SADC Health Protocol; Health Care Financing in SA: discussion

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14 June 2000
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

14 June 2000

Documents handed out:
Healthcare Financing in South Africa
SADC Health Protocol
Press Release Financing Health Care Since 1994: Is the Apartheid Legacy Being Addressed? Report Launch: Centre for Health Policy/ Health Economics Unit (See Appendix 1)
The Dynamics of Policy Change: Health Care Financing in South Africa1994-1999 (See Appendix 2)

The SADC Health Protocol, its background, the principles guiding it and its main provisions were outlined. A presentation was given by an academic team on healthcare financing in South Africa. The continued inequality in the distribution of healthcare resources between provinces was highlighted. In terms of achieving equity in the allocations to provinces, their analysis was that the formula for the horizontal allocation of resources was no longer adequate, since allocations were, in some cases, becoming more unequal.
With respect to social health insurance, the need for cross subsidising by higher income groups of the lower income groups was identified as was the general need to attach more importance to financial management within healthcare in South Africa - the allocation of the resources and on the improvement of efficiency.

The chairperson announced that one of the committee members, Dr K Rajoo (IFP) would shortly be taking up a post as Consul General for Trade to the United States, based in Chicago. The chairperson bade him farewell on behalf of the committee. The Chairperson then introduced Ms Catherine Makwakwa of the Department of Health and her presentation on the Southern African Development Community (SADC) Health Protocol.

Presentation by Department of Health on SADC Health Protocol
Ms Makwakwa gave an overview of the protocol including some background to SADC. She explained that the health sector was established under the SADC Treaty in 1997 when the SADC Ministers of Health of the fourteen member states decided on the establishment of a health sector. It was decided that it was important for the approximately 190 million citizens of the SADC region that a health protocol be established. The decision was relayed to the SADC Council of Ministers meeting in Blantyre, Malawi, at the same time, which allocated responsibility for the health sector to South Africa. A draft document was subsequently produced. Member states then consulted with stakeholders and convened at a 3-day workshop in February 1999 at the end of which the Protocol was accepted and submitted to the Council of Ministers in August 1999.

Main Provisions of the Protocol
Article 1
: Definitions.
Article 2 : Sets out the principles on which the documents are founded. Its aim is to produce an acceptable standard for all.
Article 3 : Sets out the objectives of the protocol.
Article 4 : Sets out the institutional mechanisms of the sector so as to legalise them and confirm that the health sector unit is funded by South Africa.
Article 5 : Deals with financial provisions. States that ministers should fund their attendance at meetings therefore member states should budget for this.
Article 6 : Health systems, research and surveillance for both communicable and non-communicable diseases.
Article 7 : Deals with health information systems to ensure good quality health data.
Article 8 : Deals with health promotion and education.
Article 9 : A very important provision which provides that parties are to co-operate to harmonise policies.
Article 10 : Deals with the standardisation of policies aimed at the prevention of HIV/AIDS.
Article 11 : Provides for the establishment of efficient mechanisms for the effective control of Malaria in the region.
Article 12 : TB control. Due to the seriousness of the disease and the increasing rate of resistance to treatment the protocol aims to standardise treatment and so facilitate cross border treatment. Under the provisions of this article, South Africa chairs the committee on Tuberculosis (TB).
Article 17 : Reproductive and adolescent health. Provision is made for member states to formulate coherent strategies and procedures for reproductive health, including fertility control.
Article 18 : Health human resource development. The protocol provides for the standardisation of curricula and exchange programmes for the training of doctors in other member states.
Article 19 : Health care resources. Member states should share experience relating to the mobilisation of funding resources.
Article 20 : Traditional health practitioners. Member states should endeavour to develop mechanisms to regulate traditional practices.
Article 27 : Health technology equipment. This provision provides for the sharing of information, training and skills relating to the maintenance and procurement of equipment.
Article 28 : Referral systems. This provision promotes the co-operation between member states in the harmonisation of policies, strategies and procedures regarding tertiary care services.
Article 29 : Pharmaceuticals. Under this provision, member states have to co-operate in harmonising procedures for the registration of pharmaceuticals. South Africa currently chairs the committee on bulk purchasing.

Dr E Jassat (ANC) said that he found the synopsis quite comprehensive although he noted that there was no mention of tobacco, alcohol and substance abuse. He said that he thought there would have been a need for co-operation in this area. Ms Makwakwa said that this area was covered under Article 8, which dealt with health promotion and achievement.

Ms S Kalyan (DP) asked about the financial implications for South Africa. She said that she was aware that South Africa was co-ordinating the administration but she wanted to know what the implications were for South Africa's national budget of this protocol? Ms Makwakwa replied that the budget for administration was a minimal one of R1.4m.

Ms Kalyan asked as a follow-up, whether any other states contributed or whether South Africa was solely responsible for the budget? Miss Makwakwa replied that it was unfortunately South Africa's sole responsibility. Each country had two areas of responsibility and this was one of South Africa's two.

The chairperson said that there was very little the committee could do in the crafting of this document and he therefore moved that this protocol be put to the committee for adoption. It was unanimously adopted.

The chairperson apologised for the brief nature of each of the presentations but said that this was due to the severe time constraints caused by the late start of the meeting (over an hour late due to a bomb scare in Parliament and a bus blockade of one of the main highways into Cape Town).

Healthcare Financing in South Africa
Dr Lucy Gilson, deputy director: Centre for Health Policy, Wits University, said that the study that had been conducted sought to promote health equity. The study had been conducted over the last few years and had used a critique of the current situation with regards to healthcare financing, to find new ways of improving healthcare financing. The study contrasted South Africa and Zambia and was hence titled the SAZA project. Under the area of health financing reform from 1994 to 1999, the following three areas were looked at:
(1) Free care policies.
(2) Inter-provincial resource allocation.
(3) Social health insurance.

These three areas were looked at in terms of the following:
(1) The design of the policies
(2) The process by which the policies were implemented
(3) The key stakeholders
(4) The context within which changes had occurred.

Free healthcare did have some negative aspects, for example low levels of morale in healthcare workers. With respect to resource allocation, since 1996 some provinces which were under-resourced were actually receiving even fewer resources and those well-resourced, were actually receiving more resources. This continued imbalance needed to be addressed. With respect to social health insurance, there was a need for cross-subsidising by higher income groups of the lower income groups. Proposals had been made in this regard but none had been implemented therefore there was currently a very unequal distribution of resources between high and low income groups.

