National Health Insurance (NHI) Bill: public hearings day 15

Meeting report

Submission: Witwatersrand University School of Governance

Prof Alex van den Heever, Chair: Social Security Systems Administration and Management Studies, Witwatersrand (Wits) School of Governance, presented his oral submission on the National Health Insurance (NHI) Bill to the Committee.

He said that while there is a wide consensus among the authors defining the NHI-model as a single fund and single-payer system with universal coverage, several countries name their health insurance schemes a national public institution or a specific national health program “National Health Insurance”, regardless of the health financing system of the country.

For example, Israel names “National Health Insurance” in their country a social health insurance (SHI) model, based on a multi-insurance system. Japan uses “National Health Insurance” to refer to one of the two major types of health insurance schemes in the country, which targets the population not eligible for insurance provided by the employee, in the context of an SHI-model. Several African countries, such as Ghana, Kenya or Tanzania, have insurance schemes denominated “National Health Insurance”. Nevertheless, these schemes are not universal, as they cover only a small percentage of the population (11 - 35%), which were mainly formal sector employees. These uses of the term NHI had probably contributed to some confusion in the literature.

He said the consequence of poor process was that one does not diagnose complex problems that require systemic responses; one does not identify and implement needed systemic reforms timeously; the gap between social needs and the required social responses widen; multi-faceted crises emerge with increased frequency; and policy responses consistently take the form of short-term fixes and drain resources.

He painted a five to ten year scenario.

For the public sector:

• Institutionalised corruption will continue to drive failures of efficient quality care provision, particularly for major medical and hospital-related services, which will therefore incrementally decline in scope and access relative to the population in need;
• Fiscal pressures result in budget growth below the growth in the catchment population;
• Poor risks for catastrophic health care will drift incrementally to the state.

For the medical scheme system:

• Systemic de-insurance will continue, resulting in the failure of financial risk protection for poor risk members (pensioners and people with pre-existing conditions), and the exit of private hospital beds due to the elimination of lifetime insurance coverage for many;
• This would result in the out-of-pocket market for primary care continuing to expand.

There were three distinct elements to the NHI proposals -- pooling, purchaser provider split, and monopoly purchaser. Each of these aspects should be supported by a diagnostic assessment indicating why they are necessary and which rational and reasonable interventions are required to address any problems.

Referring to the NHI's financial feasibility, Prof Van den Heever said general tax revenue is behaviourally not a substitute for medical scheme contributions. The proposed tax increases to achieve the policy end-point are not feasible.

From an institutional feasibility standpoint, health systems are extremely complex, with the “purchasing” function decentralised, not centralised, to achieve efficiencies. The proposed involvement of the executive in appointments to all aspects of the proposed system will reinforce systems of patronage that have harmed performance of the state-run health system to date.

 

The Davis Tax Commission stated in 2017 that "the large degree of uncertainty and lack of common understanding of how the NHI will be implemented and operate is of concern, given the magnitude of the proposed reform.” It also stated that "given the considerable size of projected funding shortfalls, substantial increases in value added tax (VAT) or personal income tax (PIT) and/or the introduction of a new social security tax would be required to fund the NHI.”

 

The Commission went on to state that "the magnitudes of the proposed NHI fiscal requirement are so large that they might require trade-offs with other laudable national development programmes (NDP) programmes such as expansion of access to post school education or social security reform. Given the current costing parameters outlined in the White Paper, the proposed NHI, in its current format, is unlikely to be sustainable unless there is sustained economic growth.”

In 2018, the Minister of Health had said "that the budget for the NHI has yet to be confirmed, and that initial estimates of R256 billion were a thumb-suck by a local accounting firm." He had then been advised by the World Bank and the World Health Organisation (WHO) that the amount could not be quantified by any human being because the costs are so variable

General concerns with the NHI proposals were:

• They have not been thought through;
• They are lacking in evidence of their public purpose;
• They are not based on a coherent rationale;
• They have not been evaluated for feasibility, despite nearly 11 years of apparent work;
• They pose significant risks to the public and private health systems, without any evidence of advantage to the general public;
• They do not expressly address the actual problems that exist in the health system; and
• They ignore viable and easier to implement reforms that are already identified, and that relate to actual problems in the health system.

Turning to feasibility issues, he said the institutional framework -- which implies the complete replacement of the provincial and private sector functions of financing, planning, organising and purchasing health -- is plainly too ambitious for the current capabilities of the health system.

Secondly, the fiscal requirements for the substitution of medical schemes contributions with general tax increases is plainly unachievable. It is quite evident that the failure of the National Department of Health (NDOH) and National Treasury to produce a financial feasibility study results from this realisation.

Thirdly, the inclusion of a corporate governance model for the National Health Insurance Fund (NHIF) and related organisations, based on political appointments, condemns any version of the proposals to failure. This governance approach has driven institutionalised under-performance throughout the public sector and all state-owned enterprises, which will be no different in this instance.

He warned of several constitutional and legal challenges:

• The re-direction of the provincial equitable share (PES) to the national level of government;
• The circumvention of the powers of provinces, which reduce the health function to that of an agent for the NHIF;
• The establishment of government components without the requisite powers or permissions to do so.
• The prohibition of medical scheme and related social insurance coverage for benefits offered through the NHIF.
• The elimination of social protections offered to medical scheme members through the Medical Schemes Act.
• The removal of the tax credit regime for contributions to medical schemes, which is an existing legitimate entitlement for a population that cannot in any way be accommodated in the public sector.

