Government’s third attempt at implementing a Certificate of Need for private healthcare providers should be no surprise to anyone who understands how enamoured the ANC is with the socialist system that is ‘democratic centralism’.

As socialist ideologues, the ruling party has been intent for years on implementing its National Health Insurance (NHI) proposal, and has supported that goal by placing constraints on private doctors or inhibiting medical scheme coverage from expanding.

Medical scheme coverage has been flat for years as government has repeatedly hindered initiatives for more affordable products. Equally, there has been complete inaction in implementing the recommendations of the Health Market Inquiry, which found that government had been ineffective in properly regulating the medical schemes industry, and hence contributing to its high cost.

In contrast to such prevarication, government has not held back in implementing the Certificate of Need (CON), which will encourage substantial control over where and how private healthcare providers may practise. Through the National Health Act and supporting regulations published last year in June, the implementation of the CON is imminent.

Section 36 of the Act decrees that new applications or renewals of a CON can be subject to ‘any condition’ dictated by the Director General of the Department of Health, providing extensive control over where private doctors, clinics, and hospitals may practise and under what conditions.

Once the state has this level of control over the private healthcare sector, the next step is an easier segue into an NHI world, where substantially more intrusive constraints will be imposed.

Progressing the NHI

The NHI Bill aims to implement sweeping changes to both the public and private health sectors simultaneously; it has deservedly attracted criticism from the private sector and a number of NGOs. Parliament’s Health Portfolio Committee recommenced public hearings recently on NHI, and anxious private hospital groups and medical schemes have respectfully voiced these concerns to the committee.

More importantly, certain of these stakeholders have posited alternatives to NHI. I noticed three fundamental principles across some of these – ensuring pre-emptive expert assessments of proposed reforms, implementing reforms incrementally and lastly, expanding private sector coverage.

All of these principles are incredibly important for the sustainability of health systems!

Undertaking technical and feasibility assessments on proposed reforms and implementing them incrementally are symbiotic strategies. They reflect an understanding that health systems are complex, and it is important to avoid unintended consequences in outcomes, costs, accessibility, and patient experience.

These principles also reflect the thinking of world-renowned risk specialist, Nassim Taleb of The Black Swan fame – ‘unknowledge’ is a bigger problem than knowledge – it’s what you don’t know that hurts you the most.

Expert interrogative assessments can prevent previously unseen consequences of proposed reforms, and when these are implemented incrementally, the success of each component of reform can be fairly quickly assessed. If the reforms prove unsatisfactory, they can be altered before much harm has occurred. This represents a mature and responsible approach to health policy, which minimises the possibility of major regressions or failures within the health system or even its systemic collapse.

An expanding private sector

A healthcare truism is that few things feel as important as providing the best possible healthcare for you and your family. When it comes to expanding private sector coverage, governments don’t need to ‘encourage’ it – citizens will almost certainly purchase their own private cover if they can afford it.

However, governments can implement policies to accelerate private sector expansion, such as personal tax incentives (Australia) or tax concessions for new providers entering the market (Brazil). Policies supporting private sector expansion are progressive and pro-poor, since the per capita public health budget is increased at zero cost to the state. This improves public health services for poorer citizens who may have previously been unable to afford private sector care.

We calculated that the medical schemes industry, which covers ±9 million lives, increased the state’s annual per capita health budget from R3,801 to R4,491 for the 2019/20 fiscal year – an 18.1% improvement and a total annual subsidy equivalent to R34.2bn.

NHI wisdom

The NHI proposal takes all three of these principles – the need for expert prior assessments, the wisdom of incremental reform, and expanding private sector coverage – and ignores them.

In this sense, not only can the NHI proposal be considered unaffordable but also fundamentally reckless. And to be clear, the NHI will not only ruin the private sector – it will do the same to an already dysfunctional public sector.

The NHI proposal seeks to simultaneously collapse the private and public sectors, in order to meld them into a unified ‘complementary single-payer’ health system under the control of the state. Complementary means that medical schemes are relegated to only covering non-NHI health services. Single-payer means the NHI Fund will be a monopoly – a nationally centralised vehicle through which NHI health services are purchased from both public and private providers on behalf of every citizen.

Since the role and scope of medical scheme cover will be massively reduced under NHI, a substantial proportion of private healthcare providers will need to contract with the NHI for their survival – effectively compelling them to become servants of the state.

Public health institutions will also be required to convert their revenue model. Currently, public budgets are allocated from Treasury to the provinces via the equitable share and conditional grants, and then directed by the provinces to the various health districts and institutions. Under NHI, each and every public health institution will need to convert to a ‘pay-as-you-provide’ model, similar to how private providers currently bill medical schemes for services delivered to their members.

Each public institution will require accreditation and a contract with the NHI Fund before it can bill the Fund. However, if the institution fails accreditation, its remuneration goes to zero. There will no longer be budget allocations to the provinces, as all funding will be centralised nationally through the NHI Fund.

It is obvious that the NHI has intentionally been designed to be a state-run monopoly, and no one is under any illusions as to why. But since the ANC no longer even bothers with a pretence of altruistic intentions, it was also decided in the policy process to dispense with any good governance principles for the NHI.

The governance framework is very weak – there is virtually no oversight on the exercise of powers or any separation or limitations thereon, and virtually all control is vested in the hands of the Minister of Health. This will hand de facto managerial control of the NHI board and its various sub-committees to the Minister, enabling widespread political interference into the day-to-day administration of the NHI Fund and access to its substantial budget – estimated in both white papers to be ±R500bn annually (2021 values).

Unnecessary and high risk

The NHI is an unnecessarily complex and high-risk proposal that will wreak havoc on both health sectors.

The fact is that SA has two very substantial assets in the private and public health sectors, and together they are capable of providing quality universal healthcare to all South Africans, rich and poor, and within existing public budgets.

It would require far less radical change to the structure and form of both sectors to get them operating more efficiently. It would also not threaten doctors, a substantial number of whom must be currently contemplating emigration, in view of the frightening prospect of the NHI’s deep intrusion.

The private sector could be substantially expanded if the market reforms outlined in the Health Market Inquiry were implemented. The public sector could be salvaged if the lack of governance and poor management were dealt with, and corruption was eradicated. Reforms to both sectors would bring much-needed improvement to the quality of care delivered by the state to the poorest in our society.

But the only conclusion that can be drawn is that this is of no concern to the ANC. As the veteran political journalist RW Johnson so cynically observed recently, the ANC are long past caring for the poor!


The views of the writer are not necessarily the views of the Daily Friend or the IRR

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Michael Settas is Managing Director at Cinagi, a company which specialises in innovative health insurance solutions for corporates and private individuals.. He is also Chairman of the Free Market Foundation's Health Policy Unit.