NHI what are the real costs Archives

True to form, just before elections South Africa’s ruling party, the ANC, promises whatsoever is needed to get more votes. The last 30 years have proven that the promises count for little and end in failures. The latest such shambles happened yesterday. President Ramaphosa signed the much-critiqued National Health Insurance (NHI) into law. It is nothing short of a fairy-tale.

The SA government analysed the medical environment in South Africa and determined that it essentially is a two-tiered system. The first is the public health system, funded by the state where the service is poor or non-existent, but it is essentially free to everyone. The second is the private health care system, which is world-class but only accessible to those who have got the means to pay for it (mostly via their private medical insurance). As such, the government wants to make the world class health system accessible to everyone by eliminating private medical insurance schemes and becoming the only buyer of health services (seeing it worked so well for all the communist countries). That is a mad.

Firstly, the only reason why we have such a big and well-functioning private healthcare system is because the government failed to manage the public health care system. The local clinics have not enough doctors, yet young qualified doctors sit around at home struggling to find employment. The buildings are not maintained, and the patients need to sit in long ques to get treatments. The provincial health MEC’s are completely out their depth, and their department is out of talent. When one reads about the horror stories of the Tembisa Hospital, it becomes very clear that most state clinics serve as a cash generator for a handful of dubious contractors and suppliers. Instead of fixing the public health care system, the ANC would rather pull down the private healthcare as well.

Secondly, the reason why only the wealthy can afford private healthcare is because they are able to afford the pricey health insurance premiums. The private medical aid plans are expensive because the regulator does not allow cheap plans to be sold. Across the border, in Namibia, the cheapest Medical Aids cost about R500 per month while the cheapest in South Africa cost three times that, and only because the regulator prescribes minimum benefits.

Thirdly, we have a world class private healthcare system because the rich don’t mind paying exorbitant fees. Thus, the most talented doctors can earn in South Africa what they are able to earn anywhere else in the world. However, most of the rich world is desperate for more qualified doctors and nurses. So, if the SA government thinks they can force the medical professionals to work for less, they will be mistaken. They will just emigrate, and thus their know-how will leave as well. The patients will be worse off because the doctors are not available anymore. Young medical professionals will be worse off because there is a lack of knowledge transfer, and the state will be worse off because they will collect less income tax. Everyone loses, no one wins.

Fourthly, a centralized insurance system has not worked anywhere in the world. The NHS in the UK is a disaster, Obamacare is much more expensive than first predicted and the centralized systems of China and Russia might as well be abandoned. A national insurance could only work in very well regulated environments where the government is trusted. Neither could possibly apply to the ANC government.

Fifth, the funding gap is so large, that the only way to pay is for the Taxes to increase. By world standards, the Taxes in South Africa are already excessive, but clearly the government sees no problem in taxing the population a lot more. Why? Thanks to the poorly managed transport system, unreliable electricity, and militant unions the little bit of economic growth we have experience has mainly been through the consumer sector. A consumer with less money in the pocket will not be able to buy as much, hence the ANC government would have finally managed to shrink every sector of our economy. Thus, the little bit of growth we have had over the last 15 years will completely evaporate and most South Africans will be poorer than they have been in 2005.

Sixth, the fund that will accumulate in the NHI will be so big, and the “suppliers” so many that in no time it would resemble a cesspool for corruption. The state capture inquiry showed know how quickly funds are siphoned off by crooks. Instead of providing healthcare for everyone, the NHI will provide billions in cash for a few. Typical.

It is disheartening to see the ANC turning to populist measures when they struggle to explain to their voters why they deserve to govern again. Instead of improving the state hospitals and clinics, they rather want to bring the private sector down. It is possible to improve the public health system, just look at the Western Cape, which is run by the official opposition, the DA.

The South African health minister, mr Motsoaledi has unveiled his long awaited universal healthcare plan, called the National Health Insurance (NHI). It has a noble cause – to make the same healthcare available to the rich and the poor. His solution shows that he has not understood the problem though.

According to the website news24.com, Mr Motsoaledi plan envisages one big fund that will act as the single purchaser of health services, and thereby it will “pool funds to provide access to quality health care services for all South Africans, based on their health needs and irrespective to their socio-economic status. He went on to say that “currently the private sector spends 4.5% of GDP on health but only provides care to 16% of the population while the public sector spends 4.2% but provides 84% of the population.”

The public hospitals and health care institutions are in such shambles that something needs to be done about them. A recent example of public healthcare blunders is the life Esidimeni tragedy, that cost the life of 143 helpless patients., which was purely down to bad management decisions. No one has been arrested and held responsible for it.

Mr Motsoaledi insists that, currently, the poor are subsidising the rich, and that needs to be turned around. 16% of the population that currently spend 4.5% of GDP on private healthcare are also the main income tax generators. Thus, they pay taxes, but do not make use of the healthcare provided by the government

Whoever has the means, takes out private health care insurance. It is an indirect tax, because healthcare is something that the government should, but does not provide. Insurance companies offer different packages, because not everybody wants or is able to pay for a full comprehensive package. Health insurances are zero-sum businesses. Essentially, the co-payment required on the cheaper packages can be viewed as the statistical shortfall in previous contributions.

But mr Motsoaledi also wants to eliminate co-payments, forcing everybody who want to be privately insured to take out the comprehensive insurance plan.

. What should be done? The private sector is only able to provide the service because the public sector is not providing it. Maybe the most noble thing to do would be to admit to the current mis-management and commit to make sure that the public institutions are run efficiently and effectively. That would eliminate the urge to go to a private hospital at almost any cost. It would also ignite competition and therefore bring down prices of private hospitals. Lastly, let those who can, take out private healthcare insurance. At least they will not be putting pressure on the public healthcare system. The rich and poor would not compete for the same public health service, rather the rich would subsidise the poor.