Discussion

The Chairperson said that the presentation had highlighted that there were certain significant imperfections in South Africa. Was that in both the private and public sectors? He asked where in the Bill it was suggested that it was a non-incremental approach. Was there not a single other health economist in the country or in the world who had made comments on the NHI? Why had Prof Van den Heever stated that ‘most people choose to go the private sector because the public sector was not really assisting them.’ Why had the Professor had not spoken about the significant number of people on medical aids in the private sector, who got dropped during the year, and had to make use of the over-burdened public sector or go home to die. This showed how inhumane the private healthcare sector was globally – if one did not have enough money to pay, one just had to leave the hospital. This took place irrespective of whether one had stage three or four cancer. Why was this left out of the presentation as a comparison?

Ms A Gela (ANC) referred to a slide on terminology. Why had Prof Van den Heever differentiated between service and system? What was his position on understanding the object of the NHI versus those contained in the National Health Act? The presentation set out a proposed formulation of policy, and went on to suggest that the NHI process had met those requirements. The NHI Bill was not a policy, but rather a means to realise policies that had been formulated after years of experience and consultation. Prof Van den Heever had mentioned the disparity and inequality in the current health system. Did he believe that the Bill addressed these inequalities and sought to correct this, or not?

Ms H Ismail (DA) said that Prof Van den Heever had outlined the policy process. What were the implications whereby policy makers removed evaluation and appraisal of policy change options from the process? In his view, why would policy makers do this? How would this benefit the process? How well did the Bill protect the Fund against corruption, theft and maladministration?

Mr T Munyai (ANC) asked if Prof Van den Heever had any specific proposals or suggestions on what needed to be changed in the Bill. The presentation seemed to focus on opinions, and nothing spoke to the Bill specifically. Was he totally against the provisions of the NHI Bill, in its entirety? He understood that he was instrumental in the private medical aid schemes in South Africa. To what extent were his views informed by his potential belief or interest that the Bill sought to destroy medical aids?

He had asserted that nowhere in the world was there a situation where fragmented multi-tiered health financing was transformed from a single payer, single purchaser model, as stated in clause 2 of the Bill. Could he explain what reforms took place in South Korea as they moved from the inefficient multi-payer systems to a single system that took place in the previous five years.

Mr Munyai referred to slide seven, which showed the infrastructural differences between a Gauteng Department in downtown Johannesburg and the headquarters of Discovery in the up-market centre. Could Prof Van den Heever provide an honest explanation of why there was a differentiation between these two buildings/infrastructure? Did he agree that Discovery built the facility on the basis of denying its members needed healthcare services? Discovery syphoned healthcare funds into marketing through their in-house administration costs, as put forward in the findings of the Health Market Inquiry, and the banking and insurance company that made exorbitant profits from its customers. Was he not comparing apples with oranges? Before Discovery established the company, they used a building in Sandton, which was low-cost, so as to develop themselves.

Prof Van den Heever had spoken of state health services as a ‘bad thing,’ and he requested clarity on this. He referred to Section 27 of the Constitution, which outlined the attainment of socio-economic rights to access healthcare. Did he see a problem with the two-tier system which continued to discriminate against the poor and perpetuate inequality in the Republic? Was he content with the inequality that was considered one of the drivers of the rioting in KZN and Gauteng? He seemed to be advancing federalism in a democratic unitary government, where everything needed to be decentralised. To do that, one needed a Constitutional amendment which South Africa would not do. He seemed to support the current status quo of the two-tier system – a radical system that separated the rich and the poor. He suggested that the reform should be typical of new liberal economics. Why did he not want to resolve the gap between the rich and the poor? Only the new liberal economist could seek to advance such a problem. Only the free-market fundamentalist with laissez-faire policies would not want equality within the Republic.

Mr M Sokatsha (ANC) asked whether the crux of Prof Van den Heever’s argument was that the democratically elected government was incapable and a failure. What were his specific views on the Bill, setting ideology aside? Did he agree that the challenges of the health system were well documented, and people’s experience of the health system should not be ignored and left to resolve themselves? The presentation seemed to disagree with the intentions of the Bill, and Prof Van den Heever seemed to blame the government for some of the private sector behaviour. Was he suggesting that government should do nothing by way of introducing policies that were aimed at addressing failures that existed in the health system?

Some of the work the Portfolio Committee did was to get regular reports from the Minister on the COVID-19 situation in the country. On 30th June, the Committee had hosted the Minister and it was during question time that one Member of this Committee complained about a situation where someone was turned away from accessing health services because she did not have medical aid. The Department would argue that this was the exact reason the NHI was needed. He asked that Prof Van den Heever comment on this.

He asked if the current tax credit regime benefited the uninsured population. The Committee had been told by many stakeholders that the majority of members of medical schemes were dropping out or were running out of benefits. The premiums were unaffordable, and some of these consumers ended up abusing the public health sector for various services. Universal health coverage was about financial protection for all, not just for the insured. Prof Van den Heever’s concern about the elimination of protection through the Medical Schemes Act was noted. Clause 33 of the Bill stated that only when the NHI was fully implemented, would medical schemes be expected to provide complementary cover. Clause 57 spoke about a phased implementation of the NHI. What was Prof Van den Heever’s opinion on people insuring against the same health cost twice (i.e duplicative cover). Would that not perpetuate the same inequalities threatening achievement of universal health coverage?

