Governments are often tempted to obfuscate reality through populist promises.
South Africa is no different in this regard.
For 23 years, health policy has gone from the 1995 policy paper on ‘free healthcare’ for all, to a Social Health Insurance (SHI) proposal in 1999 – hated by labour because it included a payroll tax. By 2004, reality set in. Free healthcare for all was simply not possible.
In 2007, general government policy shifted more to the left and SHI was dropped like a hot potato. The prevailing National Health Insurance (NHI) became official policy the following year, with the same promise: free healthcare for all.
The NHI is predicated on a redistribution of healthcare resources. By unwinding the private sector (read nationalising), and dumping it into the state sector, everyone will ostensibly gain access to quality healthcare.
But, as we have witnessed many times, the long-term success of robbing Peter to pay Paul is virtually zero. To quote Reverend Boetcker, “You cannot help the poor by destroying the rich”.
Elegant and noble notions often stir us to emotively evaluate policies, rather than to starkly strip them down through rational realism. This gives rise to the ubiquitous use of that well-aged political armoury: populist rhetoric. In South Africa, it comes around every five years, promising voters all and sundry, at no direct cost.
The NHI has walked a long road already – 10 years – but has delivered very little. Government documents published in support of the NHI all lacked lucidity on how it will be implemented and funded.
There is yet another healthcare policy framework being developed – this time within the existing private sector.
Most private sector healthcare funding occurs via medical schemes, which are regulated under the Medical Schemes Act (MSA). The MSA contains some noble policies, such as open enrolment, community rating and a set of prescribed minimum benefits (PMB).
But these noble policies have created an expensive set of benefits for all medical schemes to cover, thereby making the MSA distinctly anti-poor. At a current average monthly cost of around R4,000 per family, medical scheme cover is the exclusive domain of higher income earners, so it is no surprise that only about 15% of South Africans can partake.
This has twice led to private sector attempts to create a parallel, lower cost dispensation. In 2004, the creation of the Low Income Medical Scheme (LIMS) initiative and, in 2015, its resuscitation as the Low Cost Benefit Option (LCBO).
Both initiatives were blocked by government. However, by December 2016, after 10 years of negotiating, government had finally drafted a set of Demarcation Regulations (DR) acceptable to most stakeholders.
These regulations exempted some healthcare products that insurers could provide, with the rest being allocated as the exclusive domain of the MSA. The DR had one exception: it did not allow for any alternative, lower cost healthcare products – only expensive medical schemes, which was clearly exclusionary for the poor.
In essence, government had tied itself up in a constitutional knot and had to seek some respite.
This resulted in the creation of what is now known as the Demarcation Exemption Framework (DEF) for health insurers who are technically undertaking the business of a medical scheme, i.e. products that meet this technical definition but are not listed as exempt in the DR. This is an exemption framework for the exemption framework.
The DEF has only been granted up until 30 April 2019 to allow the Council for Medical Schemes (CMS), the industry regulator, time to revitalise LCBO.
Where am I going with this?
The introduction of LCBO is laudable, but to simply place it alongside the existing industry is likely to be destabilising.
The MSA’s minimum benefits are too expensive for current medical scheme members, who would opt out of the system were they able.
What prevents total exit for the majority of members, however, is the common labour practice of medical scheme membership as a compulsory condition of employment. If lower cost alternatives were put on the table by employers, there is no doubt whatsoever that many current members would make the transition.
This is problematic, since it will be the younger and healthier who will downgrade to LCBO, forcing the cost of the traditional products higher than they currently are. This could destroy the medical schemes industry, with LCBO being the catalyst.
What’s the alternative?
Deregulate the market, remove prescribed minimum benefits, and allow people to freely purchase healthcare at levels they can afford. The provider market will adapt and create products that are aligned to consumer needs.
Overall, millions more will partake in the private sector, and finally government will fulfil its mandate by enabling access to healthcare for the poor.
Perhaps with a revitalised government in place, this could be a possibility.