A coherent, achievable path to universal health coverage now imperative

Wednesday, 29 November 2023, Glaring voids highlighted in submissions on the National Health Insurance (NHI) Bill threaten South Africa’s path to equitable healthcare access for all, cautions the Health Funders Association (HFA). The organisation has voiced its profound concern, emphasising the disconcerting sway of politics over the bedrock mission of prioritising the well-being of our nation within this critical healthcare deliberation.

“The practical barriers to successfully executing NHI as it is laid out in the Bill are hard to ignore, and yet the numerous concerns and suggestions raised in the consultation process have not been considered or implemented,” says Craig Comrie, chairperson of the National Health Funders Association (HFA).

“The clear shortcomings of the NHI Bill in terms of practical funding mechanisms and lack of collaboration with experienced health funders, among other aspects, have been overlooked for the most part, with only the Western Cape so far rejecting the Bill in its current form.”

The National Council of Provinces (NCOP) Committee on Health’s approval of the NHI Bill with insignificant edits does not address the numerous concerns raised in submissions made by the public and informed stakeholders, including the HFA, on behalf of its members.

The HFA is a professional body representing medical schemes and half of South Africa’s medical aid membership.

“There are constructive solutions to address the problems identified in the NHI Bill effectively, and it is not too late to fix the legislation. While the Bill is rushing towards the President’s pen to be enacted, the HFA respectfully appeals to the President to reconsider the wisdom of signing into law a Bill that has no workable funding mechanism while disregarding solutions proposed by private health funders, leading organisations, businesses and other key constituents,” Comrie says.

“We anticipate considerable resistance to the NHI Bill on Constitutional grounds, and as the HFA, we will continue to advocate for a more achievable approach to fulfilling universal health coverage aims.

“The timing of the recent flurry of activity in moving the Bill through the necessary hoops ahead of next year’s election invites the notion of a blunt instrument, an unrealistic election promise rather than a pragmatic solution for the highly complex health challenges South Africa faces,” he says.

Health Funders Association members, including leading lights in the industry such as Bankmed, CAMAF Medical Scheme, Discovery Health Medical Scheme, Fedhealth, Glencore Medical Scheme, Momentum Medical Scheme, Profmed and PPS Healthcare Administrators, to mention but a few, are ready to work with government to develop evidence-based solutions that will help secure access to quality healthcare for all South Africans.

“There is so much opportunity to make the NHI work. Private public partnerships and collaboration have achieved so much good for the benefit of South Africans in other sectors, and there is much our industry can contribute to help make quality healthcare more accessible and sustainable for all,” Comrie concludes.

Consider the chilling effects of removing tax credit

Thursday, 16 November 2023, There is no immediate threat to medical scheme tax credits, recently put forward as a potential solution to funding National Health Insurance (NHI), says the Health Funders Association (HFA), while cautioning that the broader economic consequences for all South Africans could be dire and should be carefully considered.

“Changes to taxation can only be introduced by the Minister of Finance in a Money Bill and medical schemes, and their members should be aware that the NHI Bill has no power to implement tax changes,” says Craig Comrie, Chairperson of the HFA, a professional body representing medical schemes accounting for more than 50% of lives covered on medical aid in South Africa.

“Should it become necessary, the HFA will strongly oppose any proposed legislation to this effect through all available avenues, not only to safeguard the rights of medical scheme members but also because it does not make economic sense for the country and its people.

“Removal of the tax credits would effectively increase medical scheme members’ tax and stifle what little disposable income remains to stimulate our economy,” he says.

“Medical scheme members are already contributing substantially to the public health system but not using it, and so the tax credits provide partial compensation by reducing the tax they are paying, depending on how many dependants they have.

“The public health budget is more than the tax credit amount at around R5 000 per person per year, therefore, medical scheme members are receiving a benefit that is much lower than the benefit currently received by non-medical scheme members. Furthermore, it is essential to highlight that more than half of those belonging to medical schemes have a monthly household income below R30 000, and the tax credit is a key factor in their ability to afford cover.