Dr X Havard (ANC) referred to slide three, where the NHI was described as a state scheme. Where in the Bill was it stated that the NHI would be a state scheme? Her understanding was that clause 2 outlined the purpose of the Act, but made no mention of a state scheme. She asked that Prof Van den Heever clarify this further. Was he aware that the NHI mandated participation – there would be risk adjustment for the entire population – not only for the private sector? Did he think it was important to have cross-subsidisation and risk pooling to benefit the entire population?

Dr S Thembekwayo (EFF) referred to the tables shown in the presentation. She requested extra information about the ‘none’ reflected in the tables as being evidence. Could Prof Van den Heever inform the Committee on the importance of the inclusion of this list of problems and their relationship to the NHI Bill? When it came to terminology, as included in the NHI, it was meant to be understood by anyone. The terminologies and meanings thereof needed to be written in such a way that they could be understood. Some of the terminology used in the presentation was beyond the mental understanding of an ordinary person who was just able to read and write. The reason for policies and public opinion was for people to really understand and comment on what they understood. The ‘higher’ the terminology, the less it was understood.

Dr K Jacobs (ANC) said that Prof Van den Heever seemed to suggest that there was no understanding of what was happening in the South African health system. Was he aware of the diagnostic report prepared by Prof Di McIntyre on how the health sector contributed to inequality in South Africa? Prof Van den Heever seemed to suggest that the state should continue with the two-tier system, supporting the existence of a private system that continued to weaken the public sector, especially in the area of human resource distribution. Was this correct? If so, why should government fold its hands and do nothing about a system that threatened the population's health and national wellbeing? In one of the slides, it identified some of the challenges faced both in the public and private sectors. He got the impression that Prof Van den Heever conceded to the reality of the challenges that existed in the health system. He was not sure whether there needed to be something in the Bill to the effect that the problems in the public and private sectors needed to be addressed for the interest of consumers. He suggested a middle ground.

Did Prof Van den Heever agree that the challenges in the health system were well documented? People’s experiences of the health system should not be ignored, or left to resolve themselves. The presentation seemed to disagree with the intentions of the Bill. Prof Van den Heever was blaming government for some of the private sector behaviours. Was he suggesting that the government should do nothing – by way of introducing policies that were aimed at addressing failures existing in the health system? There were private sector beneficiaries drifting to the public sector. The presentation seemed to suggest that migration would occur only under the NHI as a result of the implementation of legislation.

Ms E Wilson (DA) said that there was a lot of concern amongst previous presenters about how the NHI would be funded, and where the money would come from. Did Prof Van den Heever believe there was anything in the NHI that proposed to improve the health outcomes, outside of more funding? Given the overall cost of the Cuban health system, at more than 13% of its gross domestic product (GDP), did he think that the NHI had any structural features that would prevent it from avoiding such a high percentage of the GDP?

The monopoly structure of NHI meant that the government assumed the cost of delivering healthcare to all citizens. What advantages would there be in a monopolised structure, as opposed to having a multi-payer system that combined the private and publicly funded healthcare systems? If South Africa could not raise the dedicated health taxes to the extent of 2.9% of GDP to fund the NHI, was there any point in implementing it? There were various reports that said that unless the country reached a certain level of growth, and a certain percentage of GDP – that the NHI could not be implemented. She asked that he comment on that. Did he think that the NHI, given the information provided in the presentation, would meet constitutional muster in a court?

The Chairperson said that some of the terminology used went above his head. He did not agree with the distinction made between the ‘state’ and ‘public.’ Section 27(2) of the Constitution stated that the state must take reasonable legislative and other measures, with its available resources, to achieve the progressive realisation of each of these rights. One of these rights, mentioned in Section 27(1), was that everybody had a right to access healthcare services, including reproductive healthcare. It clearly stated that the State must take reasonable and other measures. What distinction was Prof Van den Heever making? He had made a statement asking ‘why propose to cover what was already covered.’ What group was already covered? He referred to Section 27 of the Constitution -- how had Prof Van den Heever missed that?

 

Dr Jacobs made mention of Prof McIntyre. One of Prof McIntyre’s writings said that South Africa was a divided society. There were those who accessed health in the private healthcare sector, and about 4.5% of the GDP was spent on those people. This constituted about 16 percent of the population. He wanted to understand Prof Van den Heever’s statement that there were ‘no evaluations of the healthcare systems in the country.’ How could it be ensured that there was a more equitable distribution of healthcare services available when the prices and wages paid in the private sector were above those paid in the public healthcare sector? Did he believe that the amount and quality of healthcare that someone got should depend on their medical need or on their ability to pay for it?

He stated that he had previously asked presenters about the high caesarian section rate in the private sector and the reason for that, when it averaged 35% in the public sector. 70% of pregnant women admitted in the private healthcare sector in South Africa had caesarian sections. Was there not an anomaly there?

Prof Van den Heever's response

Prof Van den Heever said that the presentation reflected that there were significant problems in health coverage outcomes in the public and private sectors. The question was whether issues were properly diagnosed at an institutional level and whether there were reforms to address them. That was why he had raised queries around the NHI proposals. There was no reflection of what was failing in the public or private sectors. That was a fundamental critique – there was a misdirection with what was going wrong in the health system.

The reference to the non-incremental reforms was that they involved substantial change from the existing system. One of the reasons nothing had happened with the proposals for the past 12 years was because they exceeded the capabilities of government to properly consider. It was such a radical change, that no one really knew how to do it. That was likely to continue into the future.

