Discovery Health presents to Parliament: Support for NHI structural reform through a blended funding model and public-private partnership

On 25 January, Discovery Health presented inputs on the National Health Insurance (NHI) Bill to the Parliamentary Portfolio Committee on Health. These included a workable, blended-funding model aimed at sustainably achieving Universal Health Coverage (UHC).

The presentations were made by:

• Dr Ayanda Ntsaluba – Chairman of Discovery Health and Group Executive Director
• Dr Ryan Noach – Discovery Health CEO
• Professor Roseanne Harris – Head of Discovery Health’s Health Policy Unit and President of the International Actuarial Association
• Khalik Mayet – Head of Legal at Discovery Health.

“We were privileged to have time with the Parliamentary Portfolio Committee to reiterate our support of the aspirations of the NHI Bill to achieve broader access to equitable quality healthcare for all South Africans,” says Dr Noach.

“We hope it is clear that we are fully committed to constructive engagement and collaboration with policymakers and social partners on implementable and sustainable models to achieve broad and equitable care. In a solutions-oriented approach, we have proposed a progressive, blended funding model including the NHI Fund, to be realised through public-private collaboration.

“A blended funding model would leverage the current healthcare infrastructure to expedite achievement of universal health coverage in a pragmatic and sustainable manner. Under this model, private medical insurance is accommodated alongside the NHI fund as part of the social solidarity framework to attaining equitable access to quality care.”

“We believe this model enables sustainable implementation of healthcare reform that aligns to the objectives of the NHI. It’s also in line with international precedent. Most UHC systems across both emerging and developed economies have a multi-payor system (such as in Thailand) or allow their citizens the option of purchasing private cover in addition to their participation in the country’s UHC system (such as in Brazil),” adds Prof. Harris.

Dr Ntsaluba says, “Most recently in South Africa, a blended funding and public-private partnership approach has proven highly succesful within our healthcare system to stand together and address the challenges of the COVID-19 pandemic in the best interests of all South Africans.

“By leveraging the strengths of each sector, South Africa’s healthcare system has been able to better respond to the challenges posed by the pandemic. We’ve gained fundamental learnings along the way about implementing an integrated health system in a phased, affordable manner, and which is sustainable in the long term.”

Dr Noach adds, “These learnings gleaned during the COVID pandemic weren’t available when the NHI Bill was drafted and published back in 2019. Discovery has suggested that the Portfolio Committee take these learnings into account in reflecting on how best to consider this structural reform and ensure a resilient and integrated health system for South Africa.

“We recognise the current socio-economic and health inequities that are the result of our country’s unfortunate past, and the clear need for structural reforms in our healthcare system to address inequality in access to healthcare.”

Under a blended funding model medical schemes serve as an essential ‘safety valve’ for the NHI

“Under a blended funding model, the NHI Fund would be supported by tax-derived funding and would also receive a mandatory contribution from citizens who can afford it,” explains Prof. Harris. “Medical schemes would not be able to opt out of funding NHI, and would have the opportunity to provide additional cover. Virtual pooling is achieved by having a common service package with regulated costing and pooling of risk on an appropriately managed basis. Those who can afford it could contribute to medical schemes for seamless coverage. A blended funding model would ultimately leave consumers with some choice and improved access for all. This structure eradicates the current two-tier system, leverages the expertise of the entire healthcare sector, and leaves consumers with the discretionary ability to buy additional cover where they choose.”

Discovery Health does not support the single-funder model currently proposed under NHI as it:

• Is fraught with execution risks and uncertainty of success, given the massive re-organisation of both public and private sectors that is required;
• Has the potential to lead to governance and accountability challenges;
• Does not take into account some of the realities of South Africa’s economy;
• Does not accord with international learnings and precedent; and
• Will eliminate competition from the market, at the expense of innovation and consumer choice, leading to an inefficient and ineffective system.

Dr Noach says, “With a blended funding model medical schemes serve as an essential ‘safety valve’ for the NHI, absorbing excess demand, while generating additional funding for the healthcare system. This reduces the burden on the healthcare system as a whole, while promoting the progressivity of healthcare financing.”

Significant risk associated with limiting medical schemes

“Across the world we have seen that effective healthcare reform pivots off strengths in the existing healthcare infrastructure in both the payor and provider markets,” says Dr Noach.

“There is significant risk in limiting medical schemes to offering cover only for services not reimbursable by the NHI Fund (as set out in Section 33 of the proposed NHI Bill).”

Limiting the role of medical schemes to complementary cover will:

• Not solve the misdistribution of health professional resources in the healthcare system as there is a chronic shortage of health professionals (particularly specialists) across public and private sectors.
• Exacerbate inequality in the healthcare system by driving up Out-of-Pocket (OOP) expenditure as we have seen in other middle-income countries. This counteracts the benefits of social solidarity on which medical schemes are currently based.
• Place increased financial burden on lower income households (earning less than R300,000) through removal of medical scheme tax credits and loss of employer subsidies. Without these subsidies, these lower income households will lose their private medical scheme cover and will have to fund their private care OOP, resulting in catastrophic increased expenditure – an objective the NHI Bill is seeking to avoid.