Comrie points out that for a family of four, removing medical scheme tax credits would effectively result in a monthly loss of R1 220 in household income, or R14 640 per year. “For some families, this would make private healthcare cover unaffordable – thereby transferring at least 400 000 to 700 000 more people onto an already overburdened public health system,” he says.

Neither employers nor medical schemes benefit from the tax credits, he points out. During a parliamentary meeting on 9 November, Dr Nicholas Crisp conceded that the NHI Bill is technically incorrect in stating that tax credits are paid to medical schemes indicating that the Department may propose amendments to the Bill. Although tax policy is not set by the Department of Health, Dr Crisp said that the error in the Bill does not change the Department’s intent to remove tax credits.

The rebates were restructured in 2012 by the National Treasury to be more beneficial to lower income earners since the tax credit represents a higher proportion of their tax payable and has thus helped to make medical scheme membership accessible to more people.

“The approximately R27 billion rebate in the form of tax credits to medical scheme members pales in comparison to the colossal projected costs of the National Health Insurance (NHI), amounting to a mere 5% to 8% of the estimated total. The resulting additional financial burden that would be placed on the public healthcare system should members of medical schemes leave private healthcare far outweighs this amount. Unfortunately, there is currently no established mechanism in place to ringfence or allocate these funds exclusively for the funding of the NHI, creating a critical gap in financing for what is an ambitious, albeit much-needed, healthcare initiative,” Comrie says.

The HFA has also expressed concern about suggestions that public service medical scheme subsidies could be an early source of revenue for the NHI. “These funds are private money that government employees have earned. The medical aid contributions paid by the government as an employer on behalf of employees to the Government Employees Medical Scheme [GEMS], Polmed and other schemes, therefore, cannot be regarded as government expenditure that is available for redistribution,” he says.

“What’s more, it does not follow that increasing the tax rate for a substantial portion of our narrow base of South African taxpayers would increase government revenue. Tax revenue tends to diminish when the tax rate becomes too high, ultimately exacerbating wider service delivery issues, placing further pressure on families’ already constrained budgets, and having significant lasting repercussions for the economy and South Africans.

“The Health Funders Association is supportive of the goals of universal health coverage, however the financial mechanisms proposed by the Health Department to fund NHI simply do not hold water. As highly experienced voices within private health funding, we again appeal to the decision makers to ensure a workable and practical future for South African healthcare by allowing collaboration on these crucial details before the NHI Bill is enacted,” Comrie says.

“For now, the medical scheme tax credits will remain in place until the National Treasury determines otherwise through the appropriate channels. It is reckless to create the impression that removing the tax credits is a foregone conclusion – especially under the guise of allaying stakeholders’ valid concerns about how the NHI will be funded.”

Could rising road accident costs impact medical scheme coffers? 

Johannesburg, Friday, 27 October 2023 The escalating incidence of road accidents and their considerable costs are a source of grave concern for our country, with an estimated 25 annual deaths per 100 000 people attributed to road accidents. In 2022 alone, a staggering 10 000 fatal accidents occurred on our roads, resulting in a daunting annual cost of R186 billion for South Africans.

The personal toll of road accidents is difficult to quantify, especially when considering the impact on individuals' livelihoods and quality of life.

The Road Accident Fund (RAF) has always paid the medical and certain other costs associated with road accidents. It changed tack in August 2022, with the RAF now taking the stance that it will not cover past medical expenses that have been paid by a medical scheme.

This is contrary to a hundred years of legal precedent and principles, as well as being in conflict with the High Court order and judgment of Mr Justice Mbongwe which was granted against the RAF on 27 October 2022.

The High Court order interdicts and restrains the RAF from rejecting claims for past medical expenses that have been paid by a member’s medical scheme.  The substance of this judgment is unassailable, as the RAF’s appeals to both the Supreme Court of Appeal and the Constitutional Court were turned down.