The comment he made about the group that was already covered, was that everybody was covered in one way or another. One was either covered by a medical scheme or by the public health services. The coverage issue was not a problem, but there was an issue as to whether this was a defragmentation of the existing system. The reform was being expressed/proposed as if it was trying to cover somebody who was not covered previously – which was not correct.

The Korean system was developed over period from 1979 onward. The system mandated medical scheme coverage that was contributory private coverage around employers. Over a long period of time, the employer mandates were increased to require smaller and smaller employers to cover their members and families. Only two administrators operated the entire scheme of multiple funders. At one point in time, it was decided to consolidate what was effectively a uniform method of coverage, into a centralised purchasing model. That model was not available to South Africa. Korea looked nothing like South Africa. Its economic growth rate was around seven percent per annum. In 1980, it was important to note that the per capita GDP in South Korea was below that of South Africa. Today, it was eight times that of South Africa’s GDP. When they introduced their single purchaser system, costs did not go down, they went up. That was largely because the single purchaser model they introduced was too complex to introduce any other form of contracting, other than fee for service. One had to create a systemic change, that made fee for service a less desirable form of contracting. It could not just cease to exist because one introduced an alternative contracting model.

There was one slide that covered users using the public sector, despite having medical scheme coverage. There was a systemic shift. The Medical Schemes Act had prescribed minimum benefit requirements. This meant that medical schemes had to cover catastrophic care. Whatever was outside of that was potentially subject to deductibles and co-payments. The issue was that one could not run out of coverage where it was a required package. The drift he referred to was when people reached retirement and could not pay a medical scheme contribution anymore because the system of retirement protection in South Africa was flawed – around two thirds of people lost substantial portions of their income to retirement and could not pay anything toward a contributory scheme. That was a fundamental problem that needed to be solved. That group of people would drift to the State, and the State could not really accommodate them. The problems in the healthcare sectors needed to be addressed through the ways in which they were regulated.

He commented on the terminology issue that was raised about "state" versus "public." Where the obligation was placed on the state -- a democratically elected government and legislators -- these structures were duty bound to setup the rules, regulations and structures from which to ensure that the Bill of Rights was achieved. That was the obligation placed on the State. This did not mean that the state had to become a ‘state organisation’ in order to deliver on that right. If one went through the Constitutional Court judgments, one would see that it imposed an obligation on the state to create institutions that achieved this obligation. Institutions included laws and organisations that were designed and governed in the public interest. The public nature of those organisations was not necessarily in state organisations. It could be established by state, but this did not mean that members of the executive selected everybody from top to bottom in that organisation. That was then not a ‘public’ organisation.

He referred to the Grootboom Constitutional Court judgement. The requirement was for the government to establish institutional frameworks for people to protect themselves, with their own funds. That was when one was looking at regulatory frameworks that ensured that people were not discriminated against and excluded from protection coverage. That became an obligation by the state. That would be how government governed a private set of arrangements that ensured people were protected. That was where the health system was failing.

 

On the issue of service versus system, he was merely making the point that very often one failed to see a health system as a very complex set of arrangements, which did not just change because one wanted them to. One did not just solve it by a ‘draconian’ move -- one had to understand the nature of the system and achieve a systemic shift in the way the system operated.

He responded to the question about terminology. It was beholden on government not to mislead the public in the use of terminology, specifically where terminology was important to the public in understanding what a reform was about. That was where he had queried the deliberate misuse of terminology such as ‘universal health coverage’ and ‘national health insurance’ in the public discussions. Those attempts to simplify the issues distorted the true nature of what was being proposed. One could not do that. That was not proper consultation and engagement with society.

The failures in the private sector were largely to do with the regulatory framework. These had been documented in substantial detail in the Health Market Inquiry. That was not suggesting or recommending anything like what was proposed in the NHI Bill. It was recommending the appropriate regulatory framework to address the failures, so that one would in fact protect people. It should not end up being a grievance-based reform framework, where somebody said, ‘Discovery Health was a bunch of evil people trying to greedily steal from everybody else’ – that got nobody anywhere with reform. One needed to understand the system that generated those outcomes, within a private as well as a public system. Where people had abused the public system through systems of patronage and where aspects of the State were privatised for private gain, these were the instances of privatisation and greed which drove the failure of the system. Those weaknesses needed to be understood.

Prof MacIntyre’s paper was not part of a government appraisal. That was a private paper she drafted, subject to the information she had available. Government’s job in conducting an evaluation was to incorporate all evidence and formulate an evaluation that led into the policy process. Individual academic’s papers became evidence that was used in a policy process which produced a final assessment. That government document did not exist. An appraisal of policy was a government document that showed that it had evaluated the evidence for a set of policy reforms. Where he had said ‘none’ in the table, was where no government documents existed evaluating what was going wrong in the public system.

When one recommended a policy solution, it needed to be appraised to see if it was in the public interest and not to its detriment. That had not been done. That was why there was no financial nor institutional appraisal. There was no diagnosis of why the state was not working. Prof McIntyre’s paper did not address that. Those were very important issues, as they spoke to why the system was failing.

What he had pointed out about the COVID-19 statistics was the load that was carried by different parts of the system. What really concerned him was that the state health services did not appear to be capable of reporting their COVID-19 patients correctly. That suggested fundamental weaknesses in management, which flowed from the institutional weaknesses in the governance framework.

The implication he raised about the policy process was that by not having an appraisal and not having an evaluation, the state did not understand what was going wrong. The proposed reforms, as a result, did not relate to the problems. If one did not do that, it would basically be like ‘driving at night on a cliff with no headlights.’ That was what had happened with the NHI proposals. The question that had been asked was ‘why did that happen?’ In many instances, where a top-down strategy was implemented, one was ambushing a policy process and as a result not all requirements of the policy process were adhered to. If one did follow the required process, it would change the policy. That was the reason why it was not done – that was quite clear.

