A shot in the arm, or shot in the foot: will NHI work?

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A shot in the arm, or shot in the foot: will NHI work?

The bill is thin on detail about the financing and minimum care levels, and there are tricky political obstacles

Stuart Theobald

Earlier this year my wife and I had our first baby. Words cannot describe the all-encompassing experience, as any new parent will tell you. But one of the relatively mundane novelties was a first-hand experience of the United Kingdom’s National Health Service (NHS).
Having grown up in South Africa in a family luckily able to afford private health insurance, it was a culture shock to enter a system where the costs don’t even come up in conversation. Even for the well-insured rich in SA, some healthcare decisions are inevitably going to be about money. In the UK, in general, cost has very little to do with deciding what care is needed. Our experience of the NHS, before, during and after the birth, was outstanding. We felt that we were getting the best care in the world and it cost us nothing.
The NHS was the world’s first free (at the point of use) national health scheme and remains one of the world’s best. It is not without its trials – it is chronically underfunded and performance in certain areas is lacking. You can feel like a statistic more than a person when engaging with it. It is often hard to get a short-term appointment with a GP. Even if you know you need to see a specialist, you have to waste a GP’s time to get a referral (a feature that has been incorporated into the proposed SA scheme).
But the system works at a macro level, delivering outstanding national statistics on health outcomes. One of the odd consequences is that it is more often your doctor who contacts you than the other way around, telling you you’ve hit the age or some deadline for a periodic test. This kind of preventative healthcare works by reducing cancer and heart disease or at least catching it earlier and so saving costs down the road.Health policies are researched and developed to achieve the best national outcomes. The system is pretty uncaring if you want something that is vaguely elective, but on the whole you feel very comfortable that the system works.
Despite the efficiencies that come from a holistic approach, the NHS is still very expensive. The service costs about 7.1% of UK GDP and taxes that pay for it take a big bite out of taxpayers’ pay cheques. In 2017, the total budget was about £125-billion, equivalent to about R2.2-trillion, or 47% of SA’s GDP. The UK’s population is about 14% bigger than SA’s, but the NHS budget is six times our public and private health care spending combined.
As a percentage of GDP, our health spending does look better. At about 8.8% of GDP it is not far off the 9.3% average for OECD countries (the UK matches the OECD average when private and public health spending are combined). However, SA stands in a small set of countries where private expenditure is about half of the total, with the US being the other notable outlier. Private healthcare supports 16% of the population, so 84% of the population relies on an amount equivalent to 3.9% of GDP. This is a major inequality in access to healthcare, though it mirrors broader economic inequality.
Hard decisions lay ahead
Health Minister Aaron Motsoaledi unveiled an NHI Bill and an amendment bill to the Medical Schemes Act last week. Unfortunately, these remain thin on detail about the financing and minimum care levels. A universal care system funded through some kind of national insurance scheme has the potential to deliver positive outcomes for the country.
The evidence is mounting that universal health cover supports better economic performance, though it is a complex causal relationship. However, there are hard decisions about just what will be covered and how it will be funded. So far, Motsoaledi has avoided those, with the bill leaving them to a “benefits advisory committee”.
The bill outlines a national insurance scheme, but leaves aside the details on just how much will be deducted from payrolls. As is the case now, the public health sector has to make decisions about how to use its scarce resources, and that will remain the case after the NHI too.There are tricky political issues at both the top and the bottom of the income scale. All employees will suddenly have a new amount deducted from their pay cheques. As the Davis Tax Committee has provocatively suggested, that may go down as well as e-tolls have, because people will suddenly be made to pay for something they currently believe they are getting for free.
There are also proposed amendments to how private medical aid schemes will work, largely removing the current tax advantages. The ambition seems to be to make private insurance a top-up for the well-off, covering more elective aspects of healthcare, rather than basic health insurance. The problem is that it may be impossible to square these two things – the basic NHI scheme is unlikely to cover what privately insured South Africans will consider to be minimum standards. They will therefore add expensive top-ups without the tax advantages they currently enjoy.
And if the basic NHI contributions are set with graduated rates based on income, the wealthier could find their costs of healthcare escalate dramatically. Between workers and the well-off there is ample scope for a political backlash.

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