THE South African health system is in deep crisis. We need a major transformation of our health system and we need it now. Problems in the public health sector are splashed across the front pages of our newspapers on a weekly basis: patients being turned away from public clinics and hospitals and some dying as a result, some provinces running out of antiretroviral drugs, the doctors' strike, and so on.

These problems are a direct result of underfunding of the public health service for more than a decade.

From 1996, government spending on healthcare did not keep pace with inflation and population growth, let alone the AIDS epidemic. It was only in 2005 that spending levels on public health services returned to 1996 levels. Health budgets have increased in recent years, but the years of severe underfunding had taken their toll on staff morale and on buildings and medical equipment that could not be maintained.

Although given far less media coverage, the problems facing the private health sector are no less severe. Medical scheme contributions have increased yearly at rates far exceeding general inflation, since the 1980s. The range of services covered by schemes has declined and scheme members have to pay more and more out of their own pockets to cover the portion of the bill charged by a healthcare provider that the scheme will not cover.

A far greater share of our salaries is being consumed by medical scheme contributions than 20 or even 10 years ago. It is becoming increasingly unaffordable for South Africans to belong to medical schemes. And medical scheme members seem to be dissatisfied with this situation. A recent national household survey found that 71 percent of medical scheme members were willing to join a publicly supported health insurance scheme if their monthly contribution was less than for current medical schemes.

The private health sector in South Africa is rapidly becoming a mirror image of the US health system - a system that Americans themselves want completely transformed. To quote a highly respected American Professor of Medicine (Arnold Relman, Emeritus Professor at Harvard) "… most of the current problems of the US (health) system - and they are numerous - result from the growing encroachment of private for-profit ownership on a sector of our economy that properly belongs in the public domain. No healthcare system in the world is as heavily commercialised as ours, and none is as expensive, inefficient, and inequitable - or as unpopular … there is now much evidence that private businesses delivering healthcare for profit have greatly increased the total cost of healthcare and damaged - not helped - their public and private nonprofit competitors."

While the public health sector in South Africa has been drained of financial and human resources, the private health sector has seen massive increases in funding. In 1996, spending on medical scheme members was about 3.5 times greater than that spent by government per person dependent on public sector services. This gap had increased to nearly six times greater spending by medical schemes by 2006.

What is important to note is that although medical schemes account for well over 40 percent of healthcare funds, they only benefit 16 percent of the population. What this means in reality is that those who have the greatest need for healthcare do not get their "fair share" of benefits from using health services - what happens in one sector impacts on what happens in the other.

A recent study undertaken by the Health Economics Unit at UCT found that the richest 20 percent of the population receive 36 percent of the benefits from using health services (public and private) in SA, although they only account for 10 percent of healthcare needs (or the burden of poor health). The poorest 20 percent of the population receive less than 13 percent of the benefits but have more than 25 percent of the need for healthcare.

Some argue that these inequities are unavoidable because we have such an unequal distribution of income. The recent Income and Expenditure Survey from Statistics South Africa indicated that the richest 10 percent of South Africans have 47 percent of total income while the poorest 10 percent have a mere 0.2 percent of all income - one of the greatest levels of income inequality in the world.

I would argue that because we have such large income inequalities, we must have a health system that better meets the needs of the entire population, and that this can only happen through a strong, publicly funded health system. Substantial public funding of health services, and other key social services, has been internationally shown to be the key vehicle for ensuring that all citizens have the opportunity to live healthy, secure and productive lives.

Substantial public funding is also in line with the 2005 call by the World Health Assembly for member states to provide universal health financing coverage " … in order to guarantee access to necessary services while providing protection against financial risk".

What would be the core features of a National Health Insurance (NHI)? It is not yet clear what the ANC proposals on an NHI will include, but the following are likely to be some key elements: an NHI would be universal; every South African would be entitled to benefit from the services it covers. It would be funded partly by compulsory contributions by employers and employees and partly by tax funds, all placed in a single "pool". In this way, every South African would be contributing to funding healthcare - even the poorest bear a heavy tax burden through VAT and other indirect taxes such as fuel levies (which are built into taxi and bus fares). In effect, tax funds would be used to pay the NHI contributions of those who are not formally employed. The rich will pay more than the poor, but given the massive income inequalities, so we should.

Some argue that an NHI will be unaffordable for South Africa, and point to what it would cost to extend medical scheme cover to all South Africans. The question is: why would we want to follow this path anyway? This would lead us even further down the route of the American nightmare, where over 15 percent of GDP is devoted to healthcare but where millions remain uninsured and unable to get the healthcare that they need (as graphically illustrated in Michael Moore's movie Sicko).

The NHI that is envisaged for South Africa would be more akin to the excellent publicly funded health systems found in countries such as Costa Rica, where the NHI as a large, single purchaser of health services is able to improve resource use in the overall health system and to get "value for money" for its citizens.

But, for the vision of the NHI to be fulfilled, it is critical that the services that South Africans will be entitled to under the NHI are seen to be of acceptable quality. Even if the NHI purchases services from public and private providers, public hospitals will be the backbone of the system. This is not only because most of the beds are in public hospitals but also because purchasing a large share of services from private for-profit hospitals at their current, excessive fee levels is simply unaffordable in a universal healthcare system.

It was not too long ago that South Africans from all walks of life were entirely confident in the services provided by public hospitals. I believe it is possible for public hospitals to once again be regarded as the provider of choice of the vast majority of South Africans. Actions that would be required to achieve this include:

Addressing health worker conditions of service through implementing the long-awaited "occupation specific dispensation".