His problem with the NHI Bill was that it ‘did nothing,’ and it was ‘never going to be implemented to completion.’ It would never actually materialise in any substantial form because it was an intervention unrelated to the true problems of the health system. The Bill could be passed, but it would not make any difference. The problem was that many of the challenges in the health system would just continue and deepen, and the Bill would do nothing to address them.

He commented on the tax credit regime. The tax credit regime derived from a tax subsidy that was being provided to people who could not access the state services for free. There was a means test in place. That meant that all income earners and medical scheme members were excluded from catastrophic protection in the state and tax-funded services. The tax subsidy was in lieu of the subsidy that would have been obtained in kind if they were to access the free state services. The free state services were not available to them structurally on a supply basis, nor on a financial basis. If they were not covered in a medical scheme, they would be bankrupted personally by using a state service. On a per capita basis, it was lower than the per capita expenditure on people who were covered for free in the state. It was part of a universal coverage model in which medical schemes were seen as part of the coverage framework. The Medical Schemes Act did not create medical schemes. Medical scheme regulation emerged to protect the public interest, as medical schemes emerged over time from 1888. The legislation was introduced to protect those covered by medical aid from private interests. The issue was to mitigate the risks associated with coverage in that particular environment. The medical scheme legislation had evolved in countries where there was universal health coverage.

Chairperson's comment

The Chairperson suggested that Prof Van den Heever share his views with the Department of Health.

Submission: American Chamber of Commerce South Africa

Ms Angela Russell, Chief Executive Officer (CEO): American Chamber of Commerce South Africa (AmCham), Mr Nyimpini Mabunda, Board Member, and Mr Neren Rau, Director Sub-Saharan Africa, presented to the Committee.

They said the 600 American organisations present in South Africa invest billions of rands in skills, enterprise and socio-economic development each year. The U.S. President's Emergency Plan for AIDS Relief (PEPFAR) had invested over R100 billion in South Africa since 2004. For fighting COVID-19, it had spent R1 billion on the establishment of field hospitals in underserved provinces; provided hand-washing stations in over 100 schools; provided 1000 ventilators to treat the South Africans who needed help the most, and committed R10.1 billion to Aspen to manufacture COVID-19 vaccines for Africa.

The US and American organisations are committed to South Africa and are invested in quality health provision.

Referring to the sustainability of the NHI, AmCham said the funding mechanism for the NHI remained unclear. There was a serious concern regarding the lack of a current proposal from National Treasury on the fiscal implications of the NHI and the absence of the associated Money Bill. In adopting the NHI as the organising framework for financing health care, AmCham believed that South Africa had the opportunity to incorporate its entire health infrastructure and build on the strengths, assets and capabilities of both the public and private sectors.

The Government had also not yet responded to the recommendations of the Health Market Inquiry (HMI), regarding the proposed operational reforms which were developed through an extensive and robust process, and had the potential to enhance efficiencies with immediate benefits in healthcare funding and delivery.

The Chambers said the NHI should involve progressive social solidarity. The phasing should have a functional approach and be defined by milestones achieved rather than dates. A detailed implementation plan and milestone criteria would allay uncertainty. A progressive realisation of cover should target the most vulnerable, with an incremental approach to tax-based funding within the construct of our national social protection floor. This included the development of referral pathways to optimise the utilisation of resources.

There was an underlying assumption that private healthcare and medical insurance would remain an integral part of the healthcare system under the NHI. International experience had shown that implementation of universal health coverage (UHC) is expressed through the incremental broadening of benefits, based on the availability of financial resources. NHI coverage must accommodate all members and beneficiaries equally, and should aim to expand the reach of coverage over time, while recognising the right of individuals to supplementary voluntary insurance.

Notwithstanding mandatory participation in the NHI Fund, patient choice should be respected, both in the selection of service providers and between administrators and insurers. AmCham is therefore concerned about the limitation of rights to insure privately, notwithstanding all solidarity objectives having been met through mandatory participation in the NHI Fund (sections 6, 8 and 33 of the Bill when read together).

 

Referring to the need for effective governance, AmCham said the extraordinary scale and social impact of the fund deserved extraordinary consideration as to the governance. Robust governance and transparency were essential to public confidence across the public and private systems. Clarity on the role of the Minister of Health was needed, and alluded to a potential separation of power. There should be a clear separation between the state’s ownership function and other state functions that may influence the operating conditions for state-owned enterprises (SOEs), particularly with regard to legal enforcement and market regulation.

 

The Chamber warned that centralised funding, financing and procurement concentrates operational and governance risk. Centralisation of healthcare provision could result in provincial misalignment if not managed appropriately.

 

The amendments to the 11 other pieces of legislation should be dealt with through the normal process of public participation.

 

In encouraging investment to drive innovation, AmCham:

 

• Proposes the deletion of clause 3(5) that excludes the Competition Act;
• Proposes explicit reference to competitive principles to facilitate a robust and sustainable healthcare sector;
• Requests clarification in section 33 of the role for private medical insurance, and amendments to sections 1, 6 and 8 of the Bill, to make it clear what the complementary role of medical insurance will be;
• Proposes positive reference to a collaborative public/private approach to developing, expanding and maintaining health infrastructure, to healthcare funding, health services provision, health product development, investment in health goods and services, and purchasing of healthcare goods and services;
• Proposes that the policy position be stringently interrogated with reference to the findings of the Health Market Inquiry and an independent socio-economic impact assessment.

