National Health Insurance (NHI) Bill: public hearings day 13

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Health

14 July 2021
Chairperson: Dr S Dhlomo (ANC) Acting Chairperson: Dr K Jacobs (ANC)
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Meeting Summary

Video: Portfolio Committee on Health,, 14 July 2021 
Audio: National Health Insurance (NHI) Bill: public hearings day 13 

NHI: Tracking the bill through Parliament

In this virtual meeting, the Committee held public hearings on the National Health Insurance (NHI) Bill. Five organisations from the health sector presented oral submissions. All the entities welcomed initiatives to improve access to quality health care services for all South Africans, and proposed a number of amendments to improve the Bill.

Merck Sharp and Dohme supported the intention of the Bill to expand access to quality healthcare services to all patients, regardless of their socio-economic status. It pointed out that the Bill emphasised the cost of medicine over the value thereof, and also restricted formularies, particularly at a local level, which could have numerous impacts on patient care. It emphasised that the lack of clarity about funding could impact the sustainability of the NHI Fund and healthcare system. It suggested that South Africa needed a formulary that reflected the needs of all patients. It said that the implementation of health technology assessments would be challenging due to a shortage of epidemiological and cost data, the absence and impracticalities of thresholds, and a shortage of experts to conduct the assessments. It supported value-based pricing. It recommended that there needed to be improved certainty and specificity for patients and the industry in terms of benefits, the role of provinces, and procurement and supplier accreditation.

The Committee asked MSD what role it was playing in responding to the COVID-19 pandemic, specifically in terms of vaccines and clinical trials. Was it concerned about the governance structure and the Benefits Advisory Committee, in particular? Clarity was requested about its proposed definition for ‘value-based care,’ which they had recommended should be included in the Bill, and how the Bill excluded opportunity for the innovation of new medicines.

The Federated Employers Mutual (FEM) assurance company said its role was outlined in relation to the Compensation for Occupational Injuries and Diseases Act (COIDA), and the benefits offered under this existing structure for employees. It said there was a lack of congruence in terms of the eligibility of beneficiaries in the NHI Bill to that of the COIDA, and suggested that the Act offered coverage to a wider range of beneficiaries compared to the Bill. Various recommendations were made in relation to the cover for employees in the Bill, and the lack of clarity about the transitional arrangements was highlighted. FEM requested that the Compensation Fund or the Mutual Association be represented within the governance structures. Concerns around the sources of income were outlined. It also indicated that there needed to be greater clarity about the manner in which funds would be sourced.

The Committee noted that more clarity was requested about financing, and asked whether this was not sufficiently covered by clause 49 of the Bill. It questioned why greater detail was needed about the financing of the Fund, when this would be handled by the National Treasury. The company was asked if it supported the proposed referral pathways, as contained in the Bill. Clarity was sought about FEM's position on foreign migrants being covered by National Health Insurance. Members asked why medical schemes would be needed if the Fund would cover medical expenses for all. Did the company envision the Fund covering a comprehensive set of health services?

The Health Funders Association (HFA) emphasised that medical schemes were a vital vehicle for social solidarity in accessing healthcare. It highlighted that South Africa had poor health outcomes at present. It stressed that there was limited scope to increase tax rates within the current economic environment, and that private discretionary expenditure on medical scheme premiums could not be redirected toward payment for health services under National Health Insurance. It was suggested that as a result of the current economic pressures, reform needed to be incremental. The HFA indicated there were a number of consequences that would result from restricting medical schemes. These included increasing the burden on the public sector, reducing cover sustainability and exacerbating the issue of a shortage in healthcare providers. It suggested that a single-payer system was not the only way to achieve universal health care.

The Committee referred to the challenge facing medical aid scheme members when their benefits ran out, sometimes by midyear. There were no provisions in place for when benefits ran out, which was problematic. It argued that medical schemes were not based on the principle of social solidarity, as envisaged by the Bill. It asked the HFA whether the socio-economic impact assessment had covered some of the concerns it had raised. Clarity was requested as to whether the continuance of medical aid schemes would create further fragmentation under National Health Insurance. It asked what the Association had done to mitigate the escalating costs in the medical scheme industry. Did the HFA agree that the Health Market Inquiry recommendations could be implemented in parallel with National Health Insurance? The Association was asked why there was a suggestion that National Health Insurance would have narrow coverage in terms of benefits. Clarity was sought about ‘late-joiner’ fees, where new medical scheme members did not receive benefits within the first three months of joining. It was asked where these funds were then directed.

Momentum Health Solutions' presentation outlined the central challenges in the health system and the need for universal health coverage. It suggested that clause 33 of the Bill limited the right of users to access healthcare funding. It commented that the Health Market Inquiry had recommended a series of less intrusive steps that government could take to ensure the health system would operate in the public interest. It wanted to know the reasons for the removal of private funding mechanisms/schemes. Momentum stressed that medical aid schemes did not run out of funds. It suggested that milestones were needed to provide direction in the transition phases. A number of recommendations were made in terms of the governance challenges, including the need to consider a judicial panel for the appointment of the National Health Insurance Board. Challenges around the purchaser/provider split were outlined. Medical cover for migrants and asylum seekers was highlighted as an issue.

The Committee asked about the approach of including a judiciary panel, and whether Momentum was aware that the Constitutional Court had clear jurisprudence on the limitation of rights. Clarity was requested as to how Momentum would specifically be impacted by the introduction of National Health Insurance. It had cited the administration costs incurred in the United Kingdom’s National Health Service (NHS) system, and the Committee was interested in how that would translate to South Africa. It asked why medical schemes were running out of funds before the end of the year, and what Momentum’s opinion was on the potential for people taking advantage of duplicate cover. Could the recommendation of the Health Market Inquiry be implemented in conjunction with National Health Insurance?

The Financial Intermediaries Association of Southern Africa outlined its role in the healthcare system and under National Health Insurance. It proposed that there should be a strong primary healthcare system under NHI, with appropriate competition and choice, as well as workplace programmes. Financial risk protection was outlined, and the implications under NHI. It was emphasised that money was not the only issue. The experience of China in implementing universal health care was described to illustrate the health reforms implemented, and the FIA commented that the central lesson from this case was that emphasis needed to be given to how the NHI was implemented, and not simply that it was implemented.

The Committee asked where the Association saw their place under National Health Insurance. What had the Health Market Inquiry concluded about the value provided by financial intermediaries? Members wanted the FIA to clarify its statement that private healthcare was a ‘national asset,’ and to provide examples about how the country was ‘doing well’ in terms of financial risk protection. They also questioned the statement that competition between the public and private sectors was healthy, and would assist in attaining equality and equity. They wanted to know why the Association was proposing that the two-tier system be continued.
 

 

Meeting report

Opening Remarks

Acting Chairperson Jacobs opened the meeting and said that he would chair the meeting in the absence of Chairperson Dhlomo, who would join when his connectivity allowed.

The Committee Secretary noted the apology of Mr P van Staden (FF Plus).

Merck Sharp and Dohme (MSD) South Africa

Mr Zwelethu Bashman, Managing Director, MSD South Africa and Sub-Saharan Africa (SSA), presented to the Committee.

Referring to the specificity and certainty to achieving the National Health Insurance (NSI) scheme, Mr Bashman said the MSD supported the intention of the NHI Bill to expand access to quality healthcare services to all patients, regardless of socio-economic status. It believed that to realise its intent, the NHI must give rise to a health system which invests in and incentivises health outcomes, ensuring that the right medical intervention could be administered to the right patient, at the right time. It saw the introduction of the NHI Bill as a singular opportunity to reflect on the current health system, create a vision of what was needed, and enact the measures that would make it a reality. To achieve this, the NHI Bill must be specific and create certainty to ensure citizens could hold relevant bodies accountable. However, MSD considered that there were a number of areas where the current Bill fell short of certainty and specificity.

The right medical intervention for the right patient

  • The Bill remained unclear regarding benefits design – the principles informing the development thereof and where final decision-making lies;
  • There was no clear pathway for introducing innovative medicines into the NHI system – health technology assessments (HTAs), as described in the Bill, remain unclear in terms of principles informing decision-making and how they would practically work, given some of the realities in South Africa's healthcare system;
  • “Progressive realisation” precludes removing existing access to medicines;
  • Essential medicine lists (EMLs), by definition, provide for the treatment of the most common diseases of the majority of patients. However it could leave the most vulnerable at risk, such as people living with rare diseases and patients who did not respond to standard care;
  • Clear provision must be made for managing exceptions for vulnerable patient groups;
  • The Bill’s requirement of strict adherence by prescribers to the formulary could lead to inappropriate care, leading to sub-optimal patient outcomes, increased overall costs and unsustainable industries.

Mr Bashman said the Bill emphasised the cost of medicine, rather than the value of evidence-based care for the patient and health system as a whole. Restricted formularies, specifically at the local level, could cause treatment delays, unnecessary costs and poor patient outcomes. Similarly, health establishments should be enabled to procure medicines based on local patient needs. Unclear funding could jeopardise the sustainability of the NHI and the healthcare system. The Bill’s implementation timeline did not account for achieving critical goals or milestones.

South Africa needed a formulary reflecting the needs of all patients. EMLs, by definition, provide for the treatment of the most common diseases of the majority of patients. However, the EML could leave the most vulnerable at risk. Price sensitivity drove the EML’s emphasis on generics and limited inclusion of innovative molecules. The NHI formulary must be inclusive of an EML, and must also make provision for new medicines. This requires that the complementary list development process be informed by evidence-based medicines, in collaboration with medical societies and patient groups. Health care professionals (HCPs) must be empowered to prescribe medicines to help patients meet their health goals and ensure that the most appropriate interventions were enacted at the individual patient level.

Inclusion in the NHI benefits

The NHI Bill does not define or set criteria for determining the benefits package. There were no clear inclusion or exclusion criteria:

  • The meaning and intent of phrases alluding to benefits, such as ‘medically necessary’ or ‘comprehensive,’ were unclear.
  • There were no principles in accordance with which the benefits advisory committee (BAC) must fulfil their functions (e.g. evidence-based medicine, and taking into consideration vulnerable populations, and existing rights and entitlements).
  • The BAC determines benefits, but only advises the Fund, which then develops the benefits, in consultation with the Minister.

Inclusion in treatment guidelines

  • Benefits must be based on treatment guidelines that reflect “evidence-based medicine”, as stated in the NHI White Paper.
  • It would be impossible for all members of the BAC to comply with healthcare professional legislation on all health care disciplines.
  • MSD recommends that treatment guidelines be set in conjunction with relevant healthcare professional groups or clinical experts in relevant fields, or under the auspices of the independent Supply Side Regulator for Health, as the Health Market Inquiry (HMI) recommends.

Health Technology Assessment (HTA)

  • The implementation of HTA would be challenging due to factors including a shortage of epidemiological and cost data; the absence and impracticalities of thresholds; a shortage of experts to conduct assessments; and the cost and time HTAs take.
  • MSD supports value-based pricing. In the lead-up to the NHI implementation, there was an opportunity for the private and public sectors to work in partnership towards an appropriate value assessment framework for the NHI.
  • Furthermore, an effective value assessment framework should be managed independently of the NHI Fund, and its decisions should have a direct bearing on patient access.

Inclusion in Essential Medicines List (EML)

  • The concept of an EML also did not align with a set of “comprehensive” benefits: medicines available on EML programmes were not the only medicines that should be available in the public health systems; instead, they were the “most needed.”
  • If the provisions of clause 38(4) were to be adopted by Parliament, many patients who currently had access to the non-EML, and also to non-tender medicines in the public health sector, may no longer have access to these.

Referring to inclusion in the NHI formulary, Mr Bashman said the NHI medicines access and supply system must cover medicines not included in the EML, but which had been available on state tender and/or as discretionary spend. These were medicines required, in line with the principles of evidence-based medicine, by populations that were vulnerable, had unique features of their conditions and/or where treatment for an NHI-covered condition had failed, for example, including medicines required by academia or used to treat orphan diseases.

He said evidence-based medicine could contribute to a more cost-efficient health system. The

MSD was mindful of the economic and budget constraints the country faced. These circumstances made it more critical to focus the limited resources on paying for outcomes rather than just products. Evidence-based medicine could meaningfully contribute to the viability of the NHI by cutting overall treatment costs at a whole system and economy level, avoiding costly treatment failures, and losses due to follow-up and rescue therapies

Mr Bashman made the following points in summary:

The rule of law, enshrined in the Constitution, demands that the NHI Bill must be specific to create certainty and ensure accountability. To this effect, clarity was required in a number of areas, including criteria for determining the benefits package, as well as decision-making in this regard; and the ability of all health establishments -- public and private hospitals and contracting units for primary health -- to procure medicines based on their local and patient needs, and in alignment with the National Treasury rules and guidelines.

The NHI represented an opportunity to ensure a comprehensive and evidence-based formulary consisting of vaccines and therapies in keeping with the pace of scientific innovation, and to service all patients. It was critical that the NHI formulary was comprehensive, inclusive of essential and new medicines and vaccines. This required that the complementary list development process be informed by evidence-based medicines, in collaboration with medical societies and patient groups informed by the principles of (a) evidence-based medicine, (b) considering the right of access to healthcare and the progressive realisation thereof, (c) taking into consideration vulnerable populations, and (d) existing rights and entitlements.

HCPs must not be penalised but rather be empowered to prescribe medicines to help patients meet their health goals, and there must be a suitable pathway for patient access to medicines and vaccines not included in the formulary.

Given the country’s limited resources, it was critical to focus resources on paying for outcomes rather than products. Government, in collaboration with the private sector, should develop an appropriate value assessment framework for the NHI which prioritises value and cost-effectiveness versus ‘the lowest price. Based on an appropriate value assessment, the NHI should adopt a flexible pricing framework that could support cost-effectiveness whilst enabling improved patient access to innovation.