Increasing the staffing in the public health sector - a recent report by the Development Bank of South Africa indicates that compared with 1997, we need an additional 80 000 staff in the public health sector simply to address the increase in the population size and the greater burden of ill-health from AIDS.

Address the backlog created by inadequate funds to maintain buildings, equipment and other infrastructure.

Grant greater management autonomy to public sector hospitals so that problems arising in the hospital (eg broken toilets) can be immediately resolved rather than having to send requests through to the provincial head office.

We currently have a window of opportunity to transform our health system from a highly inequitable and unsustainable system to one that meets the healthcare needs of all South Africans in an efficient and sustainable way.

That window of opportunity is presented by the ANC's commitment at its policy conference in Polokwane in December 2007 and in its recent election campaign to implement an NHI. Strong political commitment is essential to successfully introduce health system change of the magnitude required. We must seize this opportunity and implement the changes required in a carefully planned and phased manner, and with widespread engagement and communication with the general public, whose support for these changes is also critical.

Professor McIntyre is the South African Research Chair of "Health and Wealth", Health Economics Unit, University of Cape Town

Di McIntyre: The Cape Times, 18 June 2009

Don't be spooked by draft proposals for a national health insurance system that were leaked to the media recently. Only after further consultations and costings will we know for sure how private healthcare cover will be affected.

Proposals for a fairly radical overhaul of the country's healthcare system - including the seemingly inevitable demise of medical schemes - are likely to make all private healthcare users fearful about the future of their cover.

The proposals are contained in a document drawn up by an African National Congress-appointed task team on national health insurance (NHI) led by Dr Olive Shisana, the director of the Human Sciences Research Council. The document was leaked to the media recently.

It proposes that an NHI authority takes over the role of funding and purchasing healthcare services in both the public and private healthcare sectors, negotiating prices for services, and paying accredited doctors, hospitals, pharmacies and other healthcare providers, both public and private, on your behalf.

The proposed authority will essentially take over the role of your medical scheme, and, according to one commentator, it is proposed that 85 percent of all contributions will be channelled into the NHI fund.

The proposals suggest that NHI will be funded from general taxes and an earmarked NHI tax.

They also suggest the scrapping of the tax deduction medical scheme members enjoy for contributions paid; the subsidy will be channelled into NHI (see "Medical scheme members may lose tax subsidy" below).

Alex van den Heever, a health economist and adviser to the Registrar of Medical Schemes, told a recent Hospital Association of South Africa (Hasa) conference that he understood that schemes will be prohibited from covering any health services covered by NHI - for example, the treatment of cancer.

Although the leaked NHI pro-posals include plans (without much detail) to revitalise and adequately staff the public healthcare system, lingering fears, based on the public health system's current failings, will be hard to allay.

The NHI task team's document has been criticised for its failure to prove that such a healthcare system is affordable - there is no costing in the document, only references to financial projections that are being developed for costing the system.

There are also no details of the health services NHI would cover.

The leaked document is dated February this year and revised documents are apparently being prepared. Dr Molefi Sefularo, the deputy minister of health, told the Hasa conference that base documents on NHI would be released by the end of this month after which there would be public and community consultations.

Thereafter the Department of Health would release a white paper on NHI. The health department has committed to doing this in its 2009/10 year and to have draft legislation ready by March 2010. It aims to have the legislation promulgated by 2011 and be ready for implementation by 2012.

Once a white paper is released, the proposals will hopefully be clari-fied, making debate on their merits more meaningful.

More realistic timelines than those in the leaked document may also emerge. The document refers to starting implementation within a year and having NHI in place within five years.

What else can we expect?
Besides the removal or restructuring of the tax subsidy, what should we expect from NHI?

Di McIntyre, a professor of health economics at the University of Cape Town, says initial interventions aimed at implementing NHI in South Africa will have to be devoted largely to getting the public healthcare system to what it should be.

Since about 1995, there has been massive under-funding on public health, with budget allocations failing to keep up with inflation, population growth or the increasing burden of disease (including HIV).

An increase in government expenditure on public health care would have to be part of any NHI system, and this could only be good for everyone in the country.

McIntyre's understanding is also that the mandatory contributions that we may be forced to make to fund NHI "would not be massive".

She says it is unrealistic to expect that medical schemes will be abolished, because it would be politically and constitutionally wrong to deny people the option to choose medical scheme cover in addition to a mandatory health system.

She says such a move would be challenged by private healthcare providers, which are already briefing lawyers to defend any attempts to do away with private cover.

Heather McLeod, a professor of public health and family medicine and an independent healthcare actuary, says even the NHI plan proposed in the leaked document would require some kind of risk equalisation to ensure that funds are directed to entities in line with the needs of the people they cover.

A risk equalisation fund for medical schemes to equalise the costs of providing the prescribed minimum benefits across all schemes has been in the planning stages for a number of years. The fund is still far from ready to be implemented, and enabling legislation has been put on ice due to the focus on NHI.

MEDICAL SCHEME MEMBERS MAY LOSE TAX SUBSIDY
The scapping of the tax deduction medical scheme members enjoy for contributions paid, as suggested in the leaked proposals for NHI, has been made before to the cabinet and seems a likely contender for future implementation.

The deduction favours higher income earners rather than lower-income ones and is regarded as unfair.

Medical scheme members are allowed to deduct from their taxable income up to R625 a month for contributions paid in respect of themselves and R625 a month for the first dependant. Deductions for further dependants are limited to R380 a month each. For a family of four, this amounts to R2 010 a month or R24 120 a year.

Should you no longer be allowed to deduct medical scheme contributions, your taxable income will increase by these amounts and your tax liability by the tax you will pay on these amounts.