A number of common problems had been identified, and these included the following:
(1) In practice, since 1994, there had been inadequate public debate on the goals of healthcare in terms of the equity of healthcare that fell under the banner of social health insurance.
(2) Health financing systems were central to healthcare, but the importance of health financing policies were not given the necessary recognition.
(3) Strong political leadership for change was evidenced but there were weak processes for technical advice. The one needed to complement the other.
(4) A key weakness was how to bring on board the key role players, for example the Department of Finance, without alienating other groups, such as the trade unions.
(5) There was also a weakness in understanding how to implement proposals.

The issues which were particularly pertinent to this committee, included:
(1) Social health insurance/social security discussions needed to try to bridge the public/private sector maldistribution.
(2) The mechanisms or tools that could be used to change the resource distribution between provinces needed to be clearly defined and discussed.
(3) The speed with which reforms are implemented should be improved upon.

The questions on policy content, needed to be complemented by, and balanced with, the processes used for implementation. Particularly, there was a need to:
(1) Promote the understanding of the importance of health financing issues.
(2) Encourage open debate.
(3) Investigate the barriers to implementation.
(4) Review the progress in developing implementation systems.
(5) Implement independent analyses.

In conclusion, the chairperson noted that the Medical Schemes Act had earlier been passed, but a number of members had passed it reluctantly, with the proviso that there would be a rapid follow-up on the social security issue. This issue was therefore prevailing in the minds of many of the committee members. He added that the members of this SAZA team were present at no cost to the committee so that was why the committee had used the opportunity for this presentation by the team.

Dr Rajoo (ANC) asked who would have the authority in the distribution of finances to the provinces, and how the data to advise that person would be delivered to him or her?

Ms J Doherty said that in terms of achieving equity in the allocations to provinces, their analysis was that the formula for the horizontal allocation of resources was no longer adequate, since allocations were, in some cases becoming more unequal. Provincial health budgets were increasingly being determined by the overall provincial budgets. The team would still look at provincial departments of Health and their interaction with the national Treasury. Norms and standards would need to be introduced at the provincial level in terms of the negotiations between provinces and the National Health Department. This was one area the team was still going to look at. Also, in terms of the mechanisms to address provincial allocations, it was applicable to look at how to strengthen the hands of the provincial MECs for Health as well as engaging the stakeholders in the provinces. How was this mismatch to be addressed? This very question went on to show that there was a need for cross subsidisation and of the need for a clear method of how to implement this.

Ms Marshoff asked whether the inclusion of conditional grants had been taken on board in terms of the Medium Term Expenditure Framework (MTEF) as these were taking on a large portion of health budgets. Would the FFC proposal that was out, go some way towards addressing this? There had always been attempts to involve communities in health policies, but these attempts had largely failed and a top-down approach had normally been adopted in the end. In light of this, and with respect to resource allocation, there also seemed to be problems and Ms Marshoff asked for the team's comments on this.

Ms J Doherty said that conditional grants were seen as part of the overall health budgets. A large portion of the conditional grants were currently going to tertiary care and this needed to be revisited. The FFC approach may work, it was noted.

The chairperson asked, in light of the fact that South Africa was a middle income country, whether the problem lay primarily in a lack of funding, or poor management?

Ms J Doherty said that with respect to whether or not the resources currently allocated were enough, it should be noted that South Africa currently spent an enormous amount on health. It was therefore necessary to look more at the allocation of the resources and on the improvement of efficiency as well as, very importantly, on the private/public split.

Mr S Thomas, of the Health Economics Unit of the University of Cape Town added that the question of whether or not enough resources were being allocated to Health, had to be looked at in comparison to other countries. A large proportion of South Africa's GNP was allocated to health and yet the health indicators for South Africa were not particularly glowing. The ways in which resources were being used, therefore needed to be improved upon, in line with the MTEF. With respect to what data was available, the National Health Report should be considered in parallel with the SAZA study. From this project each province should eventually have a complete database against which to compare themselves to the other provinces.

Dr Gouws said that provinces had always complained about tertiary academic institutions and the fact, for instance, that they were only present in some provinces and not others. Did the team have any suggestions for how such institutions could be removed from this contentious debate?

Professor McIntire said that with respect to academic institutions the government was considering restructuring the conditional grants for academic hospitals because some academic hospitals were primarily serving the areas around them, not being used as national assets, which was what they were intended as.

An ANC member asked whether anything was being done to address the low levels of interaction with relevant stakeholders?

In response to this question and that asked earlier by Ms Marshoff on community participation, Dr Gilson said that the public debate they encouraged was guided by a broad view including the involvement of committees such as this committee and those at provincial levels. Special committees also needed to include the general public in this debate. The department should also take more time in engaging health workers and in getting them to communicate with middle management more effectively.

Dr Mbulawa asked for the team's comments on the fact that provinces seemed to be exhausted through their attempts at implementing health policy? It was not apparent that this question was answered.

Ms Marshoff (ANC) asked what would be the impact of this restructuring on primary healthcare run by local government structures? What exactly would be the financial impact at the point of service delivery?

The chairperson said that he thought that Ms Marshoff's question had been answered but that he thought there would in any event be a need for further interaction. The entire issue was very important though, particularly in respect of the MTEF. The budget needed to be re-evaluated to see whether or not it was serving the constituency for which it was intended. He added that the issue of cross-border use of healthcare resources and the problems surrounding this also still needed to be addressed.

Professor McIntyre said that the issue of local government was partly being addressed by the women's health budget. There was also a benefit to having local government involved in this process. In this regard, it was noticeable that allocations from provincial levels to local government levels had been decreasing and this was a cause for concern. The issue of patients coming into tertiary institutions required that the budget either be given to the referring hospital, which then paid the tertiary institution, or to the tertiary institutions themselves. The issue of cross-border use of healthcare resources was not an easy issue to address but was a valid concern especially in Mpumalanga where people were coming in from Mozambique.

Ms Marshoff ask what was the impact of the first cycle of the MTEF? Had it brought about any real change? Also, in the second and third year cycles, it would be necessary to review whether or not to continue with this.