MSD's recommendations

Improved certainty and specificity for patients and industry, including:

  • Benefits: The NHI must spell out a benefits package. Furthermore, the BAC’s recommendations should be binding, and there must be clear principles and criteria informing the benefits design process.
  • The role of provinces: Provinces had a constitutional right to deliver healthcare AND be funded for it. It was critical for provinces to continue to have procuring ability, to enable responsiveness to local needs.
  • Procurement: Procurement should be flexible, enabling individual institutions to procure based on local patient needs, in line with the Public Procurement Bill.
  • Supplier accreditation: Pharmaceutical companies which were suppliers, were registered with the South African Health Products Regulatory Authority (SAHPRA), and their products were registered with SAHPRA. MSD did not see a role for the NHI in accreditation.

Discussion

Dr S Thembekwayo (EFF) said that at the beginning of the presentation, the presenter had said that MSD was bringing forward medicines, including vaccines for challenging diseases, and were involved in clinical trials. What was MSD’s contributions in relation to COVID-19? Was MSD bringing forward vaccines? Was MSD involved in clinical trials specifically for COVID-19? She appreciated the summary presented, as it provided a list of what the MSD proposed should be included in the NHI Bill.

Ms A Gela (ANC) noted that MSD was concerned about the NHI Bill's benefits design, and how the decisions would be made. Was MSD familiar with clause 25 of the Bill, which spoke about the role of the Benefits Advisory Committee, which would be constituted of multi-disciplinary teams of experts. The Committee had been informed that the BAC would determine and review the healthcare services, benefits and types of services to be reimbursed at each level of care. The BAC would undertake a cost analysis of treatment guidelines which would take into account the emergence of new technologies. Was MSD concerned about the BAC?

Ms M Hlengwa (IFP) said that in MSD’s written submission, it stated that the NHI Bill should include a definition of ‘value-based care.’ What was MSD’s proposed definition, and why was this definition so important that it needed to be included in the Bill?

Mr T Munyai (ANC) noted MSD’s query about the benefit designs being unclear. Was it the MSD’s view or assertion that they wanted these benefits to be defined in law, instead of in regulations? Most of the MSD medicines were inaccessible to South Africans, particularly those in the oncology, therapeutic area. What plans did MSD South Africa have in mind to ensure that, under NHI, access to these medicines was improved and a pricing system that was sensitive to the South African environment was implemented? He noted MSD’s concern about the health technology assessment. Did MSD think that there were gaps relating to the Ministerial Advisory Committee on HTA and its functions? The Committee had been told that the HTA Committee would regularly review the range of health interventions and technology by using the best available evidence on the cost-effectiveness of productive, technical efficiency for health. Were these criteria for decision-making not clear?

MSD’s recommendation that the NHI Fund formulary should be comprehensive and inclusive of essential and new medicines was recognised. Was MSD familiar with clause 38 of the Bill, which spoke about the establishment of an Office of Health Products Procurement, which would set parameters for the public procurement of health related products? This Office would also support the review of the formulary annually – or more regularly if required. This would allow for it to take into account changes in the burden of disease, product availability, price changes and disease management. Did MSD want additional information in this regard?

Dr X Havard (ANC) said that her question was already covered by Mr Munyai.

Ms H Ismail (DA) asked in what ways the Bill included or excluded the opportunity for innovation and the introduction of new medicines. If the provision of this was limited, what effects would this have on quality healthcare provision? In terms of medicines and vaccines relating to the COVID-19 pandemic, MSD had mentioned that they were involved in the development of vaccines and clinical trials -- what clinical trials had it done? What was MSD specifically doing in relation to the COVID-19 pandemic, given the situation in South Africa and the current third wave?

With the number of Special Investigating Unit (SIU) investigations in the Health Department and government, what was MSD’s view on the Bill giving the Minister the right to establish the Board and related entities? Did MSD agree with this, or would MSD prefer that the Boards being elected by, and answerable to, Parliament? What was MSD’s view on the impact of around R104 billion in illegal costs due to medical negligence? Taking this into consideration, what was MSD’s view on how the NHI would be negatively impacted in the long-run?

Acting Chairperson Jacobs asked a question relating to the NHI Bill benefits and how the decisions were made. He was of the opinion this was being answered in clause 25 of the Bill, which spoke about the role of the Benefits Advisory Committee, which would constitute a multi-disciplinary team of experts across different disciplines. The Committee had been informed that the BAC would determine and review the healthcare service benefits and types of services to be reimbursed at each level of care, and undertake detailed cost-effective analysis of treatment guidelines, taking into account the emergence of new technologies. Was MSD concerned about the role of the Benefits Advisory Committee in this regard?

The Committee recognised MSD’s recommendation about the NHI formulary -- that it should be comprehensive and inclusive of essential as well as new medicines and vaccines. Was MSD familiar with clause 38 of the Bill, which spoke about the establishment of the Office of Health Products Procurement? The Office would set parameters for the public procurement of health related products. This Office would also support the review of the formulary annually, or more regularly if required, to take into account the burden of disease, product availability, price changes and disease management. Did MSD need any other information in this regard or would they be able to review the points made about this?

Regarding the concern raised about the NHI stifling innovation, was it realistic for this to be included in enabling legislation?

MSD's response

Mr Bashman responded to the questions about the COVID-19 pandemic, and said MSD’s contribution was considerable. The organisation had signed a global manufacturing partnership deal with Johnson and Johnson (J&J). Through MSD’s manufacturing facilities, MSD was contributing and manufacturing the J&J COVID-19 vaccine for the world. This was one of its efforts to contribute to the COVID-19 pandemic. It had been very focused, and had understood that the COVID-19 pandemic would not be resolved through unilaterally utilising vaccinations as a tool to address the challenge. MSD had progressed and were researching and working on a COVID-19 treatment for the treatment of patients with mild to moderate symptoms who were not hospitalised, and had engaged with the Department of Health on this treatment. MSD had sent a letter to the Minister of Health informing the Ministry of the developments. Two weeks previously, it had announced globally that it had signed a deal with the United States of America (USA) government, which had committed to procure 1.2 million doses of the treatment. MSD anticipated that this would be available for pre-license use toward the fourth quarter of this year. MSD’s engagements with the South African National Department of Health was to start the process of engagement to avail the product to South Africa. This would work hand-in hand with the vaccinations. It provided an additional tool to the State, as well as healthcare practitioners, to deal with COVID-19.

Regarding the Benefits Advisory Committee, he would respond to this together with the HTA. MSD’s biggest challenge with the wording round the Bill was about the lack of clarity. It believed that an HTA or BAC should not necessarily just be advisory in its nature. Their decisions should be binding. MSD made this proposal under the assumption that the committees would be constituted of specialists and experts with a multitude of experiences, both in healthcare and finance. It believed that the decisions that these bodies would make to facilitate access to particular medicines should be binding, and these bodies should not necessarily just be there in an advisory capacity.

He responded to the question about value-based care. This was very important to MSD, because one could have the short-sighted view of saying ‘let us look at a product and price,’ but MSD believed that the most important thing was patient outcomes. Value-based care was rooted in patient outcomes, which stated that ‘one may pay a little bit more for an innovative product in the short-term, but the resultant benefits of availing innovation early on to patients was that hospitalisation was reduced and length of life was increased for patients.’ This ultimately resulted in a better quality of life, which out-trumped the one dimensional view of pricing. That was the conversation that MSD wanted to have where they believed that collectively, as the private and public sectors, they could work to develop a framework that could be included in the Bill to avail opportunities to access innovation.

He responded to the question about improving access to innovative products within the South African context. MSD worked within the oncology space, and the costing of medicines in that space could be somewhat restrictive. It had gone a long way to try and develop viable and sustainable access programmes that would avail these products to patients that would have historically not had access to them, in both the private and public sectors. In the public sector MSD had introduced a programme to drastically reduce the cost of medicines for patients who were utilising it. The programme had to be utilised in conjunction with a healthcare institution that was geared to treat patients. MSD continued to do this work and tried to convince the healthcare practitioners to venture into that space and allow patients access to innovative medicines. The cost reductions were quite significant – up to 50 percent within the public healthcare space.

MSD also had access solutions which they had proposed for patients that had inadequate private healthcare coverage within the private space. The big challenge it faced relating to this, was about the impact of single exit price legislation and the impact it had on access. Simply put, in South Africa there was no clear mechanism with which to introduce an access solution within the private healthcare sector. MSD had been engaging the Pricing Committee on numerous occasions, trying to find a viable means that was within the bounds of the law to enable access, but was still awaiting directives in that regard.

He responded to the question about whether the NHI would stifle innovation. MSD believed that there was no determined pathway for access to innovation in the Bill as it stood. The reliance on the Essential Medicines List (EML) on its own could result in a leaning toward generic medicines and a strong focus on price, and not on value and patient-based outcomes. The proposed alterations made by MSD could allow for the challenge to be diverted. MSD believed that if these changes were not made, a regression in access to healthcare could result, instead of the envisioned progression. It supported universal healthcare, but believed that the ‘vehicle’ needed to be structured to provide maximum benefit for all the patients involved.

Mr Yusuf Rasool, Director: Market Access, MSD, responded to the question about cost-effectiveness and cost-effective analysis. The one thing that tied into this was the utilisation of vaccinations, which was evident from a COVID-19 perspective, was how early interventions prevented downstream costs. One idea was that one did not necessarily have to increase one's budget. Patients did not benefit from the money that related to medico-legal claims. That was a different way of looking at cost-effective interventions and looking at outcomes.

Ms Vuyo Mjekula, Clinical Research Associate, MSD, responded to a question about formulary development, clause 38 and the role of the Office of Health Products Procurement. The challenge was not necessarily what was contained in the Bill in that regard, but that it stated an intention rather than clarifying a process. MSD recognised the role of the Office of Health Products Procurement and that it may regularly review what was available and support development of a formulary based on the emergence of new technology. MSD thought that this needed to be more clearly spelled out, particularly the process, the stakeholders involved in that process, and the principles that would underpin or inform the process and decision-making. There was space for the current NHI Bill to provide further clarity and certainty in that regard.

In relation to HTAs, there was a real risk that the current thinking around this, because of some of the limitations of the epidemiological data and the costs could result in a default position that looked at price and cost. In as much as MSD supported and was aware that there may be a Ministerial Advisory Committee on HTAs, it still believed there was space for greater consultation, engagement and partnership with multiple stakeholders, including patient groups and the industry. There was a process of co-creation that could be established, so that everyone could think about, given the limitations, what would be most suitable for South Africa and what would be most suitable for the NHI. MSD recognised the work that had already been done – and was not critical thereof – but it could be strengthened if multiple stakeholders could think together of a better system for value assessment of the NHI.

She responded to the question about MSD’s contribution to COVID-19, saying there was an anti-viral treatment that was in phase three trials. There was a trial that was currently being undertaken in South Africa.

Mr Bashman said that clause 38 of the Bill, and the design of the benefits, clearly stipulated that the formulary would be comprised of the EML, and by doing so, it was restrictive. The definition therefore needed to be broadened to allow for innovation that fell outside of the EML to be part of the process. That was the basis for their position of calling for clarity and a wider formulary that allowed for the inclusion of innovative medicines.

Follow-up question

Mr Munyai asked what was preventing MSD from pricing their medicines in a way that made them accessible to those who needed them, particularly in the private sector. MSD had raised a concern about the powers of the Minister – in a democratic state, in the context of the separation of powers and where there were Members of Parliament who held the executive accountable, did it want to change the Constitution so that the Minister would not exercise that democratic power in the context of the executive?

MSD's response

Mr Bashman responded to the question about improving access to medicines, specifically in the private sector. The issue around access in the private sector was a multi-faceted matter that required contributions from multiple parties. There were funders who had a responsibility to the patient, one had the healthcare system that had a responsibility to the patient, as well as MSD as the manufacturer. What MSD had always tried to do was to operate in a way that they could provide routes of access that would provide maximum benefit to the patient. Hence, he referred earlier to some of the conversations and proposals that MSD had made to the Pricing Committee to avail access programmes that would allow patients to access medications in the best way possible. The reality was that there was a price below which it no longer became viable to offer innovative products. One could accept that these products, through numerous years of research, had a basis for their high cost. MSD did realise that for certain patient populations, efforts needed to be made to broaden access. That was why MSD continued to engage with the Pricing Committee. This was MSD’s only viable option at this point in time.

In his remarks that there may be a necessity to consider the need of price confidentiality, MSD was not suggesting that there was a lack of transparency -- it was more than happy to be as transparent as required, with any relevant stakeholder or body. Confidentiality spoke to something else. It was a conversation within the South African context that needed to be addressed. The reality was that they lived in a global environment where decisions that were made in the country impacted what happened in the rest of the world. Toward the latter part of the previous year, Saudi Arabia had included South Africa in its list of reference countries from a medicine pricing perspective. That was something that the Portfolio Committee, when time allowed, should add to its agenda. South Africa needed to take a concerted effort toward pushing back on wealthier nations utilising nations such as South Africa as a reference for pricing. That was a real challenge that was faced by innovative pharmaceutical manufacturers. It was something where MSD required the support of government to address the issue on a global scale.

MSD was not calling for any changes in the constitutional powers delegated to the Minister. There needed to be a difference assigned to MSD’s views on independence. If there was a body that was constituted of experts within their fields, that body needed to be independent and its decisions needed to be binding and in the best interests of the patient. If there was an instance where the Minister was able to overturn a submission that was made by any of these advisory committees, then there was a problem with that. That might lead to challenges with improved access to medicines for patients.