The position adopted by the RAF raises a fundamental question: What happens when a mutual, not-for-profit organisation like your medical scheme, is suddenly burdened with substantial, unanticipated financial responsibilities that were never intended to form part of their budget?

Phumelele Makatini, the CEO of the Health Funders Association (HFA), highlights the financial repercussions of this situation, cautioning that this additional financial burden may impact medical scheme members considerably.

“The recent stance of the RAF significantly shifts the responsibility for covering medical costs resulting from road accidents but this could result in increased medical scheme contribution rates and a situation where members are asked to bear the brunt of a societal problem beyond their control.”

“This is of considerable concern to the Health Funders Association and to medical schemes, which are committed to protecting their beneficiaries' interests and managing the costs associated with membership. The HFA wholeheartedly supports them in this,” says Makatini.

She underscores the importance of safeguarding members' rights to claim medical expenses from the fund established to assist all road users in South Africa impacted by road accidents while emphasising the noble purpose of the RAF, funded by every motorist through fuel levies, to provide compulsory social insurance cover, rehabilitate those harmed by negligent driving and promote road safety.

“The complexities of the fuel price structure in South Africa, with its General Fuel Levy (GFL) and RAF levy, which is funded by motorists, many of whom are members of medical schemes, add to the intricate web of this issue. As costs continue to rise, the crucial question remains: How can medical schemes protect their members and ensure they do not bear the brunt of unforeseen expenses that will ultimately impact the cost of healthcare cover?”

“In the midst of this predicament, there emerges a vital perspective, one that hinges on the legal and moral responsibility of medical schemes as not-for-profit organisations. Their paramount duty is to safeguard the interests of their beneficiaries, ensuring that they receive the care they deserve without undue financial burden,” adds Makatini.

"Medical schemes have consistently strived to support their members during challenging times. However, external factors beyond our control are driving up costs in the healthcare industry, and now we could be about to add the cost of road accidents to this burden," she notes.

Makatini points out the critical role of medical schemes in protecting their members' interests, asserting that this responsibility naturally extends to containing membership costs. In her words, "The HFA firmly supports schemes in defending their members' right to claim medical costs from the appropriate fund created for the benefit of all South Africans affected by road accidents. The responsibility should not fall solely on the shoulders of private health cover contributors, who, in essence, help alleviate the burden on overcrowded state healthcare facilities."

“This situation reminds us that road safety is a collective responsibility, and as we navigate the complexities of our healthcare and insurance systems, it's vital to ensure that the burden of accidents does not become a financial burden to all medical scheme members.”

Makatini concluded by saying that the HFA is steadfast in its support of medical schemes, with a commitment to managing and containing the costs associated with medical scheme membership.

“As always, the HFA remains dedicated to collaborating with medical schemes and other stakeholders to find practical solutions that protect the interests of all South African citizens while maintaining the integrity of our healthcare system.”

Missing Pillars Of Regulatory Framework Amplify Risk And Costs

Wednesday, 13 September 2023, As family budgets continue to be stretched, long-awaited healthcare regulatory pillars for the sustainability of health funding should be prioritised as part of the transition to National Health Insurance, according to the Health Funders Association (HFA), a health cover industry body representing over 50% of lives covered by medical schemes.

“As early as 1995, policymakers envisioned the transformation of medical schemes into the cornerstone of a social solidarity framework, mandatory for individuals earning above a specific income threshold, complementing the publicly funded healthcare system, however, this has not materialised,” explains Phumelele Makatini, chief executive officer of the Health Funders Association.

“Experts estimate that, with mandatory cover and other reforms, the minimum benefit packages’ costs could be reduced by 17% to 23%, which could bring affordable quality private healthcare to many more South Africans relatively quickly with existing resources.”

A need to change the status quo

“In the last few years, the sustainability of the current model has been challenged, and as a result, various medical schemes have merged and even liquidated. As not-for-profit entities, medical schemes must ensure members’ contributions are enough to cover all their claims and build sufficient reserves to provide adequate security for members,” she says.