For a taxpayer who earns more than R525 000 a year and has three dependants, this tax would amount to 40 percent of R24 120, or R9 648 for the year. For a taxpayer on a more modest marginal tax rate of 30 percent, this would amount to R7 236 for the year.

McIntyre and McLeod, who have both been researching healthcare systems for many years, made a case for removing the tax subsidy when proposals for creating a social health insurance system that could be developed into a NHI system were made to the cabinet in 2005.

McIntyre says internationally it is an accepted practice that if you want private insurance, you - and not the government - must pay for it.

In South Africa, the government is subsidising medical schemes to provide "outrageously expensive and inefficient" health care. It is not a good investment, McIntyre says.

If the subsidy was removed, medical schemes and providers would have to work within the constraints of the money collected from employers and members, she says.

There is a lot of fat in the private healthcare system that could be trimmed, McIntyre says.

McLeod and Pieter Grobler, an actuary from Medscheme Health Risk Solutions, presented a paper outlining the impact of the sequential implementation of various healthcare reforms to the recent conference of the Actuarial Society of South Africa.

Their paper shows how withdrawing the tax subsidy for medical scheme contributions and expenses would affect the percentage of your income you spend on contributions if you pay for a family of four and fall within one of eight income groups chosen by the researchers.

The effect on professionals, who fall within the highest income group, is to increase the average percentage of income contributed to a medical scheme from 4.8 percent to 5.2 percent a year.

For people at a managerial or supervisory level, removing the tax deduction and replacing it with a per capita subsidy would increase the percentage of their income contributed to a medical scheme from 12.9 percent to 13 percent.

In lower-income groups, the removal of the subsidy would decrease the proportion of income contributed to a medical scheme. For example, people in clerical positions could see the proportion of their income spent on health decrease from 24 to 22 percent.

The impact would be greatest on the lowest income groups, the likes of domestic and farmworkers, for whom medical scheme membership is largely unaffordable. Currently, scheme membership would amount to 60 percent of their income. With the help of an employer subsidy, they might consider joining a scheme where the total contributions would amount to 28 percent of their income.

A revised tax subsidy
The National Treasury announced in the Budget in February that it is considering revising the tax deduction allowed for medical scheme contributions and expenses.

The Budget Review says the current deductions could be replaced with a tax credit or refund of 30 percent of the deductions you are currently allowed for medical expenses.

So a person who currently enjoys a deduction from taxable income of R24 120 for contributions paid for a family of four would be given a tax credit equal or refund equal to 30 percent of this amount, or R7 236.

Such a system would benefit middle- and lower-income earners who are paying an average tax rate of less than 30 percent. It would be disadvantageous to those who are paying a higher rate - taxpayers who earn more than R290 000 a year and pay a marginal rate of 35 percent, 38 percent or 40 percent.

A discussion document on this tax deduction proposal is expected this year. National Treasury officials indicated this week that the proposal will be for implementation in the 2011/12 year only.

Asked if the proposal is linked to the NHI plans, Cecil Morden, the chief director of the tax policy unit at the National Treasury, said the treasury had not even seen the ANC task team's proposals for NHI.

In their paper, McLeod and Grobler analysed the impact of converting the current subsidy as proposed by the National Treasury.

They found that the proposal would have no impact on people who earn below the tax threshold - that is, less than R54 200 in the current tax year - and no measurable effect on those who earn just more than this threshold.

There would be some benefits for middle-income earners, whereas the highest-income earners would be disadvantaged, they found.

McLeod told the Actuarial Society convention that removing the current tax deduction and replacing it with a direct government subsidy equivalent to what is spent per person in the public sector would be more beneficial for low-income earners. McLeod and Grobler worked on the assumption that this subsidy in 2007 terms would amount to R1 450 a year.

WHY DO WE NEED NHI?
A national health insurance (NHI) system would seek to ensure that all South Africans will be able to access healthcare services because they need them and not just because they can afford to pay for them, Di McIntyre, a professor of health economics at the University of Cape Town, says.

She says the healthcare benefits South Africans enjoy are heavily skewed towards the wealthiest people, yet the burden of disease is greatest among the poorest people.

About 45 percent of the total amount spent on health care in South Africa is spent on medical scheme members, who account for about 15 percent of the population, McIntyre says. Through the public healthcare system, the government looks after the health care of more than 64 percent of the population on less than what is spent in the private sector.

McIntyre says if South Africans are ranked on income, the wealthiest 40 percent, including the 15 percent on medical schemes, derive the most out of the public healthcare system. The NHI system would seek to address these inequities.

McIntyre says the best insurance systems have the biggest risk pools (that is, the most people contributing and subsidising each other’s claims), and an NHI system should seek to integrate the current public and private healthcare systems.

Innovative Medicines of South Africa has set up a website that has documents on NHI. One of these says that the World Health Organisation reported in 2004 that 27 countries have implemented a universal social healthcare system.

From start to finish, Germany took 127 years, Belgium took 118 years, Israel took 84 years, Austria took 79 years, Luxembourg took 72 years, Japan took 36 years and the Republic of Korea took 26 years.

McIntyre says we cannot sit around for 20 years before we do anything to address the healthcare situation in South Africa. Although it is not possible to predict feasible timelines, suggestions that NHI could begin within a year and be implemented within five years are over-ambitious.

McIntyre says she participated in a study of 5 000 South African households that were asked whether they would contribute to a publicly supported health insurance scheme if the contributions could be set lower than those of medical schemes. Seventy-one percent of medical scheme members who participated in the study said they would.