Follow-up question

Mr Munyai asked whether MSD was aware that if innovation was not accessible due to its high price, it would not serve the people of South Africa. Was it the view of MSD that the executive powers that the Minister had, in terms of the constitution, needed to be given by independent people that did not contest elections and would regulate on behalf of the Minister and the Department? In other words, it would be in the interest of the market or business itself? The Minister represented the people, as the Minister was democratically elected.

Ms Ismail asked a question relating to the issue of governance. What was MSD’s opinion of the Minister’s rights? Given the number of SIU investigations in the Department of Health and in government, what was MSD’s view on the Bill giving the Minister the right to establish the Board and related entities. Would MSD agree with this being in the Bill, or rather agree that the boards be elected by, and be answerable to, Parliament? She wanted MSD’s view, particularly in terms of what was contained in the Bill presently and the situation in the country with corruption.

MSD's response

Mr Bashman said he would rather not comment on matters relating to investigations that were currently under way. He did not have enough information to make an educated contribution in that sense.

He reemphasised that MSD would like positions or appointments to be made and these bodies to exist in a space that facilitated the general population, and for the country to hold them accountable. Whether this lay at the behest of the Minister or Parliament was a conversation that could be had going forward. He was simply not positioned to give an educated view in that regard. There needed to be alignment, in terms of systems and processes being in place, that allowed for maximum accountability. It was assumed that these bodies would be made up of relevant experts and patient organisations that would have the best interests of the patient at heart. MSD believed that these bodies needed to be independent and their decisions needed to be binding. One assumed that in their decision making, they were taking the most crucial elements into consideration, in terms of what was best for the patient.

He did not want to comment on individual situations taking place in the country presently. There were places that showed that a level of independence worked well. He had been speaking the week before at a function hosted by the Health Department, and had spoken about the South African Health Products Regulatory Authority (SAHPRA) and the incredible work they did as an independent body. SAHPRA had a level of accountability that was assigned to them. Their processes were quite clear, and they were not interfered with. That was a similar outcome that could be achieved through the NHI process.

Federated Employers’ Mutual (FEM) Assurance Company

Ms Ndivhuwo Manyonga, Chief Executive Officer (CEO), FEM, presented to the Committee.

She said the South African Constitution entrenches, through section 27(1)(c), the right of every citizen to have access to social security, including -- if they were unable to support themselves and their dependents -- appropriate social assistance. In terms of Section 27(2) of the Constitution, the state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right.

The compensation of employees for occupational injuries and diseases, as governed by the Compensation for Occupational Injuries and Diseases Act (COIDA), formed part of the social insurance structure within the social security system in South Africa. 

The primary objective of the Compensation Fund (CF) was to compensate employees for disablement, caused by occupational injuries/diseases sustained/contracted, in the course of their employment, or their dependants, for death resulting from such injuries/diseases and to pay for the reasonable medical expenses incurred. The benefits under COIDA include medical care, compensation for temporary total or partial disablement, compensation for permanent disablement, dependants’ benefits, certain transportation costs, a constant care attendant grant, and a funeral grant.             The benefits were funded through annual contributions (premiums) from employers. Employers were obligated to pay contributions, calculated by taking into account the risks to which the employees were exposed to in the specific sector or line of work in which the employee was involved. 

Benefits under COIDA

COIDA provides for compensation to the employees under the following circumstances:

  • Accidents that arise out of and in the course of an employee`s employment resulting in a personal injury, illness or death.
  • Fatal cases ,where an employee dies because of an accident that takes place on duty.
  • Occupational diseases contracted in the workplace due to exposure of the employee to certain agents or conditions found in the work environment.

COIDA provided for the following benefits in the event of a workplace accident that resulted in an injury or a disease:

  • Temporary total disablement (TTD): Compensation was payable to an injured employee during temporary total disablement by way of periodical payments at the rate of 75% of monthly earnings.
  • Permanent disablement: Compensation for permanent disablement, where the degree of disablement was 30% or less, takes the form of a lump sum. Compensation for permanent disablement where the degree of disablement was greater than 30% or less, takes the form of a pension. An injured employee may also qualify for a constant attendance allowance.
  • Death: Compensation for the death of an employee was in the form of a pension. The widow/widower and each child under the age of 18 would receive compensation. A funeral benefit was also paid out.
  • Medical Expenses: All reasonable medical expenses incurred by, or on behalf of, an employee may be defrayed.

Eligibility as beneficiaries of the NHI Fund

Section 4 of the NHI Bill prescribes the persons for whom the NHI Fund should purchase comprehensive healthcare. Of relevance from an employee perspective were the following inclusions:

  • South African citizens
  • Permanent residents
  • Refugees
  • Certain categories or individual foreigners determined by the Minister of Home Affairs after consultation with the Minister and the Minister of Finance by notice in the gazette.

Section 1 of the COIDA describes an employee as follows: An "employee" means a person who has entered into or works under a contract of service or of apprenticeship or learnership with an employer, whether the contract was express or implied, oral or in writing, and whether the remuneration was calculated by time or by work done, or was in cash or in kind, and includes:

  • a casual employee employed for the employer's business;
  • a director or member of a body corporate who had entered into a contract of service or of apprenticeship or learnership with the body corporate, insofar as he acts within the scope of his employment in terms of such contract;
  • a person provided by a labour broker against payment to a client for the rendering of a service or the performance of work, and for which service or work such person was paid by the labour broker;
  • The definition of "employee" in section 1 of COIDA includes the category of migrant workers (including irregular/undocumented migrant workers), while it was not clear what was meant by “certain categories of individual foreigners” under the NHI Bill. 
  • This inclusion of migrant workers was consistent with international laws and the International Labour Organisation (ILO) Convention 19 which South Africa has ratified.

Recommendation

Based on the above assessment of COIDA, the definition of an employee eligible for COIDA benefits appears to be wider than that of the NHI user. It is recommended that the Bill accommodate all users (employees) who would have been injured or diseased in the course and scope of employment within the country, and particularly in relation to occupational injuries and diseases. This was also consistent with the requirements of international laws which South Africa has ratified.

Unregistered employers and their employees

Recommendation: Consideration is required on how injured employees, who were not registered under the NHI Fund and required medical treatment or medical assessment in order to be eligible for compensation, would be dealt with. Their inability to get medical access may compromise their ability to access compensation benefits under the CF.

Alignment with benefits provided by COIDA

The Bill proposes that the NHI Fund would provide access to sustainable and affordable health care services. Section 7 states that the health care services would be determined by the Benefits Advisory Committee. Section 38 also makes reference to a formulary which would be developed and maintained by the BAC. The formulary would be “comprised of the Essential Medicine List and Essential Equipment List, as well as a list of health-related products used in the delivery of health care services as approved by the Minister in consultation with the National Health Council and the Fund.”

According to section 1 of COIDA, "medical aid" was defined to mean "medical, surgical or hospital treatment, skilled nursing services, any remedial treatment approved by the Director-General, the supply and repair of any prosthesis or any device necessitated by disablement, and ambulance services where, in the opinion of the Director-General, they were essential."

The benefit structure of COIDA includes treatment for all occupational injuries and diseases, through an annual gazetted schedule. The legislation also provides for additional benefits such as assistive devices, dental, spectacles, facial reconstruction, conveyance, treatment of post-traumatic stress disorder aligned with the American Medical Association (AMA) guides, etc that were specific to occupational injuries and diseases. In addition, COIDA also provides for medical assessments, in order to determine eligibility for and the extent of compensation. 

Further, there were proposed amendments to COIDA that had been issued under the COIDA Amendment Bill. The proposed amendments include the introduction of a programme of rehabilitation, reintegration and return to work for injured and diseased employees. The programme entails three levels of intervention -- medical, vocational and social rehabilitation. The primary objective is to provide an opportunity for injured or diseased employees to continue to be economically active where possible, and to reintegrate them to society, particularly in instances where they are disabled. This would align, firstly, with South Africa's international obligations and, secondly, with the requirements of the labour legislation, and would assist in addressing the tendency of some employers to dismiss employees on the basis of occupational injuries and diseases.  

The question remains to what extent the above range of medical aid-related services under COIDA were meant to form part of the “health care services." Health care services were defined to mean:

a) health care services, including reproductive health care and emergency medical treatment, contemplated in section 27 of the Constitution;

b) basic nutrition and basic health care services contemplated in section 28(1)(c) of the Constitution;

c) medical treatment contemplated in section 35(2)(e) of the Constitution; and

d) where applicable, provincial, district and municipal health care services.

It was possible that the scope of healthcare benefits provided for employees injured outside of South Africa under the NHI could potentially be less than that provided for under the COIDA legislation. It is therefore recommended that the Bill accommodates the unique benefit structure of COIDA as it currently benefits injured employees.

Regarding transition arrangements, the details of how the transition would be managed on the introduction of NHI was not clear. For example, certain accidents may have a long tail of medical payments, the employee may already be registered with a certain doctor, and sometimes the employees were in outlying rural areas. It was not clear whether the employee could continue treatment with their doctor, or if a suitable doctor would be available to them in their vicinity. In addition, employers would have already paid the premium for the accident that gave rise to the medical treatment a long time ago.

Ms Manyonga commented on the governance structures.

The composition of the NHI Board would be based on experts in relevant fields, which may include healthcare service financing, health economics, public health planning, monitoring and evaluation, law, actuarial sciences, information technology and communication. In addition, the following advisory committees would be established:

  • Benefits Advisory Committee
  • Healthcare Benefits Pricing Committee
  • Stakeholder Advisory Committee

As for the Compensation Fund Board, Section 12 of the COIDA sets out the functions of the Board and states that the Board shall advise the Minister regarding:

  • matters of policy arising out of or in connection with the application of this Act;
  • the nature and extent of the benefits that shall be payable to employees or dependents of employees, including the adjustment of existing pensions;
  • the appointment of assessors;
  • the amendment of this Act.

The Board may at the request of the Director-General advise him regarding the performance of a particular aspect of his functions. In essence, the CF Board was responsible for advising the Minister of Employment and Labour on pricing premiums payable by employers and benefits for employees with occupational injuries or diseases.

Recommendation 

FEM proposes the inclusion of at least one representative from the Compensation Fund or nominated member of the Mutual Associations. This would enable the NHI Fund to consider matters that fall under or connected to COIDA. As such, a representative from relevant stakeholders would provide the NHI Fund with the necessary information on the development of benefits or services specific to employees under the COIDA.           Alternatively, it is recommended that a Committee be set up between the NHI Fund and the CF to consider matters that impact on the CF.

Sources of income for the NHI

Section (48) of the NHI proposes raising money from any source which the Fund could be legally entitled to. It was unclear how the portion of the current employer assessments towards COIDA related to medical services would be determined while ensuring the CF was still able to adequately provide for other benefits payable under COIDA. 

Revenue generation for COIDA involves all employers having to register with the Compensation Fund. According to COIDA, an employer was any person who employs an employee. The revenue of the CF consists mainly of annual assessments paid by the registered employers on the basis of a percentage of the annual earnings of their employees.            COIDA makes provision for a minimum assessment to ensure that the assessment is not less than the administration costs. The COIDA assessment allows for specific rates, which cover all components of the COIDA benefits, including the payment of medical costs. These rates are determined by taking into account the risks to which the employees are exposed to in the specific sector or line of work in which the employee is involved. There are currently cross-subsidies between the different benefit components, as some fixed costs may be shared across the different benefit components. If some benefit components were carved out, there would be lower cross-subsidies and the sum of the premium of different components could be higher than a consolidated premium for all benefit components.

Recommendation

Ms Manyonga recommended that clarity be provided on the manner in which the funds for the NHI would be sourced. It was also important that sufficient funds were retained by the CF to continue to support the other benefits provided by COIDA and to avoid charging higher premiums to employers.

NHI impact on compensation benefits under COIDA

  • Most of the COIDA benefits were interrelated and were dependent on the required information to be able to manage the case. This would include the medical information in relation to the injury, so this information flow between the NHI and CF was crucial.
  • Even determining if an accident was compensable in terms of COIDA was reliant on several factors, which would include requiring access to medical reports on pre-existing conditions and current conditions. 
  • There would need to be service level standards in the submission of medical reports to the CF, as assessment of claims was dependent on receipt of medical reports, otherwise there may be potential challenges in assessing the limitation of liability of mutual associations. It was unclear who would cover the costs of this.
  • In addition, rehabilitation and return-to-work programmes required a holistic approach. The same applied to care that an injured employee may require. However, this may become fragmented if the NHI were to take over medical rehabilitation. If this was not closely managed, it may lead to additional costs for the CF in the form of higher permanent disability, temporary total disability and pension payments.

Recommendation

There was a need to ensure that a proper, comprehensive and detailed alignment of the NHI Bill and COIDA provisions were undertaken. To ensure that liability for the COIDA claim was adjudicated properly, an integrated information system would need to be put in place. This would also facilitate the flow of medical information from the NHI to the CF to facilitate the process of compensation for disablement or death.

Conclusion

FEM was mindful of the fact that the right to healthcare and the right to social security were constitutional rights that should always be protected. Considering this, it was committed to the successful implementation of the NHI and would continue to engage all relevant stakeholders in pursuit of this policy initiative, whilst at the same time ensuring that all claimants for occupational injuries and diseases continued to be timeously and fairly compensated.

Consideration should be given to the impact of the NHI on COIDA, as the latter advances employees rights to social insurance and also governs the relationship between employers and employees in terms of work-related accidents. To this end, ongoing engagement with the CF on an optimal structure is recommended.

Discussion

Ms Hlengwa asked whether FEM had other suggestions on how the relationship between the NHI, COIDA and the Compensation Fund should be improved to give people who were injured at work, maximum benefit under the NHI. She was concerned about what made it difficult for the COIDA funds to reach beneficiaries. Was there awareness in the community at the grass-roots level that there was a physical office? Where were FEM’s offices at the grass-roots level, or at a provincial level? The public needed to know where to go to access this.