 

Returning to the matter of effective governance, the Chamber said the Fund would be an institution of unprecedented size and socio-economic impact, and deserved extraordinary governance systems. Consideration should be given to Ministerial representatives -- for example, Finance; Trade, Industry and Competition and/or Co-operative Governance in the NHI governance structures -- and including the board and/or a stakeholder advisory committee and/or benefits and pricing committees. Similarly the Fund should be accountable to the Standing Committee on Public Accounts (SCOPA) as well as the Health Portfolio Committee.

 

The Minister’s powers should not extend to overriding a decision of the Board to remove the CEO (S19(5)). Sections 31 and 55 afford the Minister broad powers to restructure the relationship of the national and provincial competences with the Fund, and the public/private healthcare relationship, without clear parameters for the exercise of discretion. Instead, the Minister’s power to propose legislative amendments can be dealt with as part of the phasing approach in section 57.

 

Sections 57 and 58 should not be phrased as omnibus amendments, but rather as proposed amendments in principle which must be taken through the usual public participation processes at the relevant times, as the volume of considerations and risk of misalignment and unintended consequences is significant.

 

The Minister’s powers to truncate public participation around regulations (S55(3)(b)) in the public interest is unprecedented, and at the very least should not be subject to the deliberations of the Board alone, but rather to the Stakeholder Advisory Committee.

 

Concluding remarks

 

Amcham is of the belief that the private sector can add real value to efforts in advancing Universal Health Coverage, including scaling innovation, capacity building, and improving efficiency. As an example, one needs to consider the role of the private sector in support of the government with regard to the COVID-19 vaccination rollout.

 

Ongoing dialogue and engagement between government and the private sector remains paramount to achieving sustainable success. On this basis, and given the need to ‘get it right,’ AmCham is of the view that an additional round of drafting is required.

 

Health is a fundamental requirement for business productivity and economic growth, in the same way that it is an essential individual priority. The Chamber supports the principle and objectives of universal access to quality healthcare for all South Africans. Health policy should factor in the national contextual priorities, including social inclusion, affordability, sustainability and ongoing investment in healthcare products and services.

 

Investment and innovation are a result of competition, policy certainty, sound governance and vision and skill. The proposed single fund, in its current form, will not promote this outcome.

 

Discussion

 

Ms Ismail said it was mentioned in the presentation that the Bill created an uncertain environment for investment. What were the reasons for this, and what parts of the Bill in AmCham's opinion would result in hesitancy for investment? It had mentioned that a competitive approach was the way to go. In light of that, what was their view on the impact of a single purchaser model? It was stated in the presentation that the funding model was unclear, and therefore the sustainability of the NHI was unclear. Assuming there was not enough funding, a few years into the implementation of NHI, how would this impact access to quality healthcare or the economy?

 

Mr Sokatsha noted AmCham's concern about the limitation of rights. Clause 33 of the Bill stated that only when NHI was fully implemented, medical schemes would be expected to provide complementary cover. Clause 57 spoke about a phased implementation of the NHI. Once it was implemented, what was AmCham's opinion about people insuring against the same healthcare costs twice, i.e. duplicate cover? Would that not perpetuate the same inequalities, thereby threatening the achievement of universal health coverage? As an American organisation, AmCham should be aware that there were various pathways taken by countries to achieve universal health coverage. In South Africa, the government had chosen the single payer, single purchaser route, with appropriately structured processes to yield benefits from monopsony purchasing power. The NHI Bill contained elements to address challenges that plagued the current health system and prevented the majority of people from accessing needed care. Why did this seem incongruent with AmCham's position? He was under the impression that most of the AmCham members were against policies that would remove the perversities in the sale of medicines in South Africa. In particular, he was referring to section 18(a) of the Medicines and Related Substances Act. Would its members continue to hold this policy position in an NHI environment? Could AmCham provide clarity as to how it believed that the NHI Bill, in its current form, would negatively and/or positively impact its members?

 

Dr Jacobs said that a point was made in the presentation that a competitive healthcare sector was critical for South Africa. Was AmCham aware that the current private healthcare sector should be competitive, but the Health Market Inquiry had found evidence of a number of market failures? The market failures included supply induced demand, unfair competition, market concentration, conflict of interest, governance failures, shrinking healthcare cover -- which led to members running out of benefits -- and limited empowerment of users to hold medical scheme board members to account. Was the Chamber aware that the investigations by the South African Human Rights Commission and the Council for Medical Schemes, on issues of discrimination, fraud, waste and abuse in the industry, demonstrated challenges in this sector? Would the country be able to move to universal health coverage with this model of fragmented healthcare financing?

 

AmCham's recommendation to incorporate the entire health infrastructure in South Africa was acknowledge and welcomed. If one read the Bill carefully, one would realise that private sector providers had been extensively included in the delivery of healthcare services. For example, clause 37(2) stated that the contracting unit for primary healthcare would be comprised of a district hospital, clinics or community health centres, ward-based outreach teams and private providers, organised in horizontal networks within a specified geographical sub-district. Clause 57(2)(b)(iii) spoke about selective contracting with private health providers. In slide 15, it was proposed that the provision of healthcare services be funded by the NHI, and the NHI Fund should be subjected to normal market forces through competition and deleting clause 3(5) of the Bill. The Health Market Inquiry clearly articulated that there had been market failure, and it would be dangerous to allow the market to exert its influence unabated. Based on these findings, the government proposed that health be regarded as a public good and not be subjected to the whims of the market. He requested a comment from AmCham on this.

