
68.1
60
44.6
40
30.5
20
0
R1 001-R1 500
Source: Statistics South Africa
R1 501-R2 500
R2 501-R3 500
R8 001-R11 000 R11 001-R16 000 R16 001-R30 000
Employees with pension contributions from
employer (by industry, %)
100
82.8
82.0
80
58.1
60
53.7
47.9
(%)
37.4
40
25.3
20
0
Mining
Manufacturing
Source: Statistics South Africa
Utilities
Construction
Trade
Transport
Finance
Members who have withdrawn their
retirement funds in the past (%)
Yes
18.7
No
81.3
Source: Sanlam
Use of retirement funds after withdrawal
70
66.0
% of members who withdrew funds
60
50
40
30
20
15.6
9.5
10
4.3
3.5
1.4
0
Withdrew full
benefit in cash
Source: Sanlam
Preserved part of
Moved entire
Moved entire
the benefit
benefit to another
benefit to
employer's fund preservation fund
Purchased an
annuity
Purchased unit
trusts
Retirement fund costs by size of fund
70
63.5
60
50
Cost (% of contributions)
40
30
20.6
20
18.8
16.2
14.3
12.8
12.7
14.7
10
0.7
0
Number of members per fund
Source: Financial Services Board
Social Security Pillars
• Social assistance: Pillar 1
• Non-contributory
• Tax funded
• Focused on the poor
• Social insurance: Pillar 2
• Mandatory contributions
• Focused on income earners
• Voluntary insurance: Pillar 3
Proposals discussed in 2011
• Establishment of a National Social Security Fund (NSSF)
• Mandatory contributions for retirement, death and disability
• Sufficient unemployment protection to minimise withdrawal from
retirement savings
• Government guaranteed benefits
• All workers to contribute up to income threshold – currently R157, 000
• Contribution subsidy for low income earners
• Mandatory contributions to approved private funds for
income >R157, 000 to R750, 000
• Voluntary savings for income
above R750, 000
• Mandatory preservation
Proposed multi-pillar system
Voluntary savings
For income in excess of R750, 000
Main objective is to allow high income earners to save more
Approved funds
Mandatory contributions for income R157, 001 - R750, 000
Main objective is additional cover above NSSF
NSSF
+/- 8.3 million members (all employed South Africans)
Targets income up to R157, 000 with co-contributions for low income earners
Mandatory contributions for retirement, death, disability and unemployment
Main objective is basic contributory benefits
Social grants
+/-15 million beneficiaries
All individuals 60 and above will receive state pension
Main objective is poverty alleviation
Potential positive impacts
•
•
•
•
•
Greater coverage
Lower costs
Improved preservation
Higher replacement ratios
National solidarity
Potential negative impacts
•
•
•
•
Contraction in size of private sector
Loss of jobs
Reduction in corporate and personal tax
Strain on national resources
International case study: Chile
• Why reform ?