Dr Havard noted that FEM had requested clarity on how the NHI Fund would be financed. Did FEM need more information than what was included in clause 49 of the Bill about the chief source of income of the Fund. Clause 49(2)(a) listed the following possible sources of funding:

i) general tax revenue, including the shifting funds from the provincial equitable share and conditional grants into the Fund;

ii) reallocation of funding for medical scheme tax credits paid to various medical schemes toward the funding of National Health Insurance.’

Did FEM require additional information to this? If so, she asked that FEM elaborate.

Mr Munyai referred to slide 29. Did FEM understand that NHI was not a Money Bill? The Bill outlined principles about where the funds would be sourced, and emphasised that the core funding would be the public tax rolls. Why did FEM see it as necessary for further details to be provided in the NHI Bill? All funding matters were dealt with by Treasury.

He noted that FEM had raised a concern about the requirement that the users of the Fund needed to follow the referral pathway. The Committee had been informed that the patients, who needed to be treated by specialists, or to be treated in hospitals, would be referred by the primary healthcare providers to certified and accredited public and private hospitals, as well as to specialists. This meant that patients could not go straight to the specialist or hospital without going to primary healthcare first. Would FEM prefer a different approach, considering the associated cost with high levels of care?

Regarding the concerns raised about eligibility, did FEM’s members have undocumented migrants in their employ? In terms of unregistered employers and their employees, was FEM aware that eligibility for NHI coverage was not dependent on one’s socio-economic status or employment status? It appeared as though FEM was suggesting that the ‘user’ definition in the NHI Bill should cater for unofficial foreign individuals who were residents in South Africa, and he requested clarity on this point. It was his understanding that FEM was proposing an alternative choice of a sub-committee between the Fund and COIDA ‘to deal with the matters that impacted the Compensation Fund.’ For clarity, was FEM recommending that all medical aid related activities should be retained under COIDA, and not be covered by the NHI Fund? It appeared as though FEM was suggesting that the ‘user’ definition in the NHI Bill should cater for unofficial foreign individuals who were residents in South Africa. He referred to slide 30, and asked if FEM was aware that clause 34 of the Bill made reference to the NHI systems. Were these recommendations not adequate to meet the needs as indicated on slide 30? If not, why not?

Ms Gela asked whether, based on FEM’s presentation, it was in favour of pooling funds to increase access. Why would medical schemes be required if NHI covered medical expenses for all? Given the possibility of double-dipping with multiple funding streams for healthcare, how would one prevent the duplication of claims if COIDA continued to cover medical services? Under what circumstances were employers and employees unregistered? Did this mean that such employees, when they left their place of work as a result of injuries, would not contribute or benefit from the Unemployment Insurance Fund (UIF). Or would they get reimbursement from both FEM and the UIF?

Ms Ismail asked how well the NHI included rehabilitation services for more serious injuries. Would this fall out of the reasonable time period for care? Seeing that FEM felt foreign migrants were not reasonably covered in the NHI Bill, what would FEM like to be specifically included in the Bill that would cover their needs with regard to health.

Chairperson Dhlomo said that based on the assumption that FEM’s biggest expense was healthcare provision, which would be taken care of by the NHI Fund, did it see that a large portion of its funding mechanisms would then be redirected to the NHI Fund? Could there be a way to split FEM’s funding mechanism into different services, in terms of COIDA? He referred to slide 26 of the presentation, indicating there were many stakeholders who were impacted and affected by the reconfiguration of the health system. This needed to happen to realise NHI. Why did FEM see that it was necessary to create specific structures that focused only on matters of the Compensation Fund, and not on system-wide issues. Did this recommendation not create further fragmentation in the system, the very areas that NHI was intending to reverse

Acting Chairperson Jacobs asked whether FEM envisioned NHI covering a comprehensive set of health services that would provide a continuum of care, community outreach, health promotion and prevention to other higher levels of care. Clause 25 of the Bill outlined the role of the Benefits Advisory Committee. This was supported by clause 57, which outlined transitional arrangements, and clause 33, which specified that when the NHI was fully implemented, medical schemes would be expected to provide complementary cover. Was FEM recommending that the injured recipients of the FEM Fund should perpetually pay cash when medical aid funds were depleted? What did FEM propose should happen when such funds ran out?

FEM's response

Ms Manyonga said that the presentation had highlighted some of the specific components of the COIDA Act that the NHI Bill intended to repeal or amend. It was fair to say that a lot of the devil was in the detail. Some of the issues FEM had raised was on the basis that the detail had not been finalised or provided. It was important to reiterate that FEM fully supported that people should get access to healthcare as a human right. It was requesting that a lot more interaction and reflection needed to happen to ensure adequate care under the NHI, which was currently provided for under COIDA. There was an intricate relationship in respect of how benefits were determined and how the medical aspects that had to do with assessing the injured employee, sat under COIDA, whereas within the NHI Bill this would be carved out of that to the NHI Fund. FEM needed to make sure that if that happened, it did not compromise the other aspects of what needed to happen from a COIDA perspective as far as employees were concerned.

Regarding whether FEM had other suggestions about the relationship between NHI and the Compensation Fund, this should be improved to give workers who were injured on duty maximum benefits under NHI. The premise of their starting point was that, in terms of the benefits that were provided in terms of COIDA, there was a set of benefits that was informed by international laws, and laws that FEM had had to fight from that perspective. Given that there was no detail on the formulary and on the benefits that would be provided under NHI, this provided uncertainty in determining whether benefits provided under COIDA would be covered under NHI. It was important to map these out as a first step in terms of their own assessment. FEM had highlighted some of the potential gaps, based on the premise of what was currently included in the NHI Bill, which FEM felt needed to be expanded upon.

Concern had been raised about what made it difficult for funds relating to the Compensation Fund reaching beneficiaries, and whether there was awareness at the grass-roots level of the CF and what it was that they did. There was definitely an increased focus across all three compensation entities in this regard. They wanted to ensure access to services for all people so that they could benefit from such services. There was ultimately a spanner thrown in the works because of COVID-19. One of the key initiatives in that regard, which they had all participated in, were the Ministerial outreaches into the different communities so that all of the social security related benefits, whether they be UIF or COIDA, were made visible and accessible to people in different parts of the country. From an FEM perspective, they had offices in different provinces, and those offices were premised on where their specific industry was operational. The offices of the Department of Labour were also leveraged in this regard. FEM was always looking at ways of increasing its visibility.

She responded to the question as to whether FEM needed more information about clause 49 of the Bill, and the comment that the NHI Bill was not a Money Bill. The issues raised by FEM were from a holistic perspective. One of the impacts of carving out the medical expenses from a COIDA perspective was that the revenue collection, and their assessments of employers, would need to be reviewed. This was because they currently collected revenue or made assessments of employers that incorporated all aspects of compensation and medical benefits. Having noted the point around clause 49 of the Bill and the collection of revenue, the key thing for FEM was having a more conclusive insight into what the implications would be around COIDA revenue generation and assessments. This currently included medical benefits – in terms of how those premiums were calculated. This might link to Mr Munyai’s point about COIDA not being a Money Bill, and FEM understood this. It had raised this in the context of identifying and highlighting holistic issues and the impact on operations as a result of the NHI Bill.

She responded to the question about the referral requirements, where patients needed to be treated in hospital or by specialists. Even within the current COIDA arrangement, their own processes as FEM was not one where everyone was automatically referred to specialists. Where there was an emergency and more intensive treatment was required, this would take place. If the injuries required specialists, this was of course done, and NHI needed to take this into account in terms of the transition arrangements. The long-term treatment of such injuries across the three entities needed to be considered in terms of NHI.

She responded to the question about eligibility, and whether they used undocumented employees in the different industries. The key thing FEM was raising was that in the context of how the COIDA regulation was set up, in the event that undocumented migrants or casual labour were used in South African, FEM was obliged to make sure that they had the right to compensation and medical treatment. The way the Act was currently structured, which was compliant with international laws, undocumented migrants were covered. In the NHI Bill, as it stood, it was not clear. This needed to be taken into consideration, in order to stay consistent with the laws that the country had ratified.

Regarding the sub-committee between the NHI and the Compensation Fund, FEM was suggesting that in an ideal environment, there should be some representation from the CF at an NHI board level, or at an advisory committee level. To a large extent, she believed that there needed to be some reflection around COIDA and NHI both being part and parcel of South Africa’s social security framework, to ensure that there was greater governance and that things were being set up properly. Given the important role that COIDA and the CF played in terms of the aspects of injuries on duty, and ensuring there were no gaps in that regard, there should at least be some consideration of representation of the CF on the board of the NHI. Perhaps there did need to be a working committee that could unpack these issues further and ensure that when the relevant subcommittees of the NHI Fund were looking at things like benefits and funding, they did not miss out on the input from the Compensation Fund.

The reference on slide 30 to the National Health Information System was not suggesting that the system itself was insufficient. FEM was stating that the devil was in the detail in terms of how that system was set up and run by the compensation entities, especially when it came to ensuring that there was an appropriate flow of information as far as medical reports were concerned. Those details needed to be fleshed out sooner rather than later, so that the potential issues could be identified.

Referring to the pooling of funds to increase access, Ms Manyonga said FEM was in favour of ensuring that everyone could get access to healthcare. If the pooling of funds could achieve that, then FEM was in support of it. This was supported as long there were no unintended consequences. FEM felt that their services would be necessary, even under NHI, in terms of ensuring the continuation of income etc. If employees left employment and were no longer employed, FEM would not cover them. What FEM did was distinct from that of the UIF. FEM’s specific scope and mandate was around covering work-related injuries for those who were employed. If that injury happened outside of employment, FEM would not cover that.

The aspect of rehabilitation services required more detail in the Bill. It was not clear presently, from a COIDA perspective, whether it was directly aligned with the proposed amendments. Splitting the funding to cover the benefits was one of the aspects that required closer scrutiny. As FEM had indicated, currently the funding from a COIDA perspective was a single assessment that got done across all benefits. Thus, more detail was required in that regard. FEM was not suggesting that patients pay cash for treatment -- the current system was that FEM, as the funder, would pay for the treatment as far as medical services were concerned. FEM got funding only from the assessments that were raised against employers, and the long-term sustainability of all three entities was premised on the adequate management of the funds and the reserves and assessments that the entities got. This was something that the entities closely monitored and managed.

She said that any unanswered questions would be communicated in writing to the Committee, and FEM was willing to supply any further information that might be relevant.

Health Funders Association (HFA)

Ms Lerato Mosiah, CEO of HFA, Dr Paula Armstrong, Director: FTI Consulting, Prof Roseanne Harris and Dr Boshoff Steenekamp, of the Technical Advisory Committee at HFA, presented to the Committee.

The HFA said medical schemes were a vital vehicle for social solidarity in accessing healthcare. South Africa’s healthcare policy since 1994 had been grounded in the principle of social solidarity. Medical schemes and the Medical Schemes Act of 1998 formed part of that framework by providing a vehicle by which those who could afford to pay for their own healthcare through discretionary private expenditure, could do so.

An environment that ensured social solidarity had four key characteristics, in addition to risk equalisation -- open enrolment, community rating, statutorily defined package of benefits -- implemented as Prescribed Minimum Benefits (PMBs) -- and mandatory membership, which was not yet in place in South Africa.

Health system reform had a strong path dependence. Successful reform to achieve universal health coverage (UHC) was more feasible and likely to succeed within the framework for social solidarity via medical schemes that already exist. Dismantling this system by limiting schemes in favour of a single-payer system was not a requirement to achieve equitable access to quality healthcare. The HFA supported amendments to the current multi-payer framework to achieve UHC.

South Africa had poor health outcomes relative to its economic peers. Health outcomes and mortality were correlated with economic development. This placed tremendous pressure on health systems and provided impetus to address UHC in South Africa.

There was limited scope to increase tax rates in South Africa. Private discretionary expenditure on medical scheme premiums could not be redirected towards payment for health services provided by NHI. Additional funding for NHI could therefore be raised only via taxation. However, South Africa was on the downward sloping part of the Laffer curve, where increasing the tax rate would lead to decreased tax revenue. Removing medical scheme tax credits amounted to raising the tax rate. The capacity to generate revenue for NHI via higher tax rates was limited. More than 20% of tax payers in South Africa did not belong to medical schemes and relied on the public health system – this was South Africa’s “missing middle.” Including the missing middle in medical schemes in pursuit of social solidarity lowered the burden on the public sector and improved medical scheme affordability. This limited the need to raise additional revenue to achieve UHC.

With the fiscus under pressure, health reform must be incremental. In an already fiscally constrained environment, the global recession in 2020 put public finances under severe pressure. Prioritisation of spending would be important in order to stabilise South Africa’s public finances. An incremental approach to achieving health reform was possible and advisable. This would avoid significant expenditure from a constrained budget.

Relying on elements of the existing health system to achieve universal access to quality healthcare was necessary to avoid the numerous consequences of implementing NHI as a single- payer system. This approach was followed globally, where private health systems were already in place

Section 33 of the NHI Bill curtailed the role of medical schemes significantly -- “Once National Health Insurance has been fully implemented, as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.”

A significant departure from the 2018 version of the Bill was that “a user may purchase healthcare services not reimbursed by the Fund through any other private health insurance scheme.”  There was no document or discussion motivating the change in stance -- no technical analysis, and no assessment of consequences. A Socio-Economic Impact Assessment System (SEIAS) framework was in place specifically to “minimise unintended consequences from policy initiatives, regulations and legislation; to anticipate implementation risks and encourage measures to mitigate them.” It would be more useful to use the establishment of the NHI framework as an opportunity to improve the way that medical schemes function and to create an integrated medical schemes system capable of supporting the NHI Fund in facilitating access to quality healthcare for all.

