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NHI – Where are we now? We are in conversation with Kwaku Koranteng (FIA, FASSA), Head of Institutional Business within the Absa Multi Management team.


What is the current status of the National Health Insurance (NHI) Bill?

Kwaku Koranteng (KK): The National Health Insurance (NHI) journey was kick-started in 2012, with various consultative and legislative processes. Given its potential scale, resource and administrative requirements, as well as its potential to transform South Africa’s healthcare and socio-economic landscape, it was envisioned that potential implementation would be over a period of about 14 years. This was penned as a moving target. The aim was to set up the fund after legislative approval and provide majority coverage by mid-2020 to 2030. Implementation was expected to occur in a phased manner.

 

At present, the NHI Bill has been published by the Minister of Health, approved by Cabinet and is currently awaiting consideration in Parliament. While the NHI Bill will likely be passed, there are many uncertainties in terms of how it will work, what it will look like, how it will be funded and if it has a reasonable chance of achieving its goal of quality healthcare for all residents. A few pilot projects to test its potential and the administrative planning of the NHI, such as setting up population databases, have begun.

How much are we currently spending on healthcare?

KK: The 2021 Budget allocated about R248 billion to national healthcare provision, but this only applies to the public sector at a national and provincial level. The private sector is relatively large and the spending in this sector is similar to that of the public sector, even though it covers less than 20% of the national population. This disparity in resources, where half of healthcare spending is used in the private sector for a minority of the population, is the key driver behind the idea of the NHI. In total, South Africa’s health expenditure currently stands at roughly half a trillion rand. Relative to other emerging market economies, the share of South Africa’s gross domestic product (GDP) allocated to healthcare costs (around 8% of GDP), exceeds the average for other African and developing economies. Due to various reasons such as capacity to deliver, it is often felt that despite this relatively high level of spending, our national healthcare outcomes are not necessarily superior when compared to some of the developing economies.

What impact has the COVID-19 pandemic had on the implementation of the NHI?

KK: COVID-19 has brought into sharp focus questions around universal healthcare provisions around the world. South Africa is no exception, given the high levels of inequality and how this manifests in the allocation of healthcare resources in the country. It is commonly accepted that lower income groups have been more vulnerable in terms of access to quality healthcare during the pandemic. In some developed countries, minorities, lower income groups, women and the elderly suffered disproportionate economic and health effects as a result of the pandemic. This has increased the urgency for universal health coverage and a reconfiguration of national health systems. However, the financial resources for the successful implementation of the NHI remain a big concern. The pandemic has forced the South African government and others globally, to spend beyond what was originally budgeted for, significantly increasing national debt levels to deal with the health and economic repercussions of the pandemic. This has created potential financial constraints for the NHI and other national priorities to that need to be implemented.

How can the COVID-19 pandemic push us towards the achievement of the NHI?

KK: The COVID-19 pandemic highlighted a lack of resources to meet the country’s healthcare needs at a crucial moment. Media coverage of overfilled hospitals or the unavailability of hospital beds and other healthcare facilities in some of the most disadvantaged areas of the country, served primarily by public facilities, was evident. While the private healthcare sector also experienced some level of strain at the peak, the sector seemed to have weathered the pandemic storm marginally better, by virtue of having greater resources and the smaller population that it covers.

What are the likely effects that the NHI reforms will have on both the cost and the demand for healthcare services?

KK: There are many uncertainties in terms of how the NHI will work, what medical activities will be covered, the role of the private sector and where the resources will come from. Funding ideas have included some level of taxation whether direct or indirect, payroll charges, and a level of subsidisation where the wealthier bear the burden of some of the costs. Given these uncertainties, it is difficult to quantify the cost but it is generally accepted that improving the level of healthcare and coverage will increase the overall cost of healthcare provision in South Africa. Demand may increase for those who previously had limited access as a result of financial constraints, as they will now have access to certain medical care and procedures.

On the other hand, and as experienced in some countries, the NHI would become a single fund and a single buyer of medical services for the general public, although private medical services could still have a major role to play. Having a single buyer with a standard list of approved medical procedures covered, medicines and prescribed healthcare partners to deliver these can reduce the cost of medical services entirely. Price limits for procedures and medicines in government contracts with healthcare providers could also reduce costs. This will be achieved through the scale and bargaining power that a single buyer of the healthcare services presents.

Any consequences from an investor’s perspective?

KK: South Africa has a relatively vibrant private healthcare sector made up of pioneering medical administrators such as Discovery and other financial/medical services groups, drug manufacturers and retailers such as Aspen and Clicks, hospital groups such as Netcare and Mediclinic, and managed care companies. Significant policy changes creates uncertainty for private companies and this has been reflected in the share price volatility of some of these companies, before COVID-19 started. At the same time, given the resources and skills within the private sector, it creates potential opportunities. Some of the uncertainty relating to the private sector includes:

  • What role medical aids will play and if some of the middle class will abandon them altogether given the NHI
  • What the medical benefits of the NHI will be – if it will be focused primarily on primary healthcare
  • If there would be cost controls and limits and how significant these would be
  • What the extent of collaboration and use of private sector facilities and personnel will be
  • What the source of financing will be, as the economy is on the verge of a fiscal debt trap, which has long-term implications on borrowing and debt expenditure
  • How the medical fraternity will respond to emigration of skills, for example.

What lessons has the COVID-19 pandemic taught us when it comes to our proposed NHI plan(s)?

KK: In summary:

  • The overwhelming need for the implementation of the NHI. COVID-19 has been an unfortunate stress test for healthcare systems around the world.
  • The repercussions of global inequality, in which South Africa leads on many indicators.
  • The resources gap between the public and private healthcare sectors.
  • The implementation challenges faced by government, including a lack of resources and skills in the public healthcare sector.