Professor McIntyre said that there was a process in place, and as a result the MTEF was been continuously monitored.

Appendix 1

Health policies implemented between 1994-1999 have delivered some gains for the poor. Rural populations have seen new clinics built nearer to them, improved drug availability and the removal of fees for primary health care. Government budgets have begun to be shifted towards poorer provinces to support such changes. In these ways a foundation for broader public health system change in the interests of the poor has been established. Lower income groups see such changes as a sign of government commitment to them.

But more action is inevitably required to re-dress the massive disparities in resource allocation, health service use and health status inherited from the apartheid era. It is particularly important to tackle the resource divide between the public and the private health sectors: the public sector, serving two-thirds of the population, has around only 60% of the level of resources available to the private sector. Even nurses, the backbone of public primary care, are increasingly following doctors into the private sector. Despite more than ten years of discussion about a range of mechanisms that might help to bridge this divide, no option has yet moved beyond the proposal stage.

This policy gap emphasises that the procedures for making and implementing decisions about how to address these resource disparities must be strengthened in the future. "In developing and implementing policy on specific financing issues it will be important to strengthen the management of the whole reform process - from policy formulation to implementation".

These are some of the findings in a recent report, The dynamics of policy change: health care financing in South Africa 1994-99, produced by the Centre for Health Policy, University of Witwatersrand and the Health Economics Unit, University of Cape Town. (further details at end)

The report presents an evaluation of health policy change, focussed on the removal of fees at public clinics, shifts in health budgets between provinces and the development of social health insurance proposals.
The evaluation aimed to contribute to future health financing policy development, in part, by identifying the impacts of the policy changes that were implemented over the period of focus, and the gaps and weaknesses of policy actions.

But, as important, is its investigation of the factors explaining why some policies have been implemented and others not, why some changes have been implemented and then partially reversed, and how changes have been brought about. International experience clearly demonstrates that health policy analysis often ignores the fact that implementing complex reforms involves "not just knowing in which direction to move, but paying attention to how to get there".

As noted in the executive summary, "the particular value of this report is that it examines the 'how' of policy change". The factors identified in the evaluation as influencing health financing policy action between 1994 and 1999 include:

the tension between the pressure for speedy, symbolic actions (such as free care) and the need to take time to work through much more complex actions, such as some new forms of health insurance;

the limited range of views heard within debates about how to tackle the funding problems of the health system;
inadequate prioritisation among the massive range pressing tasks;

the massive parallel changes in institutional and administrative structures;

the combination of strong political leadership with weak mechanisms for drawing technical advice into health policy decision-making at the right times;

weak strategies and tactics concerning when to engage with which stakeholders when developing ideas and approaches to existing health financing problems;

the tax and public expenditure ceilings of the macro-economic policy framework;

limited or poor understanding of the nature of health financing issues among even senior government officials, and the small resource base of people and skills with which to tackle that mis-understanding;

the speed at which some policy changes were implemented, leaving little time for planning that implementation;

the lack of information and skills at both national and provincial levels to assess routinely the consequences, gaps and problems of existing actions.

Given these experiences, how can health financing policy development be strengthened?

Two important areas for policy action are the development of:

mechanisms to bridge the fundamental resource mal-distribution of the health system;
procedures for promoting greater equity in health resource allocations between provinces - as health budgets have declined in real per capita terms in many dis-advantaged provinces since provinces have had the responsibility for allocating budgets between sectors.

But it is clear that policy development in these areas must be accompanied by efforts to strengthen decision-making procedures. The key changes necessary to strengthen delivery to the poor include:

procedures to allow wider public debate about health system goals and strategies;

involving a wider range of health managers in policy development processes to ensure that implementation issues are considered concurrently with policy design, which will speed up the translation of new policies into real changes on the ground;

mechanisms to allow technical advice to be more effectively used in guiding decision-making;

strategic engagement with powerful interest groups able to affect the viability of policy actions;

routinely collecting and analysing information which will indicate how policies are impacting on the poor, so that refinements can be made if health policies are not adequately achieving their goals;

developing more health economics and financing skills to undertake appropriate technical analysis for policy development, and policy analysis skills to ensure that potential political constraints are adequately considered during policy development.

Delivering change within the health system requires better ways of generating and implementing policies, as well as some new policy initiatives. As Stephen Friedman of the Centre for Policy Studies has noted more generally, "the gap between policy and implementation … really lies with shortcomings in policy-making".

Report details:
The dynamics of policy change: health care financing in South Africa 1994-99,
produced by the Centre for Health Policy, University of Witwatersrand and the Health Economics Unit, University of Cape Town.

By: Lucy Gilson, Jane Doherty, Di McIntyre, Stephen Thomas, Vishal Brijlal, Chris Bowa and Sandi Mbatsha

Available from:
Dudu Mlambo, Centre for Health Policy: tel: 011-489-9936; fax: 011-489-9900

Contact names for further information concerning this report:
The Centre for Health Policy, University of the Witwatersrand.
Dr. Lucy Gilson or Dr. Jane Doherty, tel: 011-489-9936,

The Health Economics Unit, University of Cape Town
Dr. Di McIntyre or Mr, Stephen Thomas, tel: 021-406-6558

Institutional details
The Centre for Health Policy (CHP) is a multi-disciplinary health policy research group based in the Department of Community Health at the University of the Witwatersrand. It is actively engaged in policy research and debates in South Africa on issues ranging from decentralisation, to HIV/AIDS to mental health. One of its core activities is health financing and economic research, including public sector budget and expenditure analyses, analysis of the private sector, and equity analyses. The CHP has a track record of providing technical assistance to national and provincial health departments in policy development and implementation, and also collaborates extensively with other South Africa and regional institutions. Its capacity development activities include a range of formal training programmes, programmes of 'on the job' training and research collaboration with other groups.

The Health Economics Unit (HEU) is based in the Department of Public Health in the University of Cape Town. It is involved in a range of research activities, including national health accounts, geographic resource allocation, alternative financing mechanisms, public/private issues, economic evaluation and equity analyses. HEU staff have participated in a number of committees to assist the national and provincial Departments of Health in developing policy for health sector restructuring, and frequently undertake consultancy work for government and other South African groups. The HEU offers the only Masters in Health Economics in Africa, as well as regional generalist and specialist short courses for health managers. It collaborates extensively with other research groups in South Africa, regionally and internationally.