There were numerous consequences to restricting medical schemes. Limiting medical schemes in favour of a single payer would have far-reaching consequences:

  • Increases the burden on the public sector: approximately nine million lives previously covered by medical schemes through discretionary contributions of members’ premiums would need to be covered by NHI;
  • Reduces cover substantially: given budgetary constraints, NHI was likely to cover a much narrower range of services than what was currently provided by medical schemes;
  • Expenditure per person would decrease: even if taxes were increased by enough to collect current medical scheme contributions as tax revenue, and per capita expenditure increased, expenditure would remain significantly lower than medical scheme contributions per person per month;
  • Exacerbates shortage of healthcare providers: curtailing the ability of medical schemes to pay for services creates significant uncertainty amongst service providers, and may discourage them from practising in South Africa. Likewise for facilities -- uncertainty regarding the health system structure would discourage investment
  • Discourages innovation in healthcare provision: a single-payer system or monopsony buying power disincentivised research and development, which often required significant financial investment. A constrained budget precluded such expenditure

Medical schemes had the required expertise to achieve UHC in South Africa. In addressing the country's urgent need for universal access to quality healthcare, medical schemes provide robust infrastructure on which to build a framework based on social solidarity. Medical schemes had considerable expertise in the following areas, all of which were necessary to improve delivery and ultimately access to quality healthcare to a wider part of the South African population:

i. Proven administrative capacity: Currently paying in excess of 50 000 practices in South Africa, and paying more than 500 000 claims each day;

ii. Development of treatment protocols and formularies: facilitating the establishment of treatment pathways to manage cost and utilisation, with a focus on primary and preventive care;

iii. Benefit modelling and pricing: allowing for reliable, accurate costing of healthcare services, improving predictability and planning capacity;

iv. Provider contracting: increasing focus on value-based contracting to encourage efficiency and cost management;

v. Health service monitoring: capacity to monitor quality and detect fraud, waste and abuse;

vi. Health data analysis: improves patient care and experience and allows for the establishment of efficient care pathways.

A single-payer system was not the only way to achieve UHC. Relative to its economic peers, South Africa spends a large proportion of its gross domestic product (GDP) on healthcare. Various models existed to achieve UHC, which did not require restrictions on private health insurance. Public health expenditure would not replace private expenditure. In reality, limiting medical schemes would result in increased out- of-pocket expenditure.

There were various pathways to achieving the objectives sought with a single-payer system. From a functional perspective, the motivation for a single-payer system included achievement of risk pooling across the entire South African population, and the need to establish monopsony buying power for the NHI Fund as the only purchaser of healthcare services.

Risk pooling across the population did not require a single-purchaser of healthcare. A hybrid model could achieve risk pooling, leveraging existing risk-adjustment mechanisms. These were described in detail in the Health Market Inquiry’s final report, as well as in various other forums. Virtual risk pools established by a risk adjustment mechanism provide the benefits of a single risk pool while retaining a multi-payer system, but avoid pitfalls of single-payer system.

Monopsony buying power would not result unequivocally in lower prices. The risk of inappropriate prices would threaten the equilibrium of demand and supply of services. With significant cross-subsidisation in sectors servicing the public and the private sector (e.g. pharmaceuticals), single-payer may well increase prices faced by public sector. A significantly large team would be required to administer such a fund, with considerable know-how and technical capacity to manage such an entity.

Key concerns arising from the 2019 NHI Bill

  • Drafting language may cause confusion: Definitions of key concepts were absent. For example, “fully implemented”, “not reimbursable”, “semi autonomous entity” had not been defined.
  • Constitutionality of the Bill: It was potentially open to Constitutional challenges regarding the rights of medical scheme members to access healthcare via medical schemes.
  • Governance issues: The concentration of powers with the Minister for the selection of board members gives rise to significant governance concerns, given the fiscal significance of a schedule 3A entity
  • Flow of funding: National Treasury had not released a paper on NHI funding. Large financial allocations were to be made to providers who were not legal entities, such as the contracting units for primary healthcare (CUPs), which was problematic. Medical schemes did not receive tax credits -- these accrued to members and constituted “uncollected” taxes. Tax credits were not a revenue pool available to be redirected.
  • The role of provinces and local government: It was unclear what the function of provinces and local government would be in healthcare provision under a single-purchaser system. It was also unclear how District Health Management Offices and CUPs aligned with the three-tier government structure. It was unclear who the contracting party would be.
  • Maintenance of purchaser/provider split: It was unclear how the establishment of the NHI Fund would successfully establish and maintain a purchaser/provider split, given the current arrangement of healthcare provision in the provinces.

Recommendations

The HFA wholeheartedly supported health reform to achieve UHC, and recommended the following amendments:

  • Amendments to Section 33, allowing the role of medical schemes to evolve as the NHI Fund was implemented and access to quality care was achieved. Specifically, the following amendment was suggested: "Medical schemes may offer benefits to users in respect of relevant health services, as defined in the Medical Schemes Act, in accordance with the Medical Schemes Act, notwithstanding that such benefits may be reimbursable by the Fund in accordance with this Act."
  • Removal of provisions to amend the Medical Schemes Act as per Section 57 of the Bill. Such amendments should be dealt with at the appropriate time and via the Parliamentary process for the Medical Schemes Amendment Bill, not within the framework of the NHI Bill.
  • Amendments to governance provisions to entrench principles of transparency, independence and accountability. Ministerial selection and appointment of boards would leave them vulnerable to undue influence. Measures must be taken to ensure competence and accountability to communities served, not solely to the Minister. The role of Parliament in these provisions was important.
  • Implementation of phases to be defined with reference to the achievement of milestones which were quantifiable, and independently and transparently measured.

Concluding remarks

The HFA supports the policy objective to achieve the progressive realisation of the right of access to quality personal healthcare services, and to make progress towards achieving UHC. It recognises the urgent need to address inequality in access to healthcare.

The HFA supports a collaborative approach to strengthening the health sector with reference to, and aligned with, the Presidential Health Compact. The importance of a public/private partnership in the delivery of healthcare in South Africa cannot be emphasised enough. Partnerships with private stakeholders in the areas of human resources development, management skills, liability management and priority project delivery had been highlighted as fruitful areas for partnership. Medical schemes were particularly well placed to assist the Fund in establishing and developing these and other areas.

Careful consideration had to be given to the findings and recommendations of the HMI with regard to improving the efficiency in the private sector. This would assure the sustainability of the health system as whole.

Discussion

Chairperson Dhlomo addressed a question to Prof Harris. No one had said that ‘medical aid benefits ran out every year for every member,’ but there were instances of medical aid benefits running out. There was no provision for benefits running out. He was talking from experience as a general practitioner (GP) for ten years. There was no report that spoke about catastrophic health expenditure affecting ‘all’ members, but there was a significant number of members where this was applicable. When one ran out of medical aid benefits, there were three options. The first was catastrophic health expenditure, the second was making use of a public hospital which was already overburdened, or one went home and died. Out-of-pocket expenditure was not the ‘only’ option. He requested a response from Prof Harris in that regard.

Mr Munyai noted HFA’s concern about the lack of technical analysis guiding clause 33 of the Bill. Was HFA aware that clause 8(10) of the White Paper provided an analysis of the different roles that schemes could play, based on international best practices for models similar to the NHI? Were there gaps in this analysis? If so, they should specify them. It was important to read the Bill in conjunction with the White and Green Paper to understand the analysis.

Medical schemes were not based on the principle of ‘social solidarity,’ as envisaged by the Bill. Medical schemes covered only a portion of the population – 16 percent – who could afford it. HFA’s comments on this would be valuable. What did the HFA and its members propose should happen to integrate the public and private sector systems to ensure improved provision of healthcare to the broader South African population? Surely it appreciated that the current segregated approach was one of the reasons why the NHI policy was being introduced in South Africa.

He asked that HFA clarify why they thought the Bill would not achieve the desired purchaser/provider split. The Bill outlined, in its principles, the roles to be played by the National Department of Health, the Minister and the providers, both in the public and private sectors. The perspective that the medical schemes were a national asset did not make them sacrosanct from a legislative or other point of view. The Socio-Economic Impact Assessment (SEIA) document addressed the points made by Prof Harris.

Surely, continuing with the medical schemes would create further fragmentation under the NHI? How did HFA reconcile its position on the statement, ‘wholeheartedly supporting reform to achieve universal health coverage,’ while at the same time motivating for the retention of the current structure of medical schemes? Were the two positions not contradictory and thus opposed to any reform to support NHI? There were a number of assumptions made about out-of-pocket payments, indicating that they would be higher under NHI. What informed that conclusion? Was it possible that the current pricing system which was in place in the private sector, was the basis of such assumptions? He requested clarity on this.

Ms Gela said that for many years the administrative costs in the medical scheme industry were found to contribute significantly to the cost of healthcare. What had HFA and its members done over the years to address this and to ensure that more South Africans gained access to healthcare insurance? The presentation focused mainly on pricing examples that made reference to state tender pricing of medicines. Given that the most expensive medicines generally did not have a tender price, what proposal would HFA make for the provision of these categories of medicines – particularly in the interest of ensuring their accessibility in the NHI environment?

Did HFA think it was possible to implement the Health Market Inquiry recommendations in parallel with the implementation of NHI? What was HFA’s understanding of the private sector under NHI? It was the Committee’s understanding that the private sector would be a part of NHI.

Dr Havard said that HFA’s anxiety about the significant departure from the 2018 version of the NHI Bill was noted. She asked that it clarify what the main difference was between these two statements -- firstly that ‘a user may purchase healthcare services, not reimbursed by the Fund, through any other private health insurance scheme,’ and secondly, that ‘medical schemes may only offer complementary cover to services not reimbursable by the Fund.’ Was HFA requesting that the definition of ‘complementary cover’ be included? If so, was HFA aware of clause 1 of the Bill, which provided that definition? HFA seemed to be supporting the continuation of a two-tier system, inherited from apartheid, that would perpetuate inequalities leading to social instability. What were HFA’s thoughts on this?

Ms Hlengwa expressed her disappointment in the presentation. One of the concerns raised by HFA in its written submission was that the NHI Bill was unconstitutional because it limited the rights of medical scheme members to access healthcare via medical schemes. Was there such a right in the Constitution? Why did medical schemes exhaust all their money before June – was this a norm?

Acting Chairperson Jacobs asked a question about inequities and the lack of access to treatment. He made specific reference to oncology treatment reimbursements. Most medical schemes that offered oncology treatment reimbursements offered it only for members in the higher tiers. Some members were required to sometimes make co-payments for their treatments. Under NHI, did the HFA suggest that these inequities be addressed? Did HFA support that the access issue be addressed? Regarding the mechanisms that would entrench the two-tier structure, the Committee was aware that the structure unfairly prejudiced the poor and the most vulnerable of the population. Why did HFA think that this two-tier system should be continued within an environment where NHI was meant to decisively address fragmentation by changing the way people accessed and utilised needed services. Could HFA explain what a ‘collaborative approach’ actually meant and whether it related to healthcare service offerings, or administration of the NHI Fund?

Ms Ismail noted that HFA had mentioned the state of the current healthcare facilities, and the fact that they did not meet standards. Was HFA’s suggestion that the existing healthcare system be fixed before NHI was implemented? What was their view on the compliance requirement of healthcare facilities under NHI, given that the majority of the healthcare facilities did not meet these standards, and how would this affect equitable access to healthcare services? Would it create a further divide between urban and rural communities, and what implications did HFA foresee? What was HFA’s view on the governance structure of NHI in relation to the number of SIU investigations in the Department of Health and government? What was HFA’s view on the Bill giving the Minister the right to establish the board and related entities? Would HFA agree with this in the Bill, or should the boards be elected and answerable to Parliament?

Chairperson Dhlomo said there was a view proposed by the presenters that the NHI was likely to be very narrow in the coverage of health services. Where was that being picked up? Part of the NHI spoke about a comprehensive set of health services and the continuum of that. This was embedded in primary healthcare, which started with the community, and would support and identify those gaps. It would focus on health promotion and health education. This was also stated in clause 25 of the Bill, which spoke about the Benefits Advisory Committee. If there was an expert who felt that the package, once finalised, was incomplete, somebody would need to indicate that it had been missed out. What was the view of HFA in that regard? Clause 57 of the Bill spoke about the transitional arrangements, and there was a particular role that schemes would play. In clause 33, it stated that once NHI was fully implemented, there would be a complementary role played by medical schemes. Why did HFA think that there would be a narrow number of services provided?

The Health Market Inquiry Report made certain recommendations that should be implemented by the Department of Health. It did not state that the recommendations must be ‘embedded’ in the NHI Bill. The recommendations would be implemented in parallel with the implementation of NHI. While there were challenges, such as long queues etc in the public health sector, the private healthcare sector was unaffordable and unsustainable. This situation needed to be addressed in the private healthcare sector. Why did HFA seem to suggest that the situation of unaffordability in the private healthcare sector would just go away?

Acting Chairperson Jacobs wanted to understand the rationale for ‘late joiner fees.’ Late joiner fees would mean that whichever medical aid one joined at a later stage of life, this was the medical aid that became the beneficiary of the funds. There were implications, in terms of money that needed to be paid out for the rest of one's life, or for as long as one was on a medical aid. This was something that the Committee should look at very seriously. The other issue he wanted to highlight was the waiting period. Who was the recipient of the money accumulated over the first three months, where funds were paid to medical aids and no benefits were provided? Both issues needed to be looked at by the Committee. He wanted HFA to be mindful to address those two points.