By Laura du Preez

PLANS for the National Health Insurance fund have yet to be unveiled, but emotions are already running high. The Democratic Alliance is strongly opposed to the scheme, while health workers' union Nehawu has come out in strong support of it. DA leader Helen Zille said the NHI, which according to a leaked ANC document will afford health coverage for rich and poor, was "not pro-poor", as it would not improve the quality of healthcare and require a lot of additional funding from cash-strapped consumers. She said it would set out to ruin the parts of the health system that work, and ruin the economy at a time when SA was recovering from a recession. She also said it would create an unnecessary layer of bureaucracy, and hinted that those in favour of the plan were supporting it just to get positions. Zille said she hoped that Finance Minister Pravin Gordhan, National Planning Minister Trevor Manuel and Health Minister Aaron Motsoaledi would, with their expertise, realise that the plan would not work when they took a second look at it. According to reports the NHI will cost R100 billion a year, a 40 percent increase in the health budget and a nine percent increase in the tax burdens of households. Medical aid schemes have already criticised the plan as unworkable and critics have expressed fears the move could result in more doctors leaving the country, but the ANC and its alliance partners have defended the plan. The DA suggested that the government should instead review the qualifications and experience of hospital managers to establish whether they were suitably qualified. The party also suggested improving quality control measures at state hospitals, and more co-operation with the private sector through public-private partnerships. DA parliamentary leader Athol Trollip vowed that the party would push for public participation if the bill establishing the fund were to be reintroduced in Parliament. According to the leaked document, all citizens would contribute to the NHI in amounts based on their earnings. Unemployed people and those earning low wages would be exempt and their contributions would be subsidised by the state, while tax breaks for those on medical aid plans would be removed. An NHI authority, with its own chief executive officer and reporting to the Health Ministry, would be created. Nehawu said yesterday that the fund would address the inequalities in accessing healthcare between rich and poor. The union said it was disappointed that the initiative had been criticised before the policy paper was launched. The SA Communist Party this week vowed to step up its campaign in favour of the fund.

Carien du Plessis: The Star, 11 June 2009

NEW Health Minister Aaron Motsoaledi is being taken to court by the National Convention on Dispensing (NCD), a lobby group representing 6 000 drug-dispensing doctors. The association is livid that, after weeks of waiting, Motsoaledi has not effected a "satisfactory" dispensing fee structure. NCD chairman Norman Mabasa said the NCD had given the department time to amend the dispensing fees, but it has not and the NCD is now forced us to reopen the court case. He said nothing less than the publication of the correct gazette with the correct numbers would convince the convention to withdraw. The NCD claims the dispensing mark-up cap, even after it was supposedly "improved" by former Health Minister Barbara Hogan, is still low. During her short stint at health, Hogan engaged the lobby group and averted a showdown by striking a deal with the GPs. Mabasa said Hogan had good intentions, but he believes she was misled by her officials, who were "hellbent" on discouraging doctors from selling drugs. He said the NCD was not against the new Minister but he was the main person and so the buck stopped with him. Mabasa believes the department wants pharmacists and not doctors to dispense medicines, even though pharmacists are unregulated, which enables them to charge any price. Mabasa accused Anban Pillay and Humphrey Zokufa of the Health Department's pricing committee of double standards and trying to force GPs out of dispensing. For his part, Pillay said he was not going to respond to all the incorrect allegations Dr Mabasa had made through the media. Zokufa is also the CEO of the Board of Healthcare Funders (BHF), the same body that represents the medical aid industry body. This, according to Mabasa, has the potential to create a conflict of interest. The BHF has in the past raised "concerns" over drug-dispensing fees by general practitioners but the doctors' group accuses it of being one-sided and turning a blind eye when it came to other service providers. The powerful pricing committee is chaired by Gavin Steele and lists academic Di McIntyre and the Health Department's Ntobeko Mpanza as members. Mabasa said officials at health acted like autopilots, pushing their own agendas and using the department to undermine what the Ministers were trying to do. He said the department frustrated Hogan's efforts to end the feud over dispensing fees that has dragged on since 2004, when Tshabalala-Msimang was still in charge. Last year, the NCD took her to court after failing to force her to replace the 16% mark-up clause with a "realistic" figure. In terms of the clause, GPs were allowed to charge a markup of no more than 16% for drugs sold for less than R100 or a maximum of R16 thereafter. While lauding the ANC for replacing the "intransigent" Tshabalala-Msimang, Mabasa said that was not enough. He said the NCD was worried about the conduct of certain officials and wondered if they should not be removed. Giving in to the doctors' demands looks like the easy way out but it could be tricky given that the officials, like Pillay, who engineered the current pricing structure, are still calling the shots. Pillay has consistently defended the current pricing structure. Motsoaledi has his work cut out for him to return the Department of Health to credibility, and win over service providers - including the disenchanted doctors (in both sectors) even if this means getting rid of some of his generals. He will need more than his medical degrees to cure SA's health system.

Shoks Mzolo: The Financial Mail, 12 June 2009

FIFTEEN years of failing to address the systemic challenges facing the health of the country lends itself to over-compensation in the form of the grand gesture. The seductive quality of the grand gesture, however, is matched in equal measure by the inevitability of its ultimate failure as policy.

Proposals to change the health system to some form of National Health Insurance (NHI) could be falling into this trap, with substantial implications for the future of the country.

Most people can be excused for not really knowing what NHI means. It has become the proverbial content-less black box. It can be applied to a description of a health system, or to a form of any universal health insurance funding. Use of the term "insurance" when applied to a health system does, however, have some connotations, as the ordinary use of the term suggests something other than the conventional approach to government planning and budgeting.