“Medical schemes in South Africa are facing mounting cost pressures because of South Africa’s incomplete regulatory framework, which logically makes medical scheme coverage unaffordable for many South Africans.

As a country, we urgently need progress towards completing the principles of social solidarity that underpin the current health system, thereby supporting individuals to access private healthcare without exposing their families to financial risk.

“We believe that with the full regulatory framework, as intended to support several key provisions already in the Medical Schemes Act of 2000, we can work together to establish a sustainable framework and make the health future better for all more rapidly. We wholeheartedly support the journey to universal health coverage as envisaged the NHI Bill. From our perspective, closing these regulatory gaps is not only fully aligned, but would bring us nearer to the goals of universal health coverage.”

Makatini points out that some provisions introduced included community rating, open enrolment, and a comprehensive Prescribed Minimum Benefits (PMB) basket. These provisions aligned with Universal Health Coverage goals, ensuring risk cross-subsidisation and protecting members against catastrophic financial loss. South Africa subsequently achieved one of the lowest rates of out-of-pocket expenditure globally, indicating the effectiveness of these measures.

Makatini explains that the affordability of medical scheme coverage is currently under threat due to high annual contribution inflation. This primarily results from increased healthcare utilisation rates among members, driven by anti-selection, which negatively affects all members, individual schemes and the industry as a whole.

"This regulatory vacuum needs to be addressed, as medical schemes need to be sustainable and affordable while NHI is working towards implementation and gradually fulfilling needs for healthcare access currently funded predominantly through belonging to a medical scheme.

“Anti-selection refers to the practice where people join a medical scheme when they believe they have health risks that will need costly medical intervention, likely to outweigh the cost of monthly contributions. This additional risk forces medical schemes to increase everyone’s contribution rates to ensure there is enough to cover these extra claims.

The cost of higher risks

“To rectify the spiraling costs of unchecked risk in this situation, South Africa desperately needs finalisation of mandatory membership and a risk-equalisation mechanism – crucial elements of a social solidarity framework. Recommendations from various policy papers, including the Taylor Committee Report (2002), the Davis Tax Commission (2017), and the Health Market Inquiry’s (HMI) Final Report (2019) have supported the need for these outstanding reforms,” Makatini says.

With reference to the National Health Insurance (NHI) Bill, the Actuarial Society of South Africa (ASSA) has underscored the implications of incomplete regulatory reform on medical schemes and their members since the current Medical Schemes Act was enacted. The absence of mandatory membership of above-threshold employed individuals undermines social solidarity principles by reducing risk cross-subsidisation, while the anti-selection effect negatively impacts the risk profile.

“The Council for Medical Schemes [CMS] has projected that demographic and utilisation factors are set to increase medical scheme costs by 3.2% above the Consumer Price Index [CPI] for 2024. This trend signifies that contributions must rise significantly, further burdening household budgets,” she notes.  Medical schemes are also facing the pressure of increasing claims volumes as the impact of treatment forgone during COVID-19 is being felt, as well as additional claims related to post-COVID treatment and increasing mental health-related expenses.

“These trends are exacerbated if employers allow healthy lives to opt out of cover and join only when healthcare is required. Further, on an individual level, members may selectively choose which family members to include in coverage, often only covering the sickest family members. These effects result in a sicker risk pool, higher claims and, as a result, higher contributions, which may encourage the healthier lives left in the risk pool to withdraw.”

Makatini said that the introduction of mandatory cover presents an opportunity for regulators to stabilise the market, reduce cover costs, and strengthen financial protection for medical scheme members.  This, along with implementing the low-cost benefit options, presents the immediate opportunity to expand access to affordable healthcare cover for millions of South Africans, which will also alleviate the pressure on the public sector to facilitate much-needed health system strengthening without tax increases.

“On behalf of the many medical schemes and their members represented by the HFA, and any person who values the opportunity to choose financially sustainable healthcare, we respectfully urge policymakers to commit to finalising the incomplete regulations. With a full social solidarity framework, South Africa can realistically look forward to a brighter healthcare future for all,” she concludes.