HFA's response

Prof Harris responded to the question from the Chair, and the one about the medical scheme benefits running out. It was important to note that being mutual funds, medical schemes' only source of funds was the contributions that members paid into those funds. A scheme was governed by a board of trustees that determined how those contributions were allocated in the form of benefits. Added to that, medical schemes had a set of prescribed minimum benefits which they were obligated to cover. Those prescribed minimum benefits covered a wide range of services. If one had a medical emergency, one would always be covered under prescribed minimum benefits at cost. If one had diabetes, a heart condition, or asthma, the medical scheme would always cover those benefits at cost. It may be, as recommended in the NHI Bill, that one had to follow a particular care pathway to access those benefits. One could never run out of benefits in terms of emergency conditions and the list of chronic conditions.

The numbers did not support the statement that the ‘majority’ of members ran out of cover or that their benefits were completely exhausted by the middle of year. There were certainly limits that were placed on certain high cost benefits in order to preserve the sustainability of the mutual risk pool. In terms of late joiner penalties, those funds went into the members' reserves, which were used to fund the claims of all members. She was happy to make detailed submissions to the Committee on that.

It was important to stress that, in terms of the integrated approach advocated, HFA was not suggesting that medical schemes should not be tampered with. It had noted many of the recommendations made by the Health Market Inquiry which could significantly assist with more efficient operation of medical schemes. The fact that medical schemes were voluntary entities made it a challenge to operate on a social solidarity basis. The integrated approach was about making amendments to the efficiency of how medical schemes operated, as well as how the rest of the market operated. In terms of the technical points that were made in the SEIAs regarding the role of the medical schemes in the model, if one looked at some of the other models referred to in the Green and White Papers, one would see that they did incorporate this kind of integrated approach. HFA was not suggesting that the way in which medical schemes operated should be left untouched, but rather that there was an opportunity to build on those risk pools.

HFA did not believe there was a conflict in the support of universal health coverage and the need to reform. In fact, the HFA had been extensively involved in a number of initiatives to try and expand access, even through existing mechanisms, like low-cost benefit options, which harnessed employer subsidies to make access more affordable.

Regarding the evidence of higher out-of-pocket expenditure, HFA had mentioned a number of countries that had implemented single payer models, where the levels of out-of-pocket payments had increased. HFA concurred with the Chairperson that out-of-pocket payments should not be seen in isolation as a measure, as they often reflected a lack of access to care.

Regarding the provision of high-cost mechanisms, one of the mechanisms medical schemes regularly engaged in was HTAs. This was similar to what had to happen in the public sector as well. The Soobramoney case had been a landmark case in terms of establishing that there were unlimited demands and limited resources. In terms of implementing the Health Market Inquiry recommendations and establishing the NHI Fund, the HFA did not believe that these two were at odds with one another. It was not a case that those recommendations on their own would get rid of the private sector, but one needed to be very careful to consider the longer term effects of a monopsony purchaser in the market as to whether the market could continue to exist. Essentially the market outside of those contracting decisions ceased to exist, which then limited choice going forward.

HFA had attempted to outline the definitions in the presentation, specifically in relation to the definition of ‘complementary’ as opposed to ‘supplementary’ cover. The 2018 version of the Bill seemed to allow for the fact that one had to bear in mind that the cost of coverage presently, as the Health Market Inquiry demonstrated, was driven a lot by utilisation rather than the cost per service. One needed to be cautious that those levels of utilisation did not crowd out levels of utilisation for those who were most in need of expanded access to cover. HFA was not advocating the maintenance of a two-tier system, but rather an integrated system which would mean improved benefits for everyone by creating the opportunity for cross-subsidies between risk pools. It was important that those cross-subsidies operated in a managed way. This would not be the case if everyone was put into a single fund.

Dr Steenekamp requested an opportunity to respond to the questions in more detail in writing, because some of them were very important and HFA could not do justice to them in the time given. He agreed with the issue around social solidarity. The Health Market Inquiry did outline the potential for cross-subsidisation at two levels -- one was from high to low income, and the second was from young and healthy to sick and old. Those cross-subsidies needed to be introduced through all levels of the healthcare system so that everyone had access to universal healthcare coverage. The question regarding their support of universal healthcare being in conflict with their support of medical schemes – these were not mutually exclusive. Through the proper mechanisms of risk equalisation, adjustment and cross-subsidies, one could create a universal healthcare system. A universal system would be similar to that of Germany and the Netherlands, which had multiple funds with proper risk equalisation, which was done through a highly developed stewardship system. The Ministry of Health took stewardship of the system.

The recommendations of the Health Market Inquiry could be implemented in parallel with the implementation of NHI. It would create the mechanisms and vehicles that were suggested in the report, to make sure that the entire system operated more efficiently and equitably. HFA was not in favour of a two-tier system in accordance with apartheid. HFA were not apartheid apologists -- it had nothing to do with that. It was improving the system to achieve greater access.

With regard to oncology treatments being available only for higher options, one of the prescribed minimum benefits was the treatment for oncology for every cancer that existed. Schemes needed to make provision for that, and if that did not happen, that was something that the Council for Medical Schemes should investigate, as they were the regulator of that environment. The NHI Bill made provision for HTA, but it might say that a certain biological drug or cancer drug was too expensive and was not cost effective, and could not be used as a result. Similarly, if something happened in the medical schemes environment, it had to be done clearly within the ambit of regulation 15, made in terms of the Medical Schemes Act. It required medical schemes to look at cost and affordability, and if that was not the case, the medical scheme would be guilty of an offence.

HFA did not want the two-tier system to create further fragmentation. It was a single country, and they wanted a single health system where the problems were fixed as they proceeded so that everyone could benefit.

If one looked at the provisions of the Bill, it created a district health management office and contracting units of primary care, and there were some limitations there. For a purchaser/provider split, it meant that one party needed to be a legal person that handled the funding and paid the service and the other party was a provider and was a legal person that could contract with the funder. That contract was required in terms of clause 39 of the Bill, which said that there must be a legal contract between the purchaser and provider. The problem came in when the contracting units, such as the District Health Management Offices, were set up as legal purchasers – as independent national government entities -- and those entities must then send out the contracting units for primary care. A contracting unit for primary care was not defined as a ‘legal person’ – that entity could not appoint staff, nor assign contracts etc. That purchaser/provider split was a very important part of the reform, and was part of the draft legislation that needed to be looked at to make sure that it worked properly.

Chairperson Dhlomo suggested that there should be another opportunity to engage with HFA separately on other issues. Any other questions in the above regard could be communicated in writing.

Momentum Health Solutions

Mr Mike Neubert, Strategy and Corporate Schemes; Mr Nomo Khumalo, Chief Executive Officer (CEO); and Dr Boshoff Steenekamp, Health Strategist; at Momentum Health Solutions (MHS) presented to the Committee.

They said that central challenges to South Africa's health system must be overcome in order to achieve Universal Health Coverage. These challenges involved cost, affordability, access, quality and equity. Government initiatives such as the National Development Plan, the Health Market Inquiry, the Fraud Waste and Abuse Steering committee, to address these challenges had been concluded, but their recommendations had not found their way into the NHI Bill. Unless these fundamental challenges were addressed in the Bill it was unlikely that UHC would be achieved. Sustainable and meaningful improvements to the health system could be achieved only if these fundamentals were addressed.

It was against this background that MHS had made submissions on the NHI policy papers to the Department of Health, the Health Market Inquiry, the fraud waste and abuse initiative, the Davis Tax committee and the Financial and Fiscal Commission (FFC).

Universal health coverage must be achieved, and the NHI Bill provided an opportunity to harness all South African capabilities for an all-inclusive effort to achieve it. Evolving roles of public health services, medical schemes, health administrators and private service providers were required to contribute to the administration, financing, purchasing and provision of a universally assured, equitable package of health benefits for all.

Relying on the tax base to provide the full range of demands on the health system was not adequate. Countries at similar levels of development needed significant levels of private funding to augment public funds. Phasing in of the NHI would provide an opportunity for the public and private sectors to address these challenges jointly and systematically

Of concern was that Section 33 of the NHI Bill limited the right of access to healthcare funding. It removed the right to access medical scheme cover in specified circumstances, and constituted a threat to achieving universal health coverage. It was therefore critical that the reasons for removing this right was appropriate and substantively powerful so that the limitation of the right was justifiable, in relation to Section 36 of the Constitution.

There were less restrictive means to achieve UHC. In this respect, MHS had submitted a discussion document on expanding low-cost cover. This document fully integrates the findings and the recommendations of the Health Market Inquiry with the country’s duty to achieve UHC and proposes progressive improvements to the system to reduce the current unacceptably high levels of inequality. Similarly, the HMI had recommended a series of less intrusive steps that the government could take to ensure that the health system operated in the public interest

Reading Sections 6, 8 and 33 of the Bill together, they remove the existing constitutional right of citizens to acquire healthcare services from private providers through medical scheme cover, which conflicts with Sections 12(2)(b) -- security and control over own body -- and 27(2) -- access to healthcare -- and 28(1)(c) -- children's right to healthcare -- of the Constitution. This indirectly limits the rights of healthcare providers and funders to trade (Section 22 of the constitution). Section 33 empowers the Minister to determine when NHI was fully implemented, and remove access to private funding.

If there were adequate reasons to remove these rights, it had to be done in terms of Section 36 of the Constitution

Debate on the reasons for the removal of private funding was required. The socio-economic impact analysis did not explore alternative routes to UHC and therefore did not provide any evidence that the limitation in Section 33 was “reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom.”

There was a negative impact by limiting medical schemes to cover only what was not offered by the NHI. Policy uncertainty was affecting the health sector and other businesses in the country. The capacity in the private sector could be lost to other countries, as many professionals had indicated that they would emigrate. There would be an increased burden on the state to provide healthcare, with increased out of pocket expenditure. Cross subsidisation of medicines in the public sector would be lost if one price was charged for all medicines, and there was likely to be resistance through litigation.

The reasons for the limitation of private funding vehicles were largely unclear, but there were many circulating misconceptions:

  • Claims that the private sector was not efficient: the HMI had found that the private sector was not competing effectively and suggested measures to improve this.
  • The private sector did not cause the general shortage of healthcare personnel.
  • Medical schemes did not run out of benefits.
  • The expectation was that the NHI fund administrative cost would be 1% to 3% of healthcare costs, but the cost of the purchaser-provider split in the NHS exceeds 15% of all health costs, so these administration costs could be as high as 20%.

MHS said medical schemes did not run out of funds. The graph showed that November was the first month in which the weighted average ratio of risk claims paid, to claims lodged, fell below the January level at 98% – a difference of only 2%. The December weighted average ratio was the lowest, but still at 90% of January. The December claims experience differed from other calendar months because of the holidays over the year-end, as evidenced by the reported monthly seasonality of medical scheme claims. The notion that risk benefits “run out” may originate from experience prior to the implementation of the Medical Schemes Act of 1998, when vastly different requirements in terms of open enrolment, community rating and PMBs applied. Claims experience had been subject to significantly different legislation since then.

Transition phases require milestones, preceded by testing. The Bill identified fixed dates for progression to the next phase of implementation. Many factors influence the progression and depend largely on economic growth. It was suggested that these dates be replaced by objective milestones. There may be value in developing pilots that truly test the contracting and strategic purchasing required for a purchaser-provider split before this was introduced nationally. This was an area where Momentum Health Solutions had a keen interest to collaborate.

Other issues to consider were strategic purchasing, including what to purchase, who to purchase from, and how to remunerate.  Widespread nationwide purchasing would require the development of risk-based capitation models that should ideally be tested at a few districts before nationwide implementation.   Diagnosis-related groups were implemented in alternate reimbursement mechanisms, so an appropriate grouper must be developed, and the clinical coding competency must be strengthened considerably.

There would have to be development of appropriate governance structures for all the entities – from the NHI board, the central hospitals, the District Health Management Offices and the Contracting Units for Primary Care. These were new structures that would have to operate in a new environment with which MHS had no previous experience. Consideration also had to be given to appropriate governance structures to govern the expenditure of up to R10 billion annually in some of these districts.

Recommended solutions to the governance challenges

Consideration should be given for a judicial panel for the appointment of the NHI board. This panel must appoint people based on experience with the requisite, relevant and collective skills set -- an appropriate balance of medical, actuarial, financial, investment, legal and corporate governance skills. The board must elect a chairperson from its members, and be accountable to Parliament, requiring amendment to Sections 13 and 14. The board should appoint the CEO, requiring amendment to Section 19(2)(b) and 19(3).

Governance structures should be developed for the new national government components:

  • District Health Management Offices (supporting contracting units for primary care), and central hospitals.
  • At the facility level, where central hospitals would become “semi-autonomous” entities, it was critical that appropriate governance structures are designed to optimise service delivery and accountability.
  • Amend Sections 7(2)(f)iii; 57(4)(a);

Appropriate and technically competent institutions were required to implement NHI:

  • Clinical coding systems, DRG groupers and alternate reimbursement mechanisms were central to the success of the NHI;
  • DRGs require a DRG grouper – a sophisticated piece of software, which must ideally be government owned and controlled;
  • Global fees was another alternate reimbursement mechanism. These were technically highly complex and require highly specialised skills for development and introduction.
  • Accurate clinical coding was a prerequisite. This highly technical function was best performed by an institution like the HMI-proposed Supply Side Regulator for Health (SSRH).

It was recommended that the SSRH does the technical work on clinical coding, the development of DRG groupers and global fees. The pricing for these must be the result of a negotiated process that was overseen by this regulator.

There were challenges around the establishment of legal persons to contract as part of the creation of a purchaser provider split. A requirement for the creation of a purchaser-provider split was that the purchaser must enter into a contract with the provider, and to have legally enforceable contracts, each of the contracting parties must be a legal person (Section 39 of the Bill). Provincial hospitals and clinics were not legal persons and contracting could be entered into only with provinces or municipalities. Providers (hospitals, clinics, etc.) must be established as legal persons as a critical step towards the creation of a purchaser-provider split.