 

On slide 12, the concern was raised about clause 6(8) and 33. Being able to choose medical aid cover was not a human right, as it ignored the limitations of access and choice of the majority of South Africans. In addition, Section 36 of the Constitution allowed for the limitation of rights and the balancing of rights. An example of this was the right to life and the right to access healthcare for all, per the preamble of the Constitution. The Constitutional Court's jurisprudence was clear about dealing with socio-economic rights. He asked that AmCham comment on that.

 

The Chamber had spoken about their concern that the Bill did not allow for/encourage innovation and competition. It was stated in the presentation that it supported fair, equitable healthcare for all, as contained in the NHI Bill. Did AmCham not feel that clauses 26, 35 and 38 would allow for inclusion of stakeholders, as well as encourage innovation around existing and new products to the market? This would result in reasonable and affordable pricing of a variety of products that the fund would procure.

 

The NHI was a single payer, unitary healthcare system -- did this pose a challenge for the Chamber, as it might seem to be non-competitive. If it was a problem, he asked that it provide the Committee with some detail on that. AmCham seemed to believe that one of the intentions of the NHI Bill was to limit the rights of consumers to self-fund in an NHI environment. He was not aware where/if this was contained in the Bill. What amendments would the Chamber propose to Chapter five of the Constitution?

 

Ms Wilson said that South Africa was very challenged at the moment, particularly in light of COVID-19, and the corruption, looting and rioting. How would the lack of growth in its GDP affect the NHI? The overall cost of the Cuban health system was about 13% of GDP. If South Africa was faced with that, given the current situation, it would pose a number of problems to the NHI. If South Africa could not raise the dedicated health taxes to the extent of 2.9% of GDP to fund the NHI, what would happen to the NHI? Did AmCham believe that it would fail? Would health regress?

 

Suggestions were made by previous presenters about the role of the Minister and the Board – that the Minister should not have sole power over the NHI. It was suggested that Parliament should oversee the selection of the governance structures, and that there should be ongoing oversight of the boards by Parliament. If necessary, the boards should be brought before the SCOPA to account for any mismanagement. To what extent did the members of the American Chamber of Commerce contribute to the health sector? What were their biggest areas of contribution to the health sector in the country?

Dr Havard said that AmCham had made assumptions that the NHI was going to be a state-owned enterprise (SOE). Clause 9 of the NHI Bill clarified that the Fund would be established as a Schedule 3A entity, which was different to an SOE. She urged the Chamber to familiarise themselves with the difference.

Mr Munyai said that the NHI would be a single payer, unitary healthcare system. Did this pose a problem for AmCham, in that it might be seen as non-competitive? If it was a problem, could details be provided? What amendments would AmCham propose for Chapter 5 of the Constitution to reduce the powers of the Minister? Did it make some contribution to, or challenge, the United States healthcare access or the Affordable Care Act? Could it provide details on this?

The Chairperson said he thought there had been a challenge and misunderstanding about the ‘separation of powers’ of the Bill and its processes, particularly about the judiciary, executive and Parliament. Section 99 and 114 of the Constitution stated that a Cabinet member may assign any power or functions to be exercised or performed according to an Act of Parliament to a member of the provincial executive council or any municipal council. Section 114 of the Constitution outlined the powers of provincial legislators. The powers at a provincial and national level were guided by these sections of the Constitution. When the NHI process started, the Committee had invited the State Law Advisor to check whether the Bill would ‘pass the test of time.’ What issues was the American Chamber of Commerce anticipating?

Was AmCham represented in the National Economic Development and Labour Council (Nedlac)? Nedlac had not raised any issues about the constitutionality of the Bill. The Bill spoke about the pricing committee, and he had picked up that there was an issue being raised in one of the slides about that. The government had made very transparent policies about the pricing of medicines, as one of the cornerstones of the single exit price. AmCham's presentation suggested that this was not the right way to ensure transparency of the pricing of medicines. According the presentation, the single exit price was not appropriate in the South African context. His understanding was that the Health Market Inquiry recommendations applied to both the private and public health sectors. Universal health coverage sought to provide financial protection to all citizens of the country, not just one sector – did AmCham have a different view?

Dr Jacobs asked whether the Chamber was against the approach and process of policy adoption. Should the NHI be implemented in its current form, as outlined in the Bill? Would American companies withdraw their investment in health? Was that an ethical position to take? How had AmCham reacted in other contexts, where single purchaser models were implemented?

Mr Munyai asked whether the American Chamber of Commerce had seen disinvestment of companies from other countries as a consequence of such policies being introduced.

AmCham's response

Mr Rau stated that most of the questions seemed to seek clarity about the AmCham position, as stated in the presentation. The key area of competition for AmCham was about supply under the NHI. It was looking at a competitive space for those that supported the NHI. As indicated in the presentation, there were many pharmaceutical companies that were members of AmCham, and it therefore wanted to ensure that the process of procurement for the NHI supported the viability and sustainability of enterprises that sought to continue to make a contribution to healthcare in South Africa. AmCham had not suggested the depletion of healthcare service provision. It was concerned about a reduced role for players within the healthcare space. This would have consequences for the competitive space and for the security of supply and patient access to affordable therapies or treatments.