Affordable options will bring SA closer to quality universal healthcare

Tuesday, 29 August 2023, Renewed hope that a low-cost benefit option (LCBO) framework will soon become a feature of the South African healthcare funding landscape offers a practical step towards achieving quality healthcare for more people until the National Health Insurance (NHI) is fully realised.

“The industry regulator, the Council for Medical Schemes [CMS] has rightfully indicated that the introduction of LCBOs should complement the roll out of NHI through expanding private healthcare cover by making it affordable to more people,” says Phumelele Makatini, chief executive officer of the Health Funders Association (HFA).

The basket of services currently included in Prescribed Minimum Benefits ensures all medical scheme members have unlimited benefits for emergencies, maternity, and chronic conditions, including HIV, asthma, diabetes and many more severe health conditions. This means that irrespective of what members claim for these, a person has the security of knowing they will never have to pay out of their pocket for these conditions.

“A slimmed-down list of covered conditions focused on the most common and pressing health concerns, with a strong emphasis on preventative and primary healthcare, could meet most families’ health needs. Greater access to these services help to reduce the need for hospitalisation, thereby easing pressure on the public health system to build long-term capacity,” Makatini says.

“The complexity of the NHI project is immense and the tax base to fund it is narrow.  There will therefore need to be gradual steps towards addressing practical implications for society sustainably. For now, 8.9 million people are covered on medical aid, representing some 15% of the South African population.

“The introduction of low-cost benefit options could see this proportion growing with an estimated four million people, alleviating the public health system’s overwhelming patient numbers and creating the breathing space to improve quality care standards as envisioned under National Health Insurance,” Makatini says.

The HFA is a professional body offering a collective voice for constructive input and perspectives from health funders to help address broader challenges in South African healthcare and contribute to building the best possible version of universal health coverage for the future.

“The time is ripe for a shakeup in the structure of healthcare funding models, and the regulatory provisions for primary healthcare and low-cost benefit options will see many more employed South Africans and their families accessing private healthcare, many of them for the first time.”

Makatini points out that medical schemes have felt the pressure of increased claims since the pandemic, and the global financial fallout has also contributed to the local scenario of fewer new young, healthy people being able to afford traditional medical scheme membership as we know it.

“In the last few years, the sustainability of the current model has been challenged and as a result, various medical schemes have merged and even liquidated. We need new ways of catering to the growing demand for more affordable options in private healthcare cover.

“It is unclear yet what the tax implications for purchasing these more affordable health cover products might be, and whether these funds are set to contribute towards the funding mechanism for NHI,” she says.

As it stands this tax season, many South African households receive tax rebates on their medical scheme contribution, which lightens the load on public health services. It has been previously suggested that removing this income tax credit could help fund either LCBOs or the NHI, however, in practical terms, a family of three with a household income of R20 000 per month would see their tax bill soar by some 27%, according to the HFA’s technical advisory committee.

HFA represents health funders including Discovery Health; Bankmed; Fedhealth; Sasol Med; Massmart Health Plan; SAB Medical Scheme; Tsogo Sun Group Medical Scheme, and others accounting for half of the lives covered under South African medical schemes.

“Refreshing the regulatory framework for health cover will enable the benefits of private healthcare to reach so many more South Africans who have never had access before. This would make enormous, revolutionary strides towards developing a healthier population and reducing the burden of disease so that public facilities could be in a better position to cope with in-hospital care for patients both now and when NHI is eventually fully implemented.”

It’s all about building our children’s healthcare future

Tuesday, 15 August 2023, National Health Insurance (NHI) has the potential to make or break South African healthcare, depending on the strength of its foundation. With the extensive world-class skills and experience in medical funding on offer within South Africa’s private sector, the Health Funders Association (HFA) asserts that the NHI will require working together to develop universal health coverage that will best serve society.