The NHI Bill, once enacted into law, would establish District Health Management Offices as national government components (legal persons), which in turn would establish Contracting Units for Primary Care. The section mentions that the Fund would transfer funds directly to the CUPCs. Section 41(3)(a) requires that the CUPCs remunerate primary care providers. CUPCs were not established as legal persons, and could therefore not open bank accounts, employ personnel, or contract with service providers.

The Public Service Act (1994) places onerous requirements on the establishment of national government components. This Act requires that the relevant Minister must request the President to establish such an entity, a detailed feasibility study must be done to show that such an entity was viable, and the request must be supported by the Minister of Finance and the Minister of Public Service and Administration.

Tax credits were not available for redistribution to the public sector – taxes must be increased before these funds could be allocated. Section 49(2)(a)(ii) of the Bill incorrectly states that tax credits were currently being paid to medical schemes, but this does not happen. “Tax credits” means that after a person was assessed for income tax, a discount was offered to individuals belonging to medical schemes. This was a fixed discount and applied equally to all taxpayers. Should tax credits be abolished, it would have serious detrimental effects on lower income medical scheme members. Abolishing tax credits would mean an increase in the effective tax rate.

There was a duty for everyone to provide a solution, including the private sector. In respect of housing, the constitutional court had ruled “....that it was not only the state which was responsible for the provision of houses, but that other agents within our society, including individuals themselves, must be enabled by legislative and other measures to provide housing. The state must create the conditions for access to adequate housing for people at all economic levels of our society. State policy dealing with housing must therefore take account of different economic levels in our society.”

Through the implementation of the HMI recommendations, and stronger stewardship of the private sector, public health objectives could be met and the health services revenue-net could be spanned wider. Medical schemes rely on private contributions (after tax) to strengthen the health system. Medical scheme membership reduces the burden on the state. The extensive funding, administrative, purchasing, and health care provision capabilities in the private sector must be harnessed towards UHC.

The MHS commented on other pertinent points in the Bill. These included:

  • On coverage for migrants, asylum seekers and other, the Bill departs from the current arrangements and limits care;
  • Registration of the population should draw on Independent Electoral Commission (IEC) experience;
  • The Fund should report to Parliament, and the appointment of board, as well as of advisors, should be addressed;
  • The role of the provinces had been significantly curtailed, and it was not clear how this would affect appointments of staff in the provinces;
  • Progressive implementation and piloting would assist a lot; and
  • Research should be used to inform policy.

Conclusion

There was a lot of work done to arrive at the Bill to date. MHS appreciated these efforts, and hoped that its contributions would improve the Bill. Its comments served to highlight the challenges that should be resolved in the interests of an improved system for all South Africans. These were testing times which required cool heads to ensure that the underlying problems in society were solved. MHS was confident that an appropriate pathway and solution to achieve Universal Health Coverage would be found. It was at the disposal of the Committee, and offered its services to improve the health system.

Discussion

Dr Havard stated that Momentum had recommended a judiciary system as being most suited to the NHI Bill. She requested clarity regarding this specific approach, especially given that a multi-disciplinary team of individuals was expected to form part of the Board. In other words, the Board would not only be dealing with regulatory governance matters. She requested clarity on this recommendation. Was Momentum aware that the Constitutional Court had clear jurisprudence on the limitation of rights? Was it aware that the State Law Advisors had declared the Bill constitutional?

Ms Gela asked why the depletion of medical scheme funds was contested by Momentum. Was it disputing the fact that members' funds got depleted, which limited access to member benefits? If Momentum agreed to the latter, was it accepting that the very essence of introducing a universal healthcare was aimed to ensure such things did not take place?

Ms Hlengwa asked how Momentum would be affected by NHI, and how this would influence its submissions.

Acting Chairperson Jacobs asked a question relating to Momentum’s experience with the National Health Service (NHS), where it was said that there were high administration costs -- somewhere between 50 and 80 percent. In terms of the NHI Fund in South Africa, it was expected to act as single payer/purchaser model, and would benefit from the economies of scale. The Committee was told that this would result in the reduction of administration costs. He requested that research from the NHS be shared with the Committee about the administration costs being between 50 and 80 percent.

Momentum’s view that medical schemes did not run out of funds was not correct, according to the Committee’s experience. During the consultation processes across different provinces and districts, a number of medical scheme members told the Committee that they could not afford the medical schemes due to high premiums, high out-of-pocket payments, and that they were running out of cover before the end of the year. What was Momentum’s view on this? Was it aware that the Health Market Inquiry report made the same conclusion about the continuous decline in benefits? He requested clarity about the point made that membership of medical aids was not according to race – the question would then be whether it was on the basis of class. How would the poor, vulnerable and indigent population be impacted if a better alternative was not brought about?

South Africa had chosen the single payer/single purchaser route with appropriately structured processes to yield benefits from monopsony purchasing power. The NHI contained elements to address the challenges that plagued the health system and prevented the majority of people from accessing needed care. Why did this seem incongruent with Momentum’s view?

Mr Munyai said that Momentum suggested that some clauses of the Bill limited the rights of consumers to access the healthcare from medical schemes, but he was not aware of such clauses. He asked Momentum what informed this point. It had mentioned that the Bill removed the right to access medical scheme cover. Some of the stakeholders had informed the Committee that over the years, the cost of the private healthcare sector had been increasing and that medical schemes were not well protected. Medical schemes were running out of benefits before the end of the year. There were serious governance challenges in the industry. Did this situation not threaten the achievement of universal healthcare coverage?

What was Momentum’s opinion about people insuring against the same healthcare costs twice – by this he meant duplicative cover, i.e from NHI and private medical schemes for the same healthcare services? Would that not perpetuate the current situation, thereby threatening the achievements of universal health coverage. This was similarly a two-tier system. Momentum seemed to be 'threatening' the Portfolio Committee, by stating that if the provisions of the Bill were implemented, Momentum would legally challenge the government and further support an exodus of the healthcare professionals from the country, although it was the beneficiary of a lot of the healthcare money in the country. He asked whether he had understood Momentum correctly in that regard.

He referred to the slide that made rand comparisons to currencies in other countries. Given the value of the rand relative to the comparative countries, to what extent did Momentum incorporate purchasing power parity in their calculations?

Chairperson Dhlomo said that Momentum was not threatening the Committee, as the Committee was just there to process the Bill. The threat was directed at the architects of the Bill.

Mr Munyai said it was important that the threat be clarified by Momentum.

Chairperson Dhlomo asked whether the recommendations of the Health Market Inquiry should put a halt to the processing of NHI. Could this not be done in parallel to NHI? He challenged the view that health policies could not be progressive. If one spoke of social solidarity and cross-subsidisation, one was already talking about issues of a progressive nature. What was Momentum’s view? Was it that the health of this nation was not important?

It could not be disputed that the high out-of-pocket costs were not realistic or possible for all South Africans. If one could not afford it, one lined up at a government hospital. What was Momentum’s view on that, given that it was a reality? It had pointed out that there were challenges. NHI would not only solve the crisis around the poor and unemployed, it would universally solve the country’s problems, as they existed. There was no indication in the Bill that it would limit medical schemes in terms of their contribution. It spoke of the medical schemes playing a complementary role when there was a fully implemented NHI. The Benefits Advisory Committee would guide the coverage of healthcare services and review this on an ongoing basis.

He asked what Momentum’s view was on medical aid schemes running out of funds half way through the year – despite users having to continually contribute to them? He noted Momentum’s mention of the Health Market Inquiry’s recommendations and the less intrusive steps. The principles of NHI were embedded in social solidarity, universal health coverage and cost-subsidisation. It also spoke to the financial risk protection. What was the list of less intrusive steps that were mentioned – and how should these be included in the programme of redress of the current challenges?

Momentum's response

Dr Steenekamp said that Momentum was not making any threats. It had constructively identified some potential legal pitfalls that could hamper the progression of the legislation and its proper implementation. He had seen two State Law Advisor opinions -- the one was from 2018 and the other 2019. The 2018 version had made very clear mention of the Grootboom ruling of the Constitutional Court, which raised the issues highlighted in Momentum’s presentation. He would gladly share that document with the Committee.

He responded to the question about the judicial panel. Momentum agreed that it was a difficult matter. A 3A entity would be setup with a budget that was larger than any other entity in the country. Every possible step and precaution needed to be taken so that it served the public well. The judicial panel could make an input and have the necessary professional advice on the relevant matters.

With regard to the high administrative costs, he would share the relevant documents with the Committee. Momentum had not calculated those percentages -- the figures were from the British media about the cost of the NHS in the United Kingdom. The economies of scale there were equally large. Doing something like that without testing and developing it properly could result in huge expenditure. That simply had to be understood better. Some of the less intrusive steps listed in the Health Market Inquiry report included the introduction of a contribution subsidy, rather than a tax subsidy. There were a number of other recommendations that would require significant changes to the way in which the industry worked, but which would take them closer to a fair and just system.

In terms of section 33, once the NHI was fully implemented, it would limit the ability of the private sector to self-insure or have medical scheme cover. The danger was that there could be duplication. That would be at the individual level, and their choice. Everybody benefited from the NHI, because everybody paid taxes, but if one wanted extra cover in addition to that, for whatever reason, that choice should be allowed. Currently, people belonging to medical schemes paid taxes as well.

He referred to the table in slide 18, which showed Southern African countries listed on the left. Private health expenditure was listed as a percentage of the total health expenditure. GDP per capita was listed in terms of the World Bank purchasing power parities (PPP) in dollars, so that one could adjust for the purchasing power of the different currencies. That was critical.

Mr Khumalo referred to slide 16 in relation to the distribution of funds. This had been covered by Dr Steenekamp, but it may have been unclear. It showed Momentum’s experience as an administrator. Their experience was that there was no depletion of funds. There may be a depletion of funds for things outside the prescribes of the Council for Medical Schemes. It was something that they did need to work on, and he could not deny that there was experience in the public sector that some members spilled over. Momentum would want to understand why that was the case. It was certainly not the case in how benefits were designed and claims were experienced throughout the year.

Momentum would agree that high premiums were one of the challenges of healthcare in general, and how expensive it was. It was one of the things that Momentum was trying to address. Many of the elements that were discussed in this session would speak to universal challenges if universal healthcare was achieved. Issues of utilisation were important, as well as issues of lifestyle disease in the system etc. There was a broad portfolio of issues that needed to be understood if universal healthcare, in whatever form, was going to be affordable in both the public and private sectors.

It was a difficult question that had been posed about class or race. He would agree that this was the reality in South African society. Medical aid was typically taken up by those who were employed -- the nine million. This reflected where the country was as a society, and the need to address this. This was the reality. The spirit of Momentum’s submission was that there was a part that already worked, which was quite often co-sponsored by corporates, and that this should be supported. He did not see it as one or the other -- it was medical aids supporting universal healthcare, given the capabilities and systems in place. There was a bias toward class and the employed, but it was purely as a result of where it was being funded from (the corporates).

The impact of NHI on Momentum was quite explicit in clause 33 of the Bill. In the end stage of NHI, in the way it was prescribed, Momentum would still exist as a complementary product to support what was made available. The arguments made today had addressed how best that would work and the optimum mix of medical aid and NHI to make healthcare accessible to everyone.

Financial Intermediaries Association (FIA) of Southern Africa

Ms Lizelle van der Merwe, CEO of FIA, Ms Butsi Tladi, Director of FIA and Ex-Chair of Health Exco, Mr Gregory Setzkorn, Director of FIA and Chair of Health Exco, and Mr Andre Jacobs, Member of Health Exco, presented to the Committee.

They said that FIA was a trade association that represented financial services providers that were classified as intermediaries in terms of the law. An intermediary business, known as an insurance broker or financial advisor, provided financial advice and product fulfilment to consumers. The FIA represented more than 50 percent of the healthcare insurance brokers in the insurance market.

The NHI Bill in South Africa had provoked vigorous debate. The FIA commonly referred to the health crisis in South Africa as two-fold -- a public system that rendered a poor quality of healthcare and a private sector that was becoming unaffordable. This oversimplification of the healthcare crisis forces commentators either to criticise or defend the proposal at all costs. What was often misunderstood was the devastating impact that ill health had on every person, family, community and the economy.

The desired health care system would have a strong primary healthcare with a ward based system, preventative care as a key component, and ward-based community health workers, which would contribute to job creation. There would be competition and choice to avoid polarising the private and public health system, with the development of a strong quality public system to compete for private scheme members. Workplace programmes would support employer workplace health improvement initiatives, and brokers would fulfil an important role to educate employees.

 

There were three critical elements to determining UHC attainment. These were:

 

Equity in access to health services

 

Those who needed the services should get them, not only those who could paid for them. The public sector in South Africa rates very high on equity, and granted nominal access regardless of the ability to pay. The private sector provides access to care to those who could afford to. Nearly half of the total health expenditure was in the private sector.

 

Quality of health services

 

The World Health Organisation (WHO) defined this as encompassing the full range of essential services, including the capacity for promotions encouraging healthy lifestyles, prevention of disease, treatment of disease, rehabilitation following illness and palliative care when needed. It needed to be safe, effective, people-centred and timely.

 

Financial risk protection

 

This was to ensure that the cost of using care facilities did not put people at risk of financial hardship.    Access should be available to all who needed quality health services without financial hardship. Households' out-of-pocket payments should be relatively affordable, and should not push households below, or further below, the poverty line.

 

The FIA pointed out that money was not the only issue. Where South Africa performed very poorly against countries with a similar burden of disease in terms of the efficiency of its health system, it performed exceptionally well in terms of financial risk protection, as depicted in the graph.