AmCham had addressed various areas of uncertainty in their written comments, and there were a number of areas where specifics were required. It understood that the process of crafting a Bill of this magnitude was complex. It had offered its support in trying to address the specifics. Specifics might not be evident at this stage of the process, but this was an opportunity to ensure that the specifics were developed in a multi-stakeholder manner, and that as many views as possible were incorporated in the next stage of the development of the Bill.

He responded to the question about the limitation of rights. There could be a limitation of rights for patients resulting from the consolidation proposed under the NHI. The NHI should be developed in a manner that allowed for competitive access and a sustainable role for the private sector. It needed to be clear and specific, so that patients knew what they would receive under the NHI, and what could be accessed outside of the NHI. This could then be a viable environment for all players and in the best interest of ideal patient outcomes. AmCham supported the NHI, and the presentation had intended to show that support, as well as identify areas that needed further development.

He responded to the question about how NHI could negatively impact AmCham's members. There were multiple levels to the potential negative impact. At this stage of consultation, potential negative impacts could be mitigated. The NHI should support the benefits that employees received at present within the healthcare system.

He responded to the concern raised about the number of members of the Chamber that provided healthcare in the country. Many of them had brought innovations to South Africa, and this was seen in the case of the COVID-19 vaccines. This was to the benefit of all South Africans, and the Chamber wanted this to continue. This was where competition was important. It was important that the NHI procured from a broad pool of suppliers to benefit all South Africans – to ensure security of supply to South African patients.

Mr David Geral, Head: Banking and Financial Services Regulatory, Bowmans Law Firm, responded to a number of questions.

It did not appear that there were requirements for amendments to Chapter 5 of the Constitution which dealt with the Ministerial powers. Chapter 5 empowered the President to assign functions to the various Cabinet Members. There was a constellation of departments and members with defined responsibilities. It did not mean that the constellation could not be tweaked as necessary. In AmCham's view, it empowered what was proposed. The Treasury regulations, in the context of the Public Finance Management Act (PFMA), covered the Section 3A entity and allowed the Minister of Finance to make regulations to enhance public entities' feasibility and operations.

The Chamber did not think any of the proposals about bespoke government arrangements were surprising in the context of the extraordinary nature and scale of this entity. It was of the view that one need not default as a society to doing things the way they were always done, as long as no rules were being broken in proposing a different way of doing them. This was something that needed to work for the people of South Africa. The comments about this were made sincerely through looking at innovative ways to address the governance and proper functioning of the scheme.

The question of policy delegation and implementation from the Ministerial level was probably not a concern that needed to stop the process in its tracks. The concern about the relationship between government and Parliament was that there were a lot of aspects that were not clearly expressed as policy within the Bill. Universal healthcare coverage was supported, to the extent that there was a role that AmCham could play in realising its fullness.

The Bill stated that a Fund would be created, but there were very broad implementation discretions given to the Minister, Ministry and the Department. It was not uncontroversial from a legislative perspective to give quite directed and focused parameters for the exercise of Ministerial discretion.

There was enough evidence-based research that was mentioned previously in the presentation around the Health Market Inquiry, low-cost benefit options and the development of prescribed minimum benefits. In clause 5(2) of the explanatory memorandum to the Bill, it spoke about a shifting comprehensive package that referred to phased implementation. Those were things that could be drawn upon in a collaborative process in order to determine what it was that the Minister could exercise executive and regulatory power over.

It was not suggested that there were no critiques in the Health Market Inquiry of the private health funding sector. Without commenting on those in any detail, they were entirely acknowledged. The function of the Health Market Inquiry and the relevance of the report that emanated from that Inquiry had provided a blueprint for a lot of reform. It may well be that some of the answers to more equalized access and a comprehensive approach lay in some of those proposals. Those proposals were not referenced, and AmCham was not suggesting that ‘all the proposals that related to the private sector would be ignored – and the government would be held to account for the proposals about the State side.’ It was suggesting that there were proposals in there that could be used as a framework for packaging the phased implementation. Clause 57 was not inherently problematic, it provided for a number of very valuable inputs – but basically it gave the Minister powers to create a whole bunch of committees. Phased implementation spoke about what the Minister could do, but did not speak about outcomes. The outcomes were surely something important to outline, rather than stating that the Minister was empowered to create a whole bunch of committees. The only outcome was the achievement of ‘universal healthcare,’ which was not defined.

Clause 33 gave the Minister the power to declare that full implementation had taken place. That was an extraordinary power -- that the Minister could feasibly decide in six months or six years, without there being a measure established in the Bill for such a declaration.

Mr Mabunda said that investment was looked at holistically. Governance in the country, the level of technology, issues around competition and the return on investment, were taken into consideration. Depending on how those aspects were responded to, the NHI environment might be, or not be, conducive to investment.

Ms Leigh Gunkel-Keuler, AmCham member, responded to the question about the Schedule 3A entity. The Chamber's presentation had used the SOE as an example of something to be mindful of as the development of the entity took place. It had not suggested that the NHI was an SOE, but had simply used the SOE model as an example of what lessons could be learned.

She said that AmCham represented US-based companies operating in South Africa employing South Africans. The NHI and the Bill had a direct impact on them as employees. It was suggested that the recommendations from the Health Market Inquiry be taken into account to improve the system.

She responded to the question about a situation where there was insufficient growth in the country, and how it would impact the NHI. This was one of the Chamber's central concerns. Many companies, trade associations and institutions had presented without knowing the full picture of the cost implications from the Money Bill. The NHI needed to be sustainable for all South Africans to have access.

The meeting was adjourned.