Appendix 2
The Dynamics of Policy Change: Health Care Financing
in South Africa1994-1999

Lucy Gilson, Jane Doherty, Di McIntyre, Stephen Thomas, Vishal Brijlal, Chris Bowa and Sandi Mbatsha

Briefing Paper Centre for Health Policy, University of the Witwatersrand
Health Economics Unit, University of Cape Town
The SAZA Project
The report, The Dynamics of Policy Change, presents the findings of a study of health financing reforms in South Africa during the period 1994-1999 - the first term of the country's first democratic government. The study was undertaken by the Centre for Health Policy, University of the Witwatersrand and the Health Economics Unit, University of Cape Town. It is part of a two-country project called Analysing the process of health sector reform in South Africa and Zambia (also known as 'the SAZA project').

The need for such a study
Health financing reforms that aim to improve resource availability and use are a central component of the current wave of health sector reforms - both in sub-Saharan Africa and in other parts of the world. However, there has been little systematic evaluation of reform experience in any country. This study was initiated to gain a better understanding of the process of developing and implementing such reforms and so to provide information which can support policy makers and planners - not only in the countries of focus but also around the world.

A focus on South Africa and Zambia
The study was undertaken in South Africa and Zambia, two sub-Saharan countries which have introduced wide-ranging health financing changes in recent years. The experience of these countries is expected to be of relevance to other countries within the region and around the world.

The unique features of SAZA
The study has three important features that distinguish it from other research on health reforms in middle and low-income countries:
1. The major contribution of the study is its emphasis on the process by which policies are developed and implemented, and the factors facilitating or constraining their impact (where 'process' covers the steps of policy change, their timing and the strategies used within these steps, for example to build legitimacy, consensus or capacity, as well as the specific mechanisms or bodies established to take forward any of the steps);
2. To ensure a comprehensive understanding of the reforms and how they relate to other relevant policy changes, the study has also considered the linkages between different financing reforms, and links between financing reforms and other health sector reforms (particularly decentralisation);
3. The study focussed on the issues of equity and health system sustainability, issues that have been subjected to less scrutiny internationally than, for example, efficiency.

The key reforms studied
The study considered the following range of reforms:
· geographic resource allocation formulae;
· user fees (in South Africa the removal of primary care fees and in Zambia the implementation of a full fee schedule);
· health insurance options (in South Africa, formal social health insurance and in Zambia, less formal, pre-payment schemes).

The research team
A multi-disciplinary research team of health economists and health policy analysts conducted the study, linking research institutions in two African and two European countries. The institutions are: The Centre for Health Policy, University of the Witwatersrand; Department of Economics, University of Zambia; The Health Economics Unit, University of Cape Town; Health Policy Unit, London School of Hygiene and Tropical Medicine (UK); Institute of Health Economics (Sweden).

This Briefing Paper presents a summary of the report of the
South African study of the SAZA project (Analysing the process of health sector reform in South Africa and Zambia)
We are sincerely grateful to the many people who have given us their time during the course of this project, agreed to be interviewed, lent us documentation and provided us with detailed feed-back on our analyses.

We would particularly like to thank the following reviewers of the draft report:

South Africa
Dr Jonathan Broomberg
Dr Jud Cornell
Dr Nicholas Crisp
Dr Steven Friedman
Mr T. Patrick Masobe
Prof. William Pick
Dr Yogan Pillay
Dr Malcolm Segall


Dr Sara Bennett
Dr Charlotte Leighton
Dr Gill Walt


Finally, we thank our colleagues from the University of Zambia, the Swedish Institute for Health Economics, and the London School of Hygiene and Tropical Medicine for their collaboration in undertaking this study.

The authors, of course, take full responsibility for the report and the final conclusions.

The SAZA Project was funded by:

· USAID's Partnerships for Health Reform Project (through the Major Applied Research grants programme), Abt Associates Inc.
(contract number: HRN-5974-C-00-5024-00)

· The European Union (through INCO-DEV research funding, contract number: ERBIC18-CT97-0218)

· The South African Medical Research Council (through the Centre for Health
Policy's MRC Research Group on Health Policy)
Lucy Gilson is a part-time member of the Health Economics and Financing Programme of the London School of Hygiene and Tropical Medicine, UK which receives funding from the Department for International Development, UK.
Towards improving policy development
In 1994 the first democratically elected South African government took office with a mandate to undertake wide-ranging and radical change to redress the apartheid legacy of inequity and inefficiency. Although much has been done, much inevitably remains to be done in order to ensure "delivery to the poorest of the poor" in all sectors, including health.

Five years on, what can be learned from the process of new policy development? What were the obstacles? Are the policies having the expected impacts? How can we draw on the experience of the past five years to effect positive change for the future? These are just some of the questions the SAZA project sought to address through its study of policy change in the area of health care financing.

Health care financing issues are central to health system development. They include the level of funding available for health care provision and how the funds are distributed through the health system. Health care financing policies strongly influence both the provision and use of health care services. They therefore have important consequences for the quality of care, the efficiency of resource use and the equity of the health system. Not surprisingly, Health Minister Tshabalala-Msimang has included financing-related issues, such as social health insurance and increasing the number of 'fee paying' patients in public hospitals, within the health sector's top ten priorities for 1999-2004.

A key foundation for developing future policy change is evaluation of past experience. This study looked back at what has taken place in the area of health care financing reform. The report draws out some valuable lessons and insights that can inform future policy development. It specifically focuses on the period between 1994 and 1999 - a time during which the government initiated a radical overhaul of the health system. The report suggests that alongside some significant achievements there were also some setbacks and lost opportunities. It seeks to explain the strengths and weaknesses of financing policy making as a basis for determining the next steps of policy action.

The importance of process
Unlike most evaluations, which are limited to issues of content, i.e. 'what' the policy says, this study also considered the process of policy development. It recognised that the impacts of new policies are not only influenced by their content, but also by the way the policies are developed, who is involved in the process and how the policy will be implemented.