It referred to China's experience in respect of UHC. China had launched a series of health reforms which had accelerated NHI coverage for its 1.3 billion citizens, following call by the WHO to member states in 2005. Through strong governmental interventions and subsidies, a very high population coverage (96%) had been achieved. However, the benefits and structure were such that it did not provide the desired healthcare equity or financial risk protection, and there was ineffective supervision and administration of funds.

The lesson that could be learned from China was that the way in which NHI or a transformed healthcare system was implemented was of higher importance than the fact that it was implemented. Implementation of a transformed healthcare system did not automatically result in real access to quality care and improved health outcomes. There was consensus that although NHI was successfully implemented in China, UHC was not achieved.

Among realities to consider was the narrative that providers and facilities were skewed towards private sector, which was incorrect and served no value. Private healthcare also included the Road Accident Fund (RAF), Rand Mutual, and mine hospitals to name a few. The narrative that 16% uses 80% of the costs was incorrect, and served no purpose. Medical schemes also covered children, pensioners and unemployed spouses. Private medical schemes support social solidarity principles. The unemployed had access to universal cover. The application of a means test was problematic. Finally, private healthcare was a national asset.

The FIA had an expected set of objectives:

  • All citizens must have access to a minimum level of health protection. Ability to pay must not be a barrier;
  • All health services must provide quality of care;
  • All health services must be efficient and where applicable at a reasonable and sustainable cost;
  • Access to healthcare must be fair;
  • Supply of healthcare must be aligned to reasonable expectations;
  • Co-existence and competition between public and private health systems should be supported (lessons from the 1980s).

Discussion

Ms Ismail said that FIA had mentioned that the narrative that providers and facilities were skewed toward the private sector was incorrect. Did it believe that this narrative was used to ‘further a political agenda fuelled by ideology?’ FIA represented 50% of healthcare insurance brokers -- where did it foresee its place under NHI? How would it fit into the system?

Ms Gela asked what the Health Market Inquiry recommended on the value brought by the financial intermediaries in improving health outcomes. How did FIA think the proposed model in slide 26 would improve the redistribution of human resources in the healthcare system in order to benefit the entire population?

Ms Hlengwa noted that in FIA’s written submission, it was stated that private healthcare was a national asset – what was meant by this? It gave the impression that this was a contradiction. What was private could not be nationally owned at the same time.

Dr Thembekwayo commented that it had been said they were moving from a ‘human intensity curative system’ to a technologically enabled preventative system. How did FIA equate and incorporate a technologically enabled preventative system to meet the needs of the majority of the poor blacks, or those below the poverty line, who could not afford the technological devices and thereby were left behind?

Chairperson Dhlomo said that there was a slide that stated that ‘money was not the only issue.’ Maybe that was true. The point was made on the slide that there were inefficiencies in the South African health system and that when it came to financial risk protection, the country fared well. He had a big problem with that assertion. Among other things, the principles of NHI were to protect the people from ‘risk protection.’ This was almost catastrophic health expenditure. If one wanted health, one should not need to sell one’s house to do so. He requested examples of how the country was ‘doing well’ in terms of financial risk protection. The majority of South Africans did not -- they were experiencing financial hardships, including financial health hardships.

It was suggested in the presentation that the competition between the public and private sectors was healthy and should continue, so as to attain equality and equity. He did not understand this. What competition was specifically being referred to there? Almost every private health institution had specialists who were trained in the public sector. The quality would need to be something that would need to be qualified. The public sector was overburdened – was that a quality issue? Despite overcrowding, people still migrated to the public sector when they experienced financial risk in the private sector. Those were things that should not be avoided. There were challenges in the health system of South Africa in both the public and private sectors. If one pointed fingers at one over the other, there was a problem. He found that the FIA’s presentation leaned towards stating that there were challenges only in the public sector.

Dr Havard asked what the Health Market Inquiry recommended on the value brought by the financial intermediaries to improving health outcomes. She referred to slide 24, where an observation was made that the ‘narrative that providers and facilities were skewed toward the private sector was incorrect and served no value.’ She asked that empirical evidence be provided about this assertion.

Mr Munyai referred to FIA’s proposal about the implementation of mandatory participation in the private sector. Was FIA aware that the NHI Bill had proposed mandatory pre-payment mechanisms, which aimed to achieve sustainable and affordable universal access to quality healthcare services for the entire population? FIA’s proposal seemed to focus only on strengthening financial protection in the private sector.

He referred to slide 26, where it was proposed that there should be two types of basic benefit packages -- one in the private sector, funded via the medical schemes contribution, and the other in the public sector, funded from the fiscus. This meant that instead of integrating the two service delivery platforms, FIA was advocating the continuation of the status quo of the two-tier system. Could this observation be clarified?

He referred to the slide that spoke about the realities to consider, where it had disputed all factual realities of the healthcare system without providing empirical evidence to counter what one knew about the systems. For example, the majority of the healthcare professionals were in the private sector, and higher costs of healthcare were associated with fewer users in the private sector. It was disturbing to know that FIA found these realities unimportant, serving no value or purpose. He requested concrete evidence that resulted in these realities being disputed by FIA.

There was a view that universal health coverage would yield equity; China’s experience had been used as an example. The slide had focused mainly on negative experiences of where NHI was implemented, while he was more interested in positive lessons that could improve NHI implementation in South Africa.

Why did FIA think the current two-tier system should be maintained, when it was unaffordable and unsustainable? The recommendations sounded like FIA wanted the healthcare system to be privatised. He questioned the wisdom and appropriateness of making the reference to what worked during apartheid in the 1980s with regard to the competition between the public and private sectors.

Acting Chairperson Jacobs noted that they had spoken about alternative dispute resolution avenues – that there were gaps in the Bill from clauses 42 to 45 on areas that dealt with complaints, appeals and appeal tribunals. He asked the FIA to elaborate on this. Risk equalisation was mentioned in the presentation. Did FIA propose that the current healthcare system should be maintained, where equalisation of risk applied only to the private sector? Was that fair? What about the equalisation of risk and cross-subsidisation for the entire system?

In terms of FIA’s proposal that the private sector should be given tax credits for yielding improved health outcomes, how would this be positioned in the face of strategic value-based purchasing that looked at alternative reimbursement strategies that were performance based? How would FIA align the two? When FIA stated that the RAF and Rand Mutual were part of private healthcare, he wanted to clarify that they were funded by private funds. What was meant by the statement that healthcare was a ‘private good?’ When they spoke of consumers of healthcare, did this include users of healthcare services? Was FIA aware of the Health Market Inquiry findings that had identified information asymmetry as a key driver of private healthcare costs?

Ms Gela asked why FIA wanted a two-tier system when it identified in its earlier slides the need to have a transformed quality healthcare system. Did FIA support the NHI Fund Bill for a single payer unitary health system for the country?

FIA's response

Ms Van der Merwe responded to the question about the value of intermediaries and the role that they would play in the event of the implementation of the NHI Bill. It had been indicated at the beginning of the presentation that the role of intermediaries was quite critical when it came to assisting customers in the event of a healthcare crisis. Through the pandemic and unrest that was presently occurring in the country, people contacted their intermediaries to ask what had happened and what advice, recommendations and support could be provided. Access to advice needed to be expanded, and FIA was ready to serve within the NHI environment. FIA saw the role of intermediaries as being a service role to customers when requiring advice, even under an NHI healthcare services structure.

Mr Jacobs said that if all the questions could not be answered in the meeting, they would be provided in writing.

He responded to the question about the public and private sectors being played off against one another, and whether that was for political reasons or not. He did not think this was because of political reasons. There were positives and negatives in both the public and private sectors; there were areas of excellence in both sectors. The important questions were around how to change the healthcare system, in particular the health of the nation.

He addressed the question about all medical schemes being incorporated into the NHI Bill and where the intermediaries would then sit. One first needed to understand whether there would be a role for medical schemes to play. The way he understood it was that there was in fact a role to be played by private health insurance and medical schemes. The role of the broker was to guide, educate and protect consumers of healthcare. Therefore, that role and need would exist, and it did not matter whether it was a one or two-tier system. The need for advice, guidance and protection was required. People needed to understand their rights and obligations in the healthcare system.

Regarding the Health Market Inquiry and its view on the role of the intermediary, the healthcare intermediary was not really involved in the delivery of healthcare. The intermediary was involved in making sure that the consumers understood their rights and obligations, as well as what could be done in terms of preventative care. That was important. Intermediaries were involved in wellness initiatives and supporting employers and their employees in gaining improved health via prevention initiatives.

As for the private sector being a 'national asset,' both the private and public health sectors were national assets. There was a huge amount of skills and experience in that context to improve the health of the nation.

He responded to the question about the curative technology-enabled preventative system, and how it would affect poor black people below the poverty line. That was an immensely important question. It was not suggested that it would be excluded. The point that FIA wanted to make was that there needed to be a move away from curative treatment to utilising technology in practices focusing on prevention.

Referring to the slide that stated that ‘money was not the only issue,’ he said the emphasis was on the fact that it was not a money issue, but an issue of the system. If one could not afford a medical scheme, one would have to make use of the public health sector. If one used the public sector, one had unlimited care that one did not need to pay for, in terms of the means test that was applied. If one was in the private sector, one might be privileged enough to afford medical scheme cover, and in most medical schemes unlimited hospitalisation was covered at a scheme rate. However, there were 271 diagnostic treatment pairs that consisted of a large number of ICD-10 codes that a medical scheme needed to fund at cost. One’s financial risk protection was therefore high in that scenario. What sometimes happened was that members ran out of money in terms of day-to-day expenses. That might be premised simply on not understanding the benefits or the coverage.

One of the things noted by the Health Market Inquiry was that they saw the role that the intermediary could play. The asymmetry included understanding one’s rights and obligations in terms of being fulfilled by the medical scheme. The intermediary stood in when the schemes did not pay minimum prescribed benefits.

FIA did not want the status quo of the basic benefits package to continue. This was not proposed by FIA. Currently there were prescribed minimum benefits that medical schemes needed to provide. This included a certain number of benefits and conditions. They had to provide minimum benefits that were similar to what was provided in the public sector. FIA’s proposal was that the private medical schemes needed to provide exactly the same benefits as the public sector. This was not to retain the status quo – it was totally different.

Regarding the realities to consider, FIA had quoted empirical evidence, but this could be provided when providing written responses to the Committee.

The China experience had offered extremely positive lessons. It was about how NHI was implemented. FIA did not want the two tier system to remain. There was a role for both the private and public sectors – both of them could add value and could remove a liability on the public sector, enabling the public sector to deliver in terms of capacity.

The reference to the 1980s was nothing more than a reference to a system where the public system provided quality care, and where medical schemes utilised it. There was competition between the public and private sector. Competition had occurred in terms of quality and price. That had changed over time. When there was competition, there was no risk of a system failing and there being no other options. Competition between the two sectors could add value.

Regarding the complaints process that was referred to in the submission , FIA sought not to criticise the NHI Bill. If one looked at the clauses that FIA referred to in the Medical Schemes Act – and there were shortcomings in that Act – those clauses provided far more protection than what was proposed in the NHI Bill. That was the reason it was proposed. The risk equalisation fund should apply to the public sector -- an insurance-based system as well as a tax-based system. Risk equalisation worked only when there was more than one fund available.

 

Ms Tladi said that in the FIA’s submission, they had gone to great lengths to provide a balanced view and not focus on the worst of any one of the two systems. The conclusions were not just ‘thumb-sucked’ by FIA – there were full citations provided. When FIA spoke of ‘quality,’ that was in the context of the elements of what would determine whether universal health coverage was attained. Those elements were provided by the WHO, and were embraced through this process. FIA’s conclusions about the public sector were drawn from the Health Market Inquiry, the National Development Plan (NDP) and reports from the Department of Health. FIA was not attempting to put that sector in a bad light.

 

Regarding risk protection, the reality of any health system was that there would always be rationing of services because the demands were so much greater than the resources that could ever be available. Prescribed minimum benefits provided a base level safety net to all members. This had its own limitations, but tried to cover one at cost in respect of life-threatening issues. Numerous examples were provided in the written submission, but the presentation had focused on only one or two of these. In essence, it was a presentation that sought to provide a balanced view and provide some solutions to what they were thinking.

 

FIA’s view was that technology needed to be embraced. It could offer a nurse in a rural area access to a specialist based in an urban area. Those were the type of things that should be explored and embraced.

 

Mr Setzkorn clarified what was meant by health being a ‘private good.’ This was not some anecdotal philosophical terminology, but spoke purely in economic terms. There was no question that healthcare was a private good. People who were not speaking in economic terms may see it as a public good. It did not meet the economic criteria for such a good. In economic terms, a public good was one which had non-rival consumption, and which could not be withheld from people who did not pay for it. This was not true of healthcare. Non-rival consumption occurred when a person could consume a good or service without reducing the amount of that good or service that was available to others. This was not true of healthcare.

Follow-up question

Acting Chairperson Jacobs asked what the purpose of co-payments would be, what they would be mitigating and how individuals were meant to afford this. The Committee looked forward to the written responses.

FIA's response

Ms Tladi said that the FIA’s view was that healthcare demands were unlimited, and ultimately a basket of goods would be defined. Anything by its nature that sat outside of the basket of benefits became a co-payment. It would ultimately be up to the advisory committee that created the benefits package to decide what was affordable and what was not affordable. Affordability was relative. In its presentation, FIA had tried to indicate when things could be affordable or unaffordable, but that was a broad question that was difficult to answer in the time given. There was a certain level of cover that provided a safety net and protected people and lives. Vitamins might not be critical, but it was still something needed and might form a co-payment. It was ultimately about the basket of benefits and how that was defined.

The meeting was adjourned.

 

 

 

 

 

 

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