On the other hand, a blended funding model will ensure:

1. All South Africans receive the same minimum package of healthcare services, leveraging all available healthcare skills and assets in the country
2. Sharing of the public healthcare sector’s load in terms of funding and provision of healthcare services
3. Phased implementation that is affordable and sustainable with significantly lower transitional risks
4. A multi-funder system that affords consumers a choice of funder and provider
5. Funders and providers are incentivsed to compete and innovate.

Dr Ntsaluba adds, “A blended funding model will preserve the important contribution that the private sector generates in taxes to the fiscus and mitigate against legal challenges that may arise from the limitation of rights due to an unprecedented limitation on private cover. Preserving the assets of the national healthcare system in the reform process also ensures that South Africa remains an attractive investment destination.”

“We are concerned that there is a raft of proposed amendments to other legislation which can have the effect of removing cover that people currently have before there is any alternative in place. Such amendments transfer large liabilities to taxpayers before the cost of these have been properly quantified and planned for,” says Prof. Harris. “This is not a responsible approach, and we suggest that the NHI Bill should be simplified to focus on establishing the entity and not to impact the rights of citizens in accessing healthcare.”

“It is apparent the NHI Bill requires a great deal of integration and coordination between all public, private and social role players if it is going to be effective and impactful. National Treasury has a vital role to play in the implementation of NHI Bill, given the proposed reorganisation of the funding of healthcare in South Africa. Their participation in this process is key to achieve a model that considers the backdrop of our fragile economy,” says Dr Noach.

The private sector currently plays a significant and meaningful role in the overall performance of the South African health system as follows:

1. Medical schemes provide comprehensive healthcare cover to nine million South Africans. These lives fund their healthcare mainly through discretionary after-tax income, allowing the State to focus the public health budget on those most vulnerable. These lives are also sicker and older than the general South African population.
2. Research indicates that 40% of South African households access care in the private sector. Those that are not covered by medical schemes pay on an out-of-pocket basis.
3. The availability of private health cover promotes both local and international investor confidence, which is essential for promoting economic growth and associated job creation.
4. The private healthcare sector contributes to employment and GDP growth and generates significant revenue for the fiscus in terms of value-added tax and corporate tax.
5. The existence of the private healthcare sector allows for cross-subsidises necessary to sustain the public healthcare system. For example, the private sector purchase pharmaceuticals at prices significantly higher than the State tender prices. And healthcare professionals working in the public sector are able to cross-subsidise their income by working in the private sector.
6. The private health sector allows for healthcare professionals to be retained in the country. As evidence from Nigeria and India has shown, without a regulated private health insurance sector, there is significant brain drain of health professionals from the country.
7. The existence of a regulated private sector limits the extent of OOP expenditure, which is the most regressive form of financing. South Africa, although a developing country, has levels of OOP expenditure in line with developed countries (6% of total healthcare expenditure). Countries such as Nigeria and India on the other hand have OOP expenditure in the region of 71% and 55% respectively, as those opting out of the public sector provision have no choice but to purchase care OOP.

Discovery Health’s extensive history of participation in successful public-private partnerships

“Broadly, our conviction around a blended funding model, achieved through successful public-private collaboration in healthcare, stems from our history on this front,” adds Dr Noach.

Most recently:

• Discovery Group CEO, Adrian Gore, has been integrally involved in the national COVID-19 vaccine procurement process, for the benefit of South Africa as a whole.
• In 2021, nine Discovery-run mass COVID-19 vaccination sites (in partnership with the NDoH) were set up in the major metros across the country. By the start of 2022, just over one million South African residents had been vaccinated at these sites.

Also:

• Over the past 15 years, Discovery Health has also, through the Discovery Foundation, provided over R230 million in funding towards increasing the supply of healthcare professionals - specialists in particular – for the public sector.
• Discovery Health has been an active participant in forums such as the Presidential Health Compact and the Health Market Inquiry (HMI) which have identified specific feasible actions to achieve UHC.
• Introducing Keycare via the Discovery Health Medical Scheme. Keycare offers 400,000 lower income scheme members access to comprehensive medical scheme cover through a capitated funding model.
• Introducing various primary care products that provide high-quality coverage to individuals in the lower income earning brackets, by harnessing employer subsidies to promote access to primary care.
• Constructively participating in all discussions, including tabling concrete proposals for the development of a Low-Cost Benefit Option framework.
• Developing invaluable tools such as the science-based Vitality model (which is deployed across a host of global insurance sectors) which encourages behaviour that improves health outcomes, so lowering healthcare costs to make coverage more accessible.
• Developing cutting-edge and digital health platforms that are critical for both managing care and putting a focus on preventive healthcare, to streamline healthcare and lower costs.

Blended funding model: economically sustainable and effective

Dr Noach concludes, “The proposed restructure of the health system towards an NHI framework is a massive undertaking and requires co-operation across multiple spheres of government, the health system and society. We have noted a number of key references for these actions including the work of the Health Market Inquiry, the Lancet Commission and the Presidential Health Compact.

“We hope concrete steps can be taken to solidify the public-private co-operation that has emerged during the COVID-19 crisis, and we’re advocating for the planning to be made for human resources for health development and the recommendations of the HMI to be implemented to enhance efficiencies and access to cover.”

“We fully support the aspirations of the NHI bill and the need to improve access and equitable care. We acknowledge the need for structural reform, in both the private and public sectors, which should be done simultaneously and carefully in a way that will benefit all South Africans.”

ENDS