Insurance, as a funding mechanism, is not how governments fund schools, police services, clinics and hospitals. They are funded by general taxes, not a premium, with services receiving budgets based on planned provision to meet planned need within available resources.

An insurance approach implies an indirect relationship between the insurer (funder) and the health service provider.

An insurer insures the individual against medical expenses, with the service provider seen as legally distinct from the funder.

The institutional consequences of an insurance approach are substantial, however, as the system's requirements are very different. A medical scheme operates very differently from a provincial Health Department. Insurance funding approaches cost significantly more than conventional public sector budgeting and planning approaches, with a reduced capacity for needs-based planning.

For these reasons, in countries with severe resource constraints, social insurance approaches are generally avoided unless they focus on income earners who want more freedom of choice and can afford the increased expense.

Some might argue that NHI is defined by the existence of a "single purchaser" of health services. However, all public systems are by definition single purchasers, with the existing South African system no exception. Whether the purchaser is the public sector in South Africa, Medicare in the United States or the National Health Service in the United Kingdom, they all have the ability to either directly provide or contract for services in equal measure. The very poor performance of South Africa's "single purchaser" is indicative of the fact that this is very far from being a sufficient condition for efficiencies and service quality.

It is sometimes presumed that the mere attachment of an earmarked tax to a public funding model defines an NHI. However, although an earmarked tax may resemble an insurance premium, a tax is not a premium. When funding an entire health system, an earmarked tax invariably forms part of the general tax system and is determined in relation to all the priorities of government, which always includes the macroeconomic considerations.

Given the extremely redistributive nature of public health systems, their funding is without exception always by way of the system of taxes.

The only characteristic, therefore, that could conceivably classify a national system as "insurance" centres on the indirect nature of how services are funded, and not the explicitness of any tax or the existence of a single payer.

If NHI is considered for South Africa, there needs to be some evident benefit to an insurance-based funding approach over conventional public sector budgeting and planning. And given the scale of the implied institutional change, this benefit would need to be large and quantifiable.

No research has ever been produced in South Africa which has identified the need for an insurance funding approach for the public health sector as the central systemic problem requiring correction. By contrast, there is a substantial body of literature identifying correctable systemic failures of the public system, none of which involve changing the funding approach to that of insurance.

Now it might be argued that proposals to introduce NHI mainly focus on improving the effectiveness of the public health system. However, a proposal emanating from an ANC discussion paper recommends that the public sector be entirely replaced with an insurance-based approach. It recommends the establishment of a vast rambling national public entity, separate from the various departments of health, through which all the finances of the public health system will flow. It is proposed that this structure duplicate or replace provincial Health Departments.

The report further recommends the implementation of a substantial progressive earmarked tax, sufficient to raise an additional R100 billion per annum immediately. In an unusual departure from standard public finance principles, the report proposes that the entity would have the authority to raise whatever funding it requires without the formal approval of the cabinet and Parliament.

To the extent that it can be interpreted from the report, the proposal involves an earmarked tax that would need to raise additional funds equivalent to 9 percent of current gross household remuneration, which will be raised primarily from high-income groups.

Even were this windfall to arise, it would still not be possible to fund a benefit equivalent to what medical scheme members currently purchase from their own income. Consequently, the additional tax will generate no offset in the demand for private services and will amount to a substantial increase in the tax burden and to the perceived general cost of labour (the earmarked tax will be applied to all income earners in addition to existing taxes, medical scheme or other health insurance contributions). Other improbabilities aside, the capacity of the proposed system to absorb such an increase in budget is clearly questionable.

The recommendations gloss over the significant contingent financial risk for the government and the country. This arises from the need to contract with all private providers, when the capacity to enter into coherent contracts without substantial fraud and inefficiency is unlikely to exist.

The proposed earmarked tax will have severe implications for the cost of labour, is completely unnecessary, and has not been thought through. If the government were to implement improvements to the public health budget, it could do so through increases in general taxes. If there were a need to improve the progressivity of general taxes, this could be achieved more simply through changes in general taxes.

The insurance-based approach appears, illogically, to be motivated on the grounds of enhancing equity. However, insurance-based app-roaches are not superior to conventional public sector planning and budgeting in achieving equitable outcomes.

The report appears in part to motivate its changes on the improbable grounds that it can improve on private sector inefficiencies. However, there is no examination of the real risk that the proposals could deepen the service delivery crisis in the public system. Quite aside from the real possibility that attempting to implement this plan would deflect attention away from much-needed real reforms, the proposals would squander budget increases on paying public sector staff at private sector earnings levels.
A very unusual proposal is to require that medical scheme members pay 85% of their contributions into the NHI, for which they will receive only public cover in return. If the public sector services are inadequate, no one will be permitted to insure themselves for any benefits covered by the NHI. Consequently, if the public arrangement cannot afford adequate dialysis, heart transplants, cancer treatment or emergency care, no one will be permitted to purchase them privately.

This particular recommendation is without precedent, and, given the context, absurd. In conjunction with the punitive tax levels, this comes across as little more than an ideologically motivated attack on income earners.

Aside from the punitive tax and benefit provisions, there is no certainty that the actual authority will operate efficiently. The governance model, which has a direct bearing on its likely performance, bears little relation to international benchmarks on social security institutions.

Typically they are independent entities with representative boards. Internationally, the board and not the minister appoints the CEO. Direct political appointments tend to reduce efficiency, as factors other than performance tend to determine the tenure of the executive.