• Corruption and insolvency led to collapse of public PAYG system
• Falling coverage due to rising unemployment and evasion
• 3 pillar system
• Pillar 1: basic solidarity pension and solidarity complement for those
who financed small pensions (introduced 2008)
• Pillar 2: Fully funded mandatory DC system called AFP (introduced 1981)
• Pillar 3: Voluntary DC
• Pension saving education fund
introduced in 2008
Mandatory DC pillar – most well known
part of Chilean pension system
• Fully funded mandatory DC system replaced public PAYG system in 1981
• Compulsory for salaried workers but voluntary for the self employed
• Contribute 10% of income for retirement
• 2-3% of income to cover admin costs, and health and survivorship
insurance
• Contributions based on income threshold
• Large increase in pension funds under management– 10% of GDP in 1985
to 110% in 2010
• Increase in savings and investment rates
• Challenges faced by DC pillar include:
• Low density of contribution by salaried
workers
• Low coverage for the self-employed
Health care reform
Rationale: challenges with current system
•
•
•
•
High disease burden
Low coverage
Fragmented system
Escalating health care costs
Reasons for high disease burden
•
•
•
•
HIV/AIDS and TB
Maternal, infant and child mortality
Non-communicable diseases
Injury and violence
SA disease burden compared to other
developing countries
50000
40000
DALYs
30000
20000
10000
0
South Africa
Source: Econex
Brazil
Colombia
Ghana
Indonesia
Thailand
Tunisia
Population covered by medical schemes (%)
16%
Medical schemes
Public healthcare
Source: Government Green Paper
84%
Employees with medical aid contributions
from employer (by industry, %)
80
69.4
67.3
% of workers with medical aid benefits
61.8
60
40
37.2
34.0
27.1
20
14.3
9.4
2.6
0
Agriculture
Mining
Manufacturing
Source: Quarterly Labour Force Survey
Utilities
Construction
Trade
Transport
Finance
Community and
social services
Per capita expenditure in medical schemes
and public sector
12000
11150
10000
Rands
8000
6000
4000
2766
2000
0
medical aid
Source: Government Green Paper
public sector
Needs versus benefits by income group
100%
90%
% share of need/benefits
80%
70%
60%
50%
40%
30%
20%
10%
0%
Need
Q1 (poorest)
Source: Ataguba and McIntyre
Total benefits
Q2
Q3
Q4
Q5 (richest)
Proposal
• Establishment of National Health Insurance (NHI)
• Objectives of NHI:
• Provide access to quality healthcare irrespective of
employment status
• Pool risk and funds to achieve social solidarity and equity
• Procure services on behalf of population
• Efficiently mobilise and control financial resources
• Strengthen under-resourced public sector
Features of NHI
• NHI is a healthcare funding system aimed at providing
universal coverage
• Health services will be provided through accredited and
contracted public and private providers
• A defined comprehensive package of health services: primary,
secondary, tertiary and quaternary
• Will be phased in gradually over a 14 year period from 2012
• Funding model being considered: payroll tax, higher VAT rate
and surcharge on individuals’ taxable income
Potential positive impacts
• Greater coverage
• Better health care for majority of population
• National solidarity
Potential negative impacts
•
•
•
•
•
Will be clearer when more details are known
Contraction in size of private sector
Loss of jobs
Reduction in corporate and personal tax
Strain on national resources
International case study: Taiwan
• Why reform ?
• Fragmented public insurance system with 10 schemes
• Low coverage – 41% of population uninsured
• Seven years of planning from 1986 to 1993
• Move to democracy in 1987 served as a catalyst for reform
• Pressure of elections led President to decree that NHI was to
start operating by 1 March 1995
• NHI implemented after 2 decades of rapid economic growth
Features of the Taiwanese NHI
• Enrollment into NHI is mandatory - by 2006 98% of
population was insured
• Administered by the Bureau of National Health
Insurance (BNHI)
• NHI funded mainly by premiums : 60% (employees), 30%
(employers), 10% (government)
• Direct government funding also used
Features of the Taiwanese NHI
• Significant involvement by private sector – e.g. bulk of
hospitals and hospital beds are privately owned
• Co-payments for outpatient visits and co-insurance for
inpatient services
• Uniform fee schedule for contracted providers
• Comprehensive benefit package
Challenges faced by the Taiwanese NHI
• Financial sustainability
• NHI was facing deficits by 1998 and by 2002 BNHI had to
borrow from banks
• NHI reserve depleted in February 2007 and financial gap was
US$437 million in March 2008
• Quality issues – ‘fast food healthcare’
• High cost of drugs sold through hospitals
Challenges to
reforms in SA
Challenges
• Can SA finance NSSF and NHI at the same time?
• How do we improve service delivery before implementation of
NSSF and NHI?
• How do we incorporate what is already working well?
• How do we take on board views of all stakeholders?
• What can we learn from the experience of other countries?
Looking ahead
• Waiting for government paper on compulsory preservation
• Waiting for government paper on latest NSSF proposals
• Looking forward to robust debate on health care and social
security reform with other stakeholders
Thank you