The report considers the influence of various actors (role players) on the design and impact of reforms, and the nature of their agendas. It highlights the different ways in which specific policies have been developed, drawing out the characteristics of the processes. Key contextual events and trends are also explored to help explain policy decisions.
Through such analysis, the report demonstrates that design problems and implementation failures are often rooted in weaknesses in the process of policy making. Action to tackle the equity and sustainability problems within the health system must include not only specific pieces of analysis and design work, but also clear steps to strengthen policy making around health care financing. This requires consideration of issues such as how policy design influences actors' support or opposition for reforms, the mechanisms and strategies to use in engaging different actors, and when to involve and work with the various actors. The impact and evolution of policy can never be disconnected from the manner in which it is developed.

The report concludes that improved delivery of health services requires not only good policies or action to strengthen implementation capacity within the public service, but also development of policy analysis skills to manage the process of health system change. In effect, the development of such skills is the critical foundation for improved service delivery. "The gap between policy and implementation … really lies with shortcomings in policy-making."
How the study was carried out
The study examined the three areas of financing policy change over the 1994-99 period:
1. the removal of fees for both pregnant women and children under six, and general primary care;
2. the re-allocation of government budgets between provinces;
3. the development of proposals for social health insurance (SHI) - these also had links to proposals to strengthen the management of public hospitals as well as the introduction of new legislation to regulate the private insurance industry.

Although a simplification of reality, the conceptual framework used to guide the study's data collection and analysis assumed a linear process of policy change, moving from agenda-setting around a reform of focus, to reform design, and then through implementation to the achievement of immediate and longer-term changes.

The framework's primary focus was on the detailed investigation of factors that influence the overall process of policy formulation and implementation, and so, ultimately, shape the nature and extent of change achieved by the reform. Therefore, for each reform area, the study examined the 'design' of the policies, the way in which the policies were developed and implemented, and the key people who were involved in the process. Available evidence about the impact of fees and budget reallocations on aspects of equity and health system sustainability were also assessed.

Information was drawn from reviews of relevant documentation, broader literature concerning the reform areas and the context of South African policy development, newspaper analyses of health issues and relevant parliamentary speeches. Detailed interviews were conducted with key informants from various levels and sectors of government and from non-governmental organisations (NGOs). Finally, evidence from existing evaluations as well as some additional budget and expenditure data were used in the assessment of policy impact.
The analysis of information from these different sources involved a process of interpretation - and this was undertaken with great care. A first step was to compare and contrast the information from different sources in order to seek confirmation of views and opinions as well as to identify different perspectives. In addition, a first draft of the report was reviewed by a range of key informants, and their feedback was considered when finalising the report.

A rigorous process is always important in analysing qualitative information. It was critical in this study because both the institutions undertaking the research had been involved, at some time or another, in the policy development processes being studied. Another factor that may have influenced the analysis was the difficulty of accessing some key actors. Also, the focus on financing issues led to examination of particular sets of actors and processes, some of which were specific to the arena of health care financing reform. Therefore, analysis of these specific experiences may not always be transferable to broader health policy development.
Financing flows within the health system in 1994
The structure and problems of the health system inherited by the new government inevitably shaped the nature of health financing reform after 1994. Figure 1 provides a diagrammatic representation of that system. The figure highlights the main funding sources and channels as well as the division of care between the private sector - serving the minority, higher income, predominantly white population - and the public sector - serving the majority lower income, predominantly African population.

The financing flows of the public health sector include:
· the collection of taxes (to fund all public services including health care);
· the collection of fees at health care facilities;
· the allocation of budgetary resources between geographical areas and the different levels of care provided by the health system.

The two most important flows, in terms of the amount of resources being channelled through them, are tax collection and budget allocation to the health system.

In the private health sector (as inherited in 1994) high-income and some middle-income members of the population and their employers make contributions to voluntary insurance schemes known as medical aid schemes. These are the primary source of revenue for private health care providers, providing funding to them through different forms of reimbursement mechanisms. The insured also make co-payments directly to the providers of care, but these co-payments are smaller than the insurance premia. (Since the early 1990s a range of other forms of health insurance products have also developed.)

Figure 1 also highlights two other financial flows within the overall health system. First, the higher income insured population benefits from tax subsidies on its medical insurance contributions. Second, there is a relatively small financial flow from the private insurance sector to public facilities when insured patients use these facilities. Such use may result, for example, from the need for specialist services only available in the public sector or from the lack of private hospital facilities in some small towns.
[PMG Ed Note: Figure 1 not included]






Context and pattern of financing policy change
The ability of the new government to deal with the legacy of the apartheid health care system was shaped by contextual factors. These need to be considered to appreciate the extent of subsequent reform.

The reform of the government required a complete reconceptualisation and reorganisation of the state and its relationship with society. In particular, the unification of previous administrations and the restructuring of government into a quasi-federal arrangement was an enormous and complex task. In parallel, the new government catapulted activists from the liberation movements into positions of power as politicians and civil servants. There they were confronted with an outmoded, inefficient and rule-bound bureaucracy subject to contradictory decentralising and centralising processes.

The emergence of new patterns of intergovernmental relations, and the special place allocated to the private sector through the negotiation process, introduced a variety of new players to the process of policy formulation.

The limited resource base compounded the problems produced by such structural changes. Previous patterns of underdevelopment as well as new economic policies had the effect of limiting government taxation and spending. This constraint on budgetary resources was accompanied by strictures on human resource redeployment, as well as pressure to increase salaries through central bargaining arrangements.

Progress made towards implementing new policies
Despite the problems and constraints, the new government made strong moves towards re-orienting service provision towards the needs of the majority of the population and away from those of historically powerful interest groups, such as the urban wealthy.

To remove financial barriers to care, and so improve access, two free care policies were implemented (action 1 in Figure 1). In addition, budgetary resources were reallocated between geographic areas to promote equity in their distribution (action 2, Figure 1). Initially, a needs-based formula developed by the Department of Health was used to determine provincial health department allocations. This approach was, however, overtaken by the introduction of a fiscal federal system with the finalisation of the new Constitution in 1996. Since then the Department of Finance has determined the total block grant allocated to each province. Provincial administrations then allocate resources to each sector, including health.

