Social Health Insurance: Department briefing

Meeting report

HEALTH PORTFOLIO COMMITTEE
7 June 2005
SOCIAL HEALTH INSURANCE: DEPARTMENT BRIEFING

Acting Chairperson: Ms M Madumise (ANC)

Documents handed out:
Department briefing

SUMMARY
The Department of Health presented on the proposed Social Health Insurance model. Detail was provided on the key strategic challenges, the policy context, comparisons between National Health Insurance (NHI) and Social Health Insurance (SHI), and the objectives of SHI. Risk equalisation and income cross-subsidies were outlined. Members asked numerous questions, including on possible sanctions for unco-operative schemes; plans to revive public hospitals; provincial and rural-urban disparities; the decline in the use of public hospitals; the claimed evolutionary process from SHI to NHI; high inflation and fraud within private medical schemes, and the containment of outpatient costs at public hospitals.

MINUTES

Department of Health briefing
Dr K Chetty (Department Deputy Director-General: Health Service Delivery) referred to the lengthy planning process regarding the formulation of the social health insurance policy. The matter was complex and required broad-based consultation with relevant government departments, such as the Treasury, and other stakeholders. The presentation focussed on agreed aspects and ignored certain issues still to be determined through discussion. The subject had generated significant debate within the media and confusions had to be clarified. The position on private sector medical schemes was explained and the distinction between social health insurance and national health insurance was clearly outlined.

Ms B Khunoane (Department Director: Social Health Insurance) outlined the key strategic challenges to facilitating universal access and adherence to World Health Organisation (WHO) principles. The number of recipients of private and public healthcare varied, with the private system serving a relatively small number as compared to the public sector. The membership of medical schemes had not grown in the interim and specialists and private hospitals had received increased payments. Medical aid schemes ignored public sector facilities in general. The intention was to converge sectors and provide more balanced service delivery.

Ms Khunoane elucidated on the distinct characteristics of the national health insurance model versus the social health version. The NHI model operated efficiently within a developed state context, while the SHI approach was more appropriate for a smaller pool of contributors. The objective was to create a NHI system after the entrenchment of SHI systems in an evolutionary process. SHI intended to render affordable universal cover and remove access barriers. SHI would consider risk-related cross-subsidies, income-related cross-subsidies and mandatory contributions. Risk equalisation would be promoted across medical schemes, and lower prices for delivery would be encouraged through enhanced competition. She further explained the tax expenditure subsidy framework and proposed next steps.

Discussion
Ms S Rajbally (MF) asked what additional subsidy income the Social Health Insurance policy would receive.

Ms B Ngcobo (ANC) asked what sanctions could be imposed on medical schemes that contravened legislation, and whether public sector hospitals could be revived to attract more medical scheme patients.

Dr Chetty responded that the National Revenue Fund was a major contributor towards public sector funds and that other donor grants had been organised. The Council for Medical Schemes (CMS) regulated the industry and ensured compliance in an interactive manner. The unethical behavior of medical schemes had been addressed in recent years and further discussions would occur. Public-private partnerships would be considered as part of the hospital revitalisation programme, and public hospitals would encourage an increase in-patient numbers. Certain public hospitals had improved service delivery and the public sector should become designated service providers for all medical aid schemes.

Mr S Njikelana (ANC) asked whether the department had considered the disparities between rural and urban areas in addition to the obvious differences between public and private sector service delivery. He asked whether local government facilities had been included within an appraisal of the South African health system. The decline in use of public hospitals by medical schemes was a concern. He sought clarity on the reasons for this trend. He asked which areas of service within the public sector continued to be utilised by medical schemes. He proposed that representatives of the Department attend an upcoming Committee meeting with the Board of Healthcare Funders to gain additional insight. Clarity was also sought on progress in primary healthcare. He provided the example of Cuba as a developing country that had a National Health System model, and asked for evidence of the proposed evolution from Social Health Insurance schemes to a conventional national system.

Mr I Cachalia (ANC) referred to rising contribution fees and decreasing benefits over the past decade within medical schemes, high levels of fraud and private hospital bias. He asked whether these issues had been considered in advocating Social Health Insurance as a suitable model. He queried what proportion of the population would benefit from the envisaged system.

Ms Khunoane replied that the Department was aware of persistent service disparities between the rural and urban areas. Inequalities also remained between provinces and weaknesses would be addressed over time. The role of municipal expenditure towards clinics and other health service had not been included in the presentation, but the Division of Revenue Act provided detail. The decline in public sector hospital use had many causes, including the growth in the private hospital industry and the low regard shown by medical scheme patients towards the public sector.