Remarkably, the task group recognised the possibility that health professionals will flee the country rather than be subjected to this process. To mitigate this inevitable consequence they envisage again resorting to importing Cuban doctors. It is, however, not clear that the fleeing engineers, accountants, lawyers, and actuaries will also be replaced by Cuba.

Although social and national insurance approaches are possible for South Africa, this particular proposal has conceivably not been designed with the best interests of the country at heart. In substance it comes across merely as an attack on income earners and businesses.

It has been conceived within a questionable process designed to avoid the standard reality checks associated with complex policy development. If such proposals are permitted to proceed unchecked the implications for the country, well beyond health provision, will be severe and permanent.

To avoid further mistakes concerning health reform, it is essential that discussions on NHI occur in public, with proper consultation and stringent technical review. As they stand, these proposals fall far short of the adequacy required for proper government consideration and require substantial revision.

Van den Heever is a specialist economist in public policy, health and social security. He was a member of the Taylor Committee of Inquiry into Comprehensive Social Security and advises the Council for Medical Schemes and numerous government departments. This article is written in his personal capacity

Alex van den Heever: The Cape Times, 9 June 2009

THE ANC has criticised media reports of its health plan and vowed to continue its efforts. ANC spokesperson Jesse Duarte said the party would transform healthcare in South Africa and would not be deterred by narrow interest groups and individuals bent on undermining the introduction of NHI before its work was made public. She said the ANC had noted with concern media reports attempting to deflect public attention away from the crucial work of the National Health Insurance (NHI) task team. Over the weekend there were a number of reports on health economist Alex van den Heever's presentation to the Hospital Association of SA (Hasa) conference, in which he said that from his knowledge of the NHI, the system was a "completely unworkable, unaffordable solution that would not improve health services despite massive increases in expenditure". Van den Heever said one of the proposals made in the yet-to-be released document, compiled by the ANC task team researching the matter, would increase the health budget by R100-billion, adding that there seemed to be an attempt to avoid debate on the issue. Van den Heever told conference delegates that the documents had been produced, but had not been subjected to external peer review or technical analysis. Duarte said the accusations of critics such as Van den Heever were without substance. She said unsubstantiated claims of an NHI "secret report" and "non consultative" approach of the NHI task team were untrue and only sought to create public confusion. She said the ANC was going through an "internal process" on the NHI policy and would only make public statements once it was concluded. Meanwhile, the Democratic Alliance has attacked this process. DA MP and health spokesperson Mike Waters said as things stood, it appeared that the ANC was trying to force through its implementation by avoiding public debate on the matter. He said that there were no parliamentary health committee meetings scheduled yet to discuss this, adding that there must be more room for public input. Waters accused the ANC of making NHI policy "covered in a cloak of secrecy" and without consulting experts.

SAPA, 8 June 2009

THE GOVERNMENT'S reluctance to resolve the crisis over doctors' pay and working conditions could have severe repercussions for the 2010 Fifa World Cup.

Disgruntled doctors in public hospitals, some of whom earn less than bus drivers in Johannesburg, have threatened to intensify their protests around the country. Several doctors said they would continue to protest and would have no qualms about going on strike during the World Cup. "How else can we pressure the government to help us?" one asked.

Research by the South African Medical Association (Sama) shows that doctors are underpaid by as much as 70 percent and their working conditions are a nightmare.

As part of the occupation-specific dispensation (OSD) system, doctors, dentists, pharmacists and emergency care workers were to have been on a similar pay system by June last year. But only nurses in the public service, who went on strike for a month in 2007, got pay hikes of 20 percent, better medical coverage and housing subsidies.

Sama chairwoman Denise White said: "Doctors study for long periods and after qualifying, are saddled with study debt and living expenses. They have lost almost half a decade of earning potential compared to other professionals, but they are asked to work long hours and perform miracles with limited resources."

A doctor, after studying for six years, earns R8 000 a month as an intern. A Metrobus driver who has three years of service gets R8 800 a month. Entry-level nurses get between R10 000 and R12 000. While it is against the law for doctors to strike - they are classified as an essential service - many employed at government hospitals have taken to the streets.

On Friday, doctors marched to Parliament in Cape Town. In the past two months, there have also been marches in KwaZulu-Natal, Mpumalanga, Gauteng, Limpopo and North West.

White said there was one doctor for every 3 846 people in the country. The burden on doctors at state hospitals was severe: because of budgetary cutbacks, 30 percent of posts had been frozen.

"Doctors are under severe stress, and ultimately it is the patient who suffers," said White.

"Doctors are angry and have legitimate grievances. I've heard that as many as 3 000 doctors have applied for certificates from the Health Professions Council of South Africa (HPCSA) that would enable them to work overseas. This would worsen the problem," she said.

"The OSD model is structured to increase salaries based on specific criteria such as performance, qualification, scope of work and experience. The government is being lambasted for its tardiness in implementation, as well as for the insultingly low offers made in the bargaining process thus far."

Other factors leading to the protest action include deteriorating academic facilities, too few doctors being trained, poor working conditions for health professionals in the public sector and the often atrocious conditions facing patients at public health facilities.

"Sama's public and private sector doctors remain committed to ensuring that the OSD becomes a reality, as it is critical to prevent the wholesale walkout of doctors from the public sector and from our country," White said.

Last year, according to the HPCSA, 34 687 doctors were registered in the country. Of those, 10 653 were working in the public sector. The number of medics in community service declined from 1 224 in 2007 to just 295 last year - apparently as a result of poor planning and mismanagement by the national Health Department when it converted the MBChB degree from six years to five and introduced a two-year internship.

Asanda Fongqo, the spokesman for the Democratic Nurses' Association of South Africa, said all healthcare professionals, especially doctors, should be rewarded.