Two other critical areas of financing policy debate between 1994 and 1999 were:
· The level of cross-subsidies from the private to public sector (action 3, Figure 1): The SHI proposals developed over the 1994-99 period sought to extend insurance coverage to a larger proportion of the population (particularly to lower income but formally employed people). Through this extension they sought to generate revenue through and for public hospitals by charging higher fees to the subsequent, larger pool of insured users of the public sector. Some of the proposals also sought to promote greater cross-subsidisation between the high and low-income earners and between the private and the public health sectors.

· Legislative change to re-regulate the private insurance industry (action 4, Figure 1): This was to tackle two of the industry's critical problems - spiralling costs and the exclusion of certain groups from coverage. (This area of policy action was not an initial focus of the study but came to be considered as a spin-off of SHI debates.)

By 1997 the development of SHI proposals had become divorced from the development of private insurance regulation proposals, although these were initially seen as part of the same policy. The regulation proposals became law in the 1998 Medical Schemes Act. However, by 1999 the broader SHI proposals had still not been implemented despite repeated and intense debate. It remains unclear whether the most recent set of proposals, published in 1997, have sufficient backing from key actors to be implemented effectively. Moreover, only slow progress had been made by 1999 in strengthening public hospital management - an important first step towards SHI.

The process followed
All the health care financing reforms discussed above, had their roots in health policy debates amongst the 'progressive health movement' in the late 1980s. The debates then fed into the African National Congress (ANC) Health Plan, published in 1994, which included proposals on all of the financing reforms examined in this study. However, after 1994, the experience of taking forward the reforms differed in three important ways:

· the speed with which progress was made: the speedy 'policy actions' of creating a health sector resource re-allocation formula and the removal of some public care fees contrasted with the slow progress made on public hospital fees and with the uneven process of 'agenda-setting' for social health insurance;

· the implementation process: although initial policy action on both fees and resource reallocation occurred speedily, the way in which these actions were implemented differed - fee removal involved two special 'one-off' policy actions, but health resource allocation policy evolved in response to changes in the broader governance pattern and structure of the country (the creation of a quasi-federal system).

· routine vs. 'special' policy-making structures: while changes in resource allocation practice were almost immediately implemented through the routine budgetary process, the slow development of SHI policy through various special bodies led to policy proposals but no policy change.
The impact of the reforms and remaining challenges
The financing policy changes introduced between 1994 and 1999 had clear potential to tackle some of the equity and sustainability problems within the health system:
· the two free care policies improved financial access to public care for specific vulnerable groups;
· the use of the health sector resource allocation formula supported geographic reallocations of public sector health budgets in favour of the formerly under-resourced provinces;
· the 1998 Medical Schemes Act has the potential to tackle critical problems within the private insurance industry, such as cost inflation and risk selection, and so to have positive equity and sustainability impacts.

However, these policy actions also had drawbacks. Although the available data are limited, the two free care policies and the parallel budgetary geographic reallocations seem to have had a negative impact on the stability of the health system. Uncertainty in planning, poor morale of providers, declining quality of care and public disaffection with the public health system, are all by-products of reform which create a climate within which it becomes difficult to sustain system improvements. In addition, favourable early trends in health budget reallocations are being jeopardised by the post-1996 process of allocating unconditional block grants to provinces. Poorer provinces have seen initial budget gains reversed or halted. There are also continuing inequities in health resource allocations within provinces.

Finally, social health insurance, a reform ten years in the making, was not implemented. The failure to implement such a complex reform in only five years was, perhaps, inevitable, but the limited progress achieved in simply finalising a proposal that had adequate support to move towards implementation was disappointing. This represents a failure to find, within the context of constrained government expenditure, both an extra-budgetary source of funds and a mechanism to achieve greater cross-subsidisation between the private and the public health sectors. However, such action is essential if equity and sustainability are to be promoted throughout the entire South African health system. The limited action to date in tackling the weaknesses of public hospital funding and management has important implications not only for sustainability within the public health sector but also for the feasibility of introducing SHI.

Perhaps the most important factor of policy design that limited the positive impacts of the different health financing reforms was the weak linkage between financing policy change and other changes in the health system. For example, removing fees does not in itself ensure that the services are either geographically accessible or seen to be of sufficiently high quality to attract people to use them. Although important efforts were made to build new clinics in previously under-served areas, the impact of the speedy removal of fees on staff workloads (due to increasing patient numbers) had knock-on consequences for drug availability and staff morale. These, at least in the short-term, appeared to jeopardise patient perceptions of the quality of care.

Similarly, speedy and substantial budget reallocations between provinces were not turned into the same level of real resource reallocations, in part because the existing civil service regulations (including labour agreements) restricted provincial departments of health from moving personnel between areas and facilities. This also constrained reallocation between levels of care.

In general, during the 1994-99 period, financing policy appears to have taken second place to specific interventions such as drugs policy or abortion. Yet a combined package of institutional and financing reforms is necessary to enable health system change to achieve its intended objectives.
Some explanations …
What explains the mixed picture of health care financing change? The Department of Health has been held up as a department that delivered change - and the removal of fees has sometimes been given as a specific example of its commitment to addressing the legacy of the past. This policy action and the initial establishment of a sectoral resource reallocation formula both generated political capital and provided some equity and sustainability gains. But the picture of financing policy change over the 1994-99 period is flawed both by weaknesses in the design of these policies and by the lack of action on some other critically important issues. As a result, the pattern of change may lead to longer-term equity and sustainability losses.

A central conclusion from the study is that the weaknesses in the overall pattern of policy action and inaction on health care financing issues since 1994 reflects problems with the underlying policy-making processes. Although policy design influences impacts, the roots of implementation failure - both the manner in which some actions have been implemented and the failure to implement others - lie in these problems of process.

Fee removal
The rapid, top-down implementation of the fee removal policies and the health resource allocation formula, for example, captured a window of political opportunity, but prevented the policies from being implemented carefully in consultation with those implementing them and in ways that would promote sustainability. Indeed, the reactions of health providers to these policies only heightened the low morale of health providers. The strong political leadership shown in initiating policy change represented, at the same time, poor leadership for implementation.