She continued that the public system needed to improve their billing methods as medical schemes required accounts within three months of treatment in accordance with the Medical Schemes Act. The administration component of public hospitals would have to be improved. The public sector suffered unnecessary costs when patients did not disclose medical scheme membership status upon admittance. Public hospitals could not refuse treatment in line with constitutional principles. Specialised services within the public sector were used by private practitioners and medical schemes, particularly within academic hospitals. Cost escalations for primary care had occurred within medical schemes due to contract agreements with private primary care providers.

Primary care would be included within risk pools created by Social Health Insurance, and growth in the industry could be expected. The presentation had focused on health policy issues but debate on the merits and demerits of the proposed model would have to include political economy policy positions, such as current government macro-economic policy. Studies had confirmed the evolutionary path experienced by industrialised countries from SHI to NHI where smaller systems had converged into large national beneficiary pools. The Department was aware of extensive fraud and cost escalation within medical schemes, and the Council for Medical Schemes was investigating. The Department would strive for reasonable prices within the private scheme system and the National Health Act permitted intervention by the Minister where necessary.

Dr Chetty confirmed that the inequities in service distribution would be addressed and human resources would be a prime focus point. The recent rural allowance paid to health practitioners within the public sector had facilitated an increase in personnel within rural areas. The Department had considered empirical studies comparing SHI and NHI applications and related successes, but this had limits due to varying socio-economic contexts in different countries. She recommended that private hospital representatives make a presentation to a future Committee meeting where explanations on escalating costs could be provided. Recent pharmaceutical pricing regulations had caused a shift in costs towards private hospitals and other services by private companies.

Ms B Ngcobo (ANC) asked how a public sector bill was paid if medical schemes refused to pay on the basis of delays. Clarity was sought on the role of traditional practitioners within the proposed system and the current rating by the World Health Organisation.

Dr Chetty stated that a new electronic billing system was under consideration for the public hospitals that would provide centralised billing and accurate records. Incentives would be created for hospitals to submit accounts to medical schemes more timeously. Improved records would also assist in addressing cross-border discrepancies. Pre-payment arrangements with medical schemes could be considered. Registered traditional practitioners would receive a practice number from the Board of Healthcare Funders that would initiate access into the health system. Traditional services could be provided within medical scheme packages in accordance with demand. The poor rating within the last WHO rating study had been due to high inequalities between the public and private sectors in terms of resources and the number of beneficiaries.

Ms R Mashigo (ANC) asked what role the Department of Social Development had played in the discussion process to install a revised health insurance system.

Ms Rajbally asked how the costs of outpatient fees in public hospitals could be controlled in the interests of the indigent and unemployed.

The Chairperson asked how medical schemes could be prevented from exhausting the allocated funds of patients and dumping them onto the public sector. She asked for detail on the extent of the consultation process around the development of the policy, and how the abuse of schemes could be discouraged.

Dr Chetty responded that outpatient fees at public hospitals were governed by a uniform fee schedule composed of certain categories determined by socio-economic circumstances. The public sector had to provide healthcare to citizens irrespective of ability to pay. The presence of cash within the system did increase the likelihood of fraud and corruption, but regular audits within provinces would be conducted to monitor activities and prevent unlawful practices. Any anecdotes of corrupt activities known by Members should be forwarded to the Department. Legislative amendments would be initiated to reduce ‘dumping’ and discourage unnecessary expenditure by medical schemes.

Ms Khunoane replied that the consultation process had occurred for some time. A 2001 study had focused on the types of services desired by low-income earners and their willingness to contribute some payment towards service delivery. The study revealed a clear understanding of needs and a strong social solidarity stance. Benefits should be widespread and the public displayed a commitment to contribute to payments, although the agreed amount was variable. The Department would quantify a package of benefits and discuss fiscal issues with the Treasury. Consultations had occurred with organised labour and other stakeholders, but many had fallen out of the system over time. The Social Development Department had been part of a broader consultation process focused on the restructuring of the social security system.

Mr Njikelana recommended that the Department consult with information technology experts to expedite the improvement of the billing system. He noted the movement away from NHI and asked for the Department's strategy on non-contributors. The danger of cartels between medical schemes and service providers should be considered. He advocated a stronger emphasis on public participation within the policy planning process.

Dr Chetty replied that SHI proposed that contributions be paid by the employed, with the indigent covered by the state. The creation of one pool of beneficiaries was not planned at this stage. The model would concentrate on adding the employed currently uninsured into the system, and create income cross-subsidies. The danger of cartels would be addressed by various regulators,such as the Competition Commission. A potential conflict of interest between service providers and laboratory services could be prevented by pressure to unbundle subsidiaries where necessary. The Health Professions Council could intervene in such situations.

The meeting was adjourned.