"It is not fair to pay some and not pay others, there is no consistency. We support better pay and working conditions for both nurses and doctors, in addition to tools of the job, like resources, safety and security."

HPCSA registrar and chief executive Boyce Mkhize, has expressed concern about threats of further strike action.

"While we support the need for commensurate remuneration packages and improved working conditions for public service healthcare practitioners, we request all parties to mediate until settlement is reached," he said.

Cosatu spokesman Patrick Craven said: "We are meeting with government (tomorrow) in a bid to sort it out without further delays."

Last month Health Minister Aaron Motsoaledi acknowledged that doctors were poorly paid but said that it might take a year to resolve problems with the new system.

Edwin Naidu: The Sunday Independent, 7 June 2009

WHEN we talk of transforming healthcare, we tend to think in terms of black and white. How many senior black managers are there in the bigger private hospital groups? How many small black businesses have been set up as suppliers? But transformation goes much further - it's about creating a health system that is truly equitable and provides quality services to all South Africans.

The private hospital sector can play an important role in assisting the government to ensure transformation succeeds.

For more than a decade, we have been fiddling with a system that was designed for a different country. Apartheid set us back decades in terms of democratised healthcare. Other nations, such as the UK and Switzerland, began implementing national health systems that would deliver healthcare to all their citizens after the Second World War. Meanwhile, SA was preoccupied with creating different tiers of healthcare for different races. And when we stopped discriminating on the basis of race, we started discriminating on the basis of economics.

One of the biggest challenges for the new government under President Jacob Zuma will be to implement the national health insurance (NHI) system. This system will enable every South African to access fair medical treatment at a point of service. Although the details of this plan still need to be ironed out, NHI would see healthcare providers such as hospitals being paid by the state to provide a service to each person they treated. No one would be turned away at a hospital because they couldn't pay.

A more open, consultative and inclusive relationship between the public and private sector is critical if transformation is to succeed. The appointment of Pakishe Aaron Motsoaledi as the new Minister of Health is appropriate and is welcome by those who know him. He, just like his deputy, Molefi Sefularo, has a full understanding of healthcare in the hinterlands of this country, having worked at the coal face for years under much more difficult conditions.

During the apartheid years, Motsoaledi worked in organisations intent on transforming healthcare in SA. Post-apartheid, he continued to be involved with the African National Congress (ANC) health and education committee. The private healthcare sector is encouraged by his reputation as a straight talker and a hard worker, with a passion for service delivery and a real understanding of the issues.

However, there are a number of challenges we face. Perhaps the most critical concern revolves around the chronic shortage of healthcare professionals. If NHI is to be successfully implemented, we need enough healthcare professionals to deliver the services. When the ANC came into power in 1994, there was a rationalisation in terms of human resources in the healthcare sector. Posts were frozen and a number of specialist skills were lost.

More than a decade down the line, the country faces a deficit of about 70 000 nurses, doctors, specialists, pharmacists and other healthcare workers. This shortage does not take into account the increased disease burden - such as more patients with HIV/AIDS - nor does it factor population growth into the equation. Exacerbating the healthcare skills crisis is the fact that state nursing colleges have been mothballed.

In order to ensure its own survival and meet the skills shortfall, the private hospital sector began training nurses. In 2007, private hospitals trained 1200 nurses. While some of these nurses work in the public sector, the number graduating each year is still below the estimated additional 3 500- 4 000 nurses required each year if the country is to deliver care to more people. We believe that the government should reopen all nursing colleges as a matter of urgency.

The private sector would also be willing to assist the state with training world-class doctors and specialists, but would require permission to do so. Trainee doctors and specialists could greatly benefit from exposure to the latest technologies housed in private hospitals as part of their training.

The state should engage more with the private sector in terms of public-private partnerships on a scale previously implemented at Hewu, Shiluvani, and Matikwane hospitals, where comprehensive management - including clinical management - was managed by the private sector.

The recently opened Port Alfred-Settlers public-private partnership gives much hope for the future since it allows for clinical management of patients, unlike many other public-private partnerships we have seen.

While the private sector contributes 22% of SA's hospital bed capacity, one of the best ways to improve access to healthcare for the majority of South Africans would be to open some of the mothballed beds in the public sector and allow the private sector to help manage some of these hospitals.

It also seems unfathomable that South African private hospital groups are being contracted by some European governments to help address their backlogs of patients waiting for surgical procedures, yet in SA this model has not been utilised. Our companies meet the strictest quality control standards and outperformed bidders from across the world to win these contracts.

Although the same hospital groups undertake surgical procedures as part of their corporate social responsibility programmes locally - for example, thousands of cataract operations are performed each year for free at various private hospitals - this is not a sustainable economic model. If the state were to buy these services from the private sector, the huge backlogs of surgical patients in public hospitals could be eliminated. This at little additional cost to the state because of the efficiencies extracted.

Two of the most important aspects of the healthcare system the incoming minister will need to consider are the poor leadership and structural weaknesses that currently characterise the system.

Priorities should include changing regulations to empower hospital administrators so that they are not handicapped in responding to local needs. Under the existing system, they are hamstrung while waiting for decisions from provincial heads. The end result of this arrangement is that patients suffer.

The fact that SA has failed to make much progress in meeting the Millennium Development Goals of reducing HIV/AIDS, communicable diseases and maternal deaths is an indication that the health system is performing poorly. Many of these factors are under the government's control.

It is evident that the government will have to move quickly if it is to address the healthcare catastrophe. The private hospital sector has historically contributed to programmes aimed at improving access to healthcare, both on a collective and individual level, for patients beyond those who can afford private hospitals.