Social health insurance
Speedy fee removal shaped the nature of subsequent SHI proposals by limiting the SHI benefit package to hospital care. Such a package may encourage inefficient use of the health system and does not address the concerns of some key actors. The trade unions, for example, appear to have sought private primary care access for their members. SHI policy development was also a site of recurring disagreement between the technicians (who even before 1994 had begun to develop their ideas on possible design options) and the new policy makers who had little grounding in the earlier debates. (The word 'technicians' refers to those inside and outside government with health economics knowledge.)

By allowing differential care between the insured and the uninsured, even if only in hotel-like amenities, and by incorporating a role for the private sector in health care administration/provision, several of the sets of SHI proposals sowed the seeds of opposition to them. The new policy-makers and their allies, the trade unions, simply did not accept that a system based on these lines was appropriate, whatever the technical arguments in its favour. As the new policy-makers sought 'equal access for all', in reaction to the discrimination of the apartheid era, the proposals simply made no sense to them. At the same time, the proposals never persuaded the newly empowered Department of Finance to set aside its opposition to any form of earmarked tax.

Yet the technicians repeatedly developed policy designs that had limited support, predominantly from the private insurance industry. The new policy makers, on the other hand, repeatedly brought the technicians into policy development through special committees without clearly engaging with their arguments. The process of policy formulation remained a largely technical affair that did not allow broader debate of either policy goals and relevant strategies, or the concerns of different interested, or potentially interested, actors. The end result was a stalemate in policy development.

Geographic reallocation of resources
The initial health sector resource allocation approach was overtaken by the introduction of new budgetary processes in line with the creation of a quasi-federal governance system. Under the new system provincial treasuries have final responsibility for allocating resources to the health sector. But the highly political nature of this process has generated severe concerns for health budgets in some provinces and has required a new approach to resource allocation policy development. Provincial departments of health, in collaboration with the National Department of Health, sought to adopt a collective planning approach in thinking through the budgetary needs of the health sector, and had some success in developing conditional grants to protect aspects of provincial health budgets. However, although they initially sought to protect primary care, they had to accept the Department of Finance's preference to protect high-level hospital care through these grants. They also had not, by 1999, implemented the 'norms and standards' that can influence budget decisions within provinces. Interestingly, although the technical complexity of this area of policy development mirrors that of SHI policy development, limited health economics expertise was drawn on to support health policy makers in this task.

Common problems
Across the three areas of health care financing reform investigated in this study, the most critical problems of policy making were:

· the limited public debate about the appropriate and feasible goals for the health system in the post apartheid era, particularly in relation to equity, and strategies for achieving them;
· little recognition of the importance of health financing policies in shaping the nature of health care provision and its impact on equity and sustainability;
· a combination of strong political leadership with weak structures and processes for providing technical advice on complex issues;
· the limited availability of relevant technical expertise within the country, and weaknesses in the ways in which those with expertise were used in policy development;
· the failure of reformers to engage a broad range of actors in discussion on some of the most fundamental issues of financing policy development, including the link between policy design and actor support or opposition for policy change;
· inappropriate patterns of engagement and consultation with different actors within specific policy processes;
· inadequate consideration of implementation needs and strategies within both policy design and the process of policy formulation;
· the lack of preparation for policy implementation, such as limited action taken to develop the skills and systems required to allow effective implementation of financing (or other) policy;
· poor leadership of implementation, including a failure to set clear priorities for policy development, to build support before implementation, and to establish mechanisms for learning through experience.

Financing reforms are, of course, always highly contested and so difficult to implement. In addition, the radical transformation of the government and political bureaucracy since 1994 constrained all policy action. Nevertheless, through their actions key actors influenced the processes of policy formulation and the policies generated through them. These actors' experience of managing policy change in a changing policy environment offers lessons for 'how to do things differently' in the future.
Lessons for the future
1. Strengthening policy formulation as a foundation for implementation

(a) Supporting leadership by providing technical analysis
Senior health policy makers exercised considerable personal influence over decision making in South Africa between 1994 and 1999, in part because it was a time of rapid transformation within the health and governance systems. At the same time, the structures for channelling information and advice to these policy makers on health economics issues were quite weak. Perhaps as a result, health care financing policy appeared to receive less attention than other aspects of health policy development despite its importance to health system change. Aspects of priority setting and design development for health care financing were also weak. To strengthen future decision making it may be important to review the existing mechanisms of providing technical support to health policy makers and to establish procedures that enable regular contact with technical advisers. Opening up some policy issues, including overall health system goals and particular policy goals, for broader debate might also allow a timely flow of relevant information to decision makers.

It is particularly important to strengthen the National Department of Health's Directorate of Health Financing and Economics by improving its access to the highest level of government and promoting systematic dialogue between it and key reform managers and policy makers at both national and provincial levels. To make best use of the small pool of health economists available within the country, it would be useful to clarify research needs for particular issues as well as the objectives and nature of any involvement of external analysts. Capacity shortfalls in the area of health economics can also be addressed through long-term partnerships between government and key training institutions. However, the independence of non-government groups is an important characteristic of their particular contribution to policy debates.

Example: Policy-makers require good technical support in relation to the establishment and use of norms and standards to influence provincial health resource allocations. These norms must be compatible with national affordability criteria, so that provincial treasuries can realistically be expected to fund the services from their unconditional block grants. Consideration must also be given to the services to be covered by the norms. Specific attention needs to be given to maintaining the secondary referral services that are critical in the effective provision of primary care, but that may be overlooked in policy development. Technical analysis is also important in tackling intra-provincial health budget inequities.

(b) Strengthening the strategic skills and awareness of technicians
It is vital for government technicians, as well as non-government policy analysts, to recognise the importance of strategy as a complement to technical analysis. The 1994-99 experience shows, for example, that where the technical design of a financing policy matched the values of policy elites, and the broader political goals with which they were
associated, there were fewer barriers to implementation. Political buy-in was a necessary pre-condition for further policy development. Understanding the power, value bases and concerns of major actors in the health sector is a first step in managing the process of policy change. It provides the basis for developing strategies that create alliances in support of reforms and offset opposition. It also allows the actors' interests to be taken into account in the design of the reforms. In addition, as inappropriate presentation of technical inputs can impede reform, consideration of the dominant values of key political actors will help analysts appropriately frame their policy inputs. Complex reforms anyway need to be communicated clearly and simply both to policy makers and the broader public. This need not sacrifice technical detail.

Technicians need to have the knowledge and skills to develop effective strategies of policy change. The particular role of special committees, for example, needs to be thought through carefully. They can help strengthen policy formulation, for example, by protecting the task from the administrative burden of government, supplementing government's skill base, or allowing broader representation of key actors. However, if planned poorly, they may also frustrate policy development.

Example: Technical and political analyses need to be combined to clarify the possible alternatives for a future social health insurance system. Five key steps that will provide a foundation for further SHI policy development are:

1. undertaking a comprehensive analysis of the extent of cross-subsidisation within existing health care financing and spending patterns;
2. reconsidering the motivations and objectives of cross-subsidisation in health care financing and spending within the context of South Africa's social objectives, in part through dialogue with key actors;
3. analysing the extent to which alternative SHI proposals achieve the desirable level of cross-subsidisation;
4. considering the acceptability of new proposals (and other options) to key actors, and the risks associated with implementing the reform as presently configured;
5. reconsidering the separation of SHI from the conventional medical schemes environment and the nature of the benefits to be covered through SHI (in part to ensure that they offer members advantages over current services).

(c) Building implementation concerns into design development
As happens in many countries, the development and design of the health care financing policies did not involve those who would be responsible for implementing the policies. The consequences of this included poor implementation practices and negative impacts of policy, as noted in relation to the free care policies. Involving representatives of mid-level health system managers and health care providers as advisers in policy formulation may be important in strengthening the eventual implementation of reforms. In addition, 'policy champions' within government should be identified to enable the work of special policy processes to be fed forward into implementation.

2. Strengthening implementation processes
(a) Working within a changing policy environment
The structural change and institutional flux during the government's first term of office undermined the capacity for both policy development and policy implementation, so weakening the impact of the reforms. In a changing structural environment it is important to recognise the costs of 'trying to do too much too quickly', even whilst accepting that problems demand urgent action. When institutions are being reformed and new lines of management, roles and responsibilities are being developed, the priorities for policy action need to respond to concrete and identifiable problems as well as building political support for a broader reform agenda. In addition, these priorities must be rooted in clear analysis and understanding of the key health problems, how the reforms could address such problems and the sequencing of policy actions needed to support the implementation of complex reform. Enhancing the institutional capacity for future policy development and implementation is also likely to be an important building block for continuing reform.

(b) Enabling implementation through leadership
It is critical to improve central co-ordination and facilitation of policy implementation. It is particularly important that the policy-making process allows for more dialogue and consultation with those who will implement policy. This requires a clear specification of roles and responsibilities between the tiers of government, and structures for co-ordinating action between managers at the different levels of government. Strengthening skills and systems for implementation is also important. More gradual implementation processes can enable such capacity development.

Example: Although some technical analysis is needed in conceptualising norms and standards, their effective implementation will require a well-managed process. It will be particularly important to build support for the policy with provincial treasuries, as well as with medical professionals and health system managers.

(c) Planning for implementation
Although it may be important to take advantage of 'windows of opportunity' to introduce policy change, rapid change at such times can generate problems for further reform. Important steps in planning for implementation always include identifying the potential obstacles to change, preparing guidelines to support change, and identifying the capacity needs to implement change. The gradual implementation of reforms can also allow some details of policy design to be determined through experience. Complex reforms may need to be broken down into phases or stages to enable their implementation, particularly where they involve establishing new institutions. Such stages also need to be planned in advance, as the policy environment may change and leave the complex reform only partly implemented. Reformers must ask whether the individual steps toward the reform meet objectives in themselves. If not, then the cost or risk of failing to implement all the steps must be considered beforehand.

Example: The implementation of SHI must be preceded by improved hospital billing and fee systems, revenue retention as part of enhanced decentralised hospital management, and a mechanism for ensuring the equitable distribution of all resources available to public sector services. Similarly, the effective implementation of any mechanisms for influencing resource distribution between and within provinces requires that budgetary changes are accompanied by new approaches to personnel decision making, and that capital and recurrent budgeting is more closely linked.

(d) Securing better policies through monitoring and evaluation
Monitoring and evaluation systems are vital to ensure that reforms are adapted over time to meet their objectives. They should allow assessment of the progress made towards the objectives and of the factors that influence the degree of progress (i.e. assessment of both what has been achieved and what has constrained or encouraged the progress). The views of the broader public should always be considered in evaluation. Existing information systems may need to be strengthened to provide regular data on key indicators. Non-government analysts can play a role in designing effective evaluation systems and in implementing some evaluation activities.

Examples: There is an opportunity to prepare for the evaluation of the 1998 Medical Schemes Act in advance of its implementation, and to keep a watching eye over its equity and sustainability impacts. It is always important to monitor the impact on geographic equity and level-of-care spending patterns of resource allocation policies. Such assessment of the existing conditional grants, as well as any new policies developed in the future, will be critical in informing further policy development. Equity could also be introduced as a key criterion for monitoring the implementation of the government's medium-term expenditure framework.

3. Towards delivery - strengthening the policy process
Finally, the study highlighted six key principles to guide the development of a policy process that will lead from new policy formulation to change in health care delivery practices. They are:

1. Financing reform should pay attention to the 'art' of politics rather than just the 'science' of technical analysis
- to enable change and to ensure that it does not become the preserve of the few with the relevant knowledge.

2. Financing reform should be placed at the heart of health system development
because it has a wide-ranging influence over the patterns of health care
provision and use, and because it must be supported by parallel institutional changes.

3. Financing policy should be developed through a relatively open and transparent process
- to allow broader, public debate about the goals and strategies of policy; however, 'closed' decision making may be useful to identify policy options on the basis of publicly debated goals or to develop detailed design proposals in relation to specified options.

4. Information is a critical element in financing policy development
- both formal data and, despite their informality, the views and opinions of the
public and key actors.

5. As technical analysis is important in supporting financing policy development, the roles of different groups of technicians and analysts must be clear
- to enable best use of the limited pool of available health economists.

6. Implementation should be an integral element of financing policy development
- rather than being seen as an activity that somehow automatically follows policy development and that does not require policy management skills.
Overall, the study emphasises that in implementation as in policy formulation:
"policy analysts cannot continue to ignore the how of policy reform" .


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