We urge the government to engage the private sector to truly transform healthcare for all.

Dr Matlala is chairman of the Hospital Association of SA, and sits on the board of Medi-Clinic

Dr Nkaki Matlala: Business Day, 8 June 2009

NOTHING makes the achievement of a better society less likely than a government's failure even to try. Without ambitious public policy goals, and programmes that stretch the capabilities of public servants and citizens, no society can make major developmental advances.

Political leaders, however, can be prone to breezy optimism. They assemble wish lists that have no prospect of realisation, and assume that the capacity to implement complex programmes can be created overnight.

The result is the adoption of symbolic policies that placate organised interests but do society no good at all - and often do a lot of harm.

Italian political philosopher Antonio Gramsci got the appropriate balance broadly right when he wrote that "I am a pessimist because of intelligence, but an optimist because of will".

President Jacob Zuma's state of the nation address last week was interpreted by some analysts as heavy on optimism of the will, most particularly in its hopes for a national health insurance (NHI) system. SA's constitution, of course, embodies a right to healthcare, which the state must take reasonable steps progressively to realise. NHI, however, strikes many critics as ideological and impractical.

Knocking Zuma on these grounds is probably unfair. NHI in fact reflects a global shift in thinking about how healthcare should be financed. In the "Washington consensus" decades, the emphasis of international institutions was on stimulating the growth of private healthcare insurance and encouraging citizens to support public systems with higher user charges. Practical and theoretical understandings of the limitations of dominant private insurance markets, however, have led to a new international consensus in favour of prepayment financing through mandatory NHI.

First, voluntary insurance markets are subject to "adverse selection" because those least likely to fall ill opt out until cover becomes unaffordable for those who need it most.

Second, information asymmetry in the health sector leads to "overtreatment", a pathology that partly explains spiralling healthcare costs and so premiums.

Third, private schemes provide limited population coverage. Even in the US, where almost inconceivable resources are devoted to healthcare, tens of millions are excluded. In SA, the number of private medical scheme beneficiaries remains at 7-million, more or less where it was 15 years ago, despite such schemes eating up about 60% of financial resources.

Fourth, there is burdensomely high total expenditure, but resources are not efficiently or equitably allocated - and so outcomes are poor. The state shoulders the cost of training health sector workers but these scarce human resources disproportionately service private scheme members. A private sector general practitioner (GP) has 600 patients (or 250 in a medical aid scheme) whereas a public sector GP serves 4 000. There is one specialist doctor for each 470 private patients but only one per 10 000 in the public hospitals.

For these reasons, there are grounds for an overhaul of the national health system that reconfigures the relationship between private and public sectors. The fact that private health markets are imperfect, however, does not help policy makers to know what is possible or desirable in SA. All manner of combinations of revenue-collecting mechanisms, funding pools, purchasing instruments, and mixed private and public provision methods are possible.

Building new institutions will be expensive and difficult and SA's shambolic state cannot be burdened with complex tasks. The revenue service and private medical schemes must be used as instruments of implementation. Scarce human resources must not be chased away and lost as a national resource.

The public hospital system, moreover, needs to function much better if NHI is not to represent another tax on the formal economy. Despite some symbolic gestures, there is no sign that the new African National Congress leadership will pay frontline health workers adequately, empower hospital managers, or address the mismanagement and corruption at provincial health administrations.

Critics have found it hard to enthuse about the reported role of Human Sciences Research Council head Olive Shisana in what has been a needlessly secretive policy development process.

Zuma pledged to introduce the NHI in "a phased and incremental manner" and after the "urgent rehabilitation of public hospitals", which means there is still time for the process to be shaped by a wider public and specialist debate. While there is plenty of optimism of the will on show, however, so far there has been too little pessimism of the intellect.

Butler teaches public policy at UCT

Anthony Butler: Business Day, 8 June 2009

DEPUTY Health Minister Molefe Sefularo has assured private hospitals that they are seen as a national asset that can be relied on for world-class healthcare.

He said their assistance - along with that of others in private healthcare - would be sought in any plans to make healthcare in the country more accessible and equitable to all.

In an address to the Hospital Association of SA conference this week, Sefularo referred to media reports about alarm at the introduction of a national health insurance (NHI) system.

Molefe gave an assurance that the process of planning and introducing a NHI would be transparent and stakeholders, as well as the public, would be drawn into the process, listened to, and would contribute in the form of public-private partnerships.

Making frequent references to President Jacob Zuma's state of the nation address earlier this week, in which the threat of an imminent and cataclysmic change to the national health system was dampened down, Molefe said the draft white paper with proposed legislation would be released near the end of this month. It would signal the beginning of the consultative process. The planned NHI was a tool towards universal coverage and better care for all in one united healthcare system for the country, he said. He said the NHI was seen as the funding mechanism to be used to fulfil these aims. This would be funded in part by tax revenue, but would require resources to come from elsewhere.

It is clear that the other sources of revenue are intended to come from a payroll tax on employees and employers, with a major portion of medical scheme funds to be paid over to the NHI to fund the R200-billion needed in the envisaged new body. The plan would force members to use state health facilities or pay for private health from their own pockets and prohibit schemes from providing insurance for private hospitals as part of the benefit plans.

Aiming a shot across the bows of medical scheme administrators and private medical practitioners, he said the present system contributed to the increasing of administration costs, contributed to the continuing cost escalation of "hotel services" within private hospitals, and encouraged the over-servicing by healthcare practitioners and specialists within the private hospital environment.

The Business Times, 7 June 2009