“Fundamentally, we all want the same thing – a functional, quality healthcare system that is within reach for all,” says Phumelele Makatini, chief executive officer of the HFA, a health cover industry body representing over 50% of lives covered by medical schemes.

“We share the government’s commitment to health, and although South Africa’s public expenditure on health exceeds the 15% Abuja target set by African Union countries, establishing an adequately resourced and sustainable universal health system is a complex challenge that even first-world countries grapple with.

“Only high-income countries have health systems that are predominantly funded by public funds. Elsewhere in the world, private funding contributes to achieving universal health coverage. In South Africa, where volumes are so much lower, our private health expenditure is well below that of most middle-income countries,” she says.  

Fulfilling an essential non-profit solidarity mandate

“During 2021, medical schemes collected R225 billion in membership contributions and paid out more than 91% of this for members’ medical treatment. This efficiency in private healthcare funding is fulfilling a non-profit social solidarity mandate to care for members' health on a large scale.

“This closely mirrors the aims envisaged by NHI, and the medical scheme industry can bring this experience and capacity to a collaborative effort to build the NHI we all want for our children and grandchildren. The cover currently provided by medical schemes has much in common with this social security framework as prescribed minimum benefits ensure members never run out of cover for in-hospital care, chronic conditions, or life-threatening emergencies,” Makatini points out.

A medical scheme member who is on a diabetes programme or who has asthma, for example, cannot run out of benefits for these conditions and any member who has an emergency is fully covered regardless of how much they have claimed. The availability of these benefits contributes to the fact that South Africans pay only 5% of all health expenses out of their own pockets. By comparison, upper-middle-income countries pay 31%, according to World Bank data.

Expanding access to quality healthcare

Medical schemes contract with designated service providers to protect members from out-of-pocket payments, and the treatment pathways are also broadly similar to what is being proposed under NHI. Considerable inroads have been made in establishing quality healthcare access, which will be further enabled with the long-awaited finalisation of a low-cost benefit option framework.

Statistics South Africa’s General Household Survey of 2021 reports that roughly half of those surveyed belonging to a medical scheme live in households with a monthly income of less than R30 000, and the majority of respondents with healthcare cover surveyed were from previously disadvantaged groups. Members pay contributions from their income, which is partially refunded in tax rebates paid to the member – the medical schemes do not receive any such incentive.

“It has been indicated that the NHI will be implemented gradually in a phased approach. As we all know, healthcare access is not something a person can necessarily afford to wait years for. Even when the NHI is functional, it may be decades before it is equipped to offer the comprehensive quality care we would all want for our families.

“We fully support the need for universal health coverage and believe there is no time to lose in harnessing the extensive experience and expertise of public and private stakeholders so that we can contribute together to the design of the best possible version of NHI,” Makatini says.

“In the meantime, medical scheme members are relieving pressure on public health facilities through providing unlimited cover for chronic conditions and some 300 common health conditions in the private sector.”

Joint responsibility

“Health funders will continue to broaden and fine-tune healthcare access mechanisms for the benefit of more South Africans as far as possible within the regulatory parameters, thereby further easing the burden on the public health system. We are rolling up our sleeves and are ready to assist in improving healthcare for all.  This is why medical schemes are appealing to their regulator, the Council for Medical Schemes, to be able to offer primary care cover to lower income earners.”

Health Funders Association (HFA) members, including leading lights in the industry such as Bankmed, CAMAF Medical Scheme, Discovery Health Medical Scheme, Fedhealth, Glencore Medical Scheme, Momentum Medical Scheme, Profmed and PPS Healthcare Administrators, to mention but a few, are ready to work with government to develop evidence-based solutions that will help secure access to quality healthcare for all South Africans.

Until the NHI is fully implemented, Makatini points out that there is a joint responsibility to do everything possible to preserve the pockets of excellence in the public sector and find workable solutions to raise the level of healthcare generally to the standards of care that private healthcare funding has made possible.

“This fundamentally includes the need to protect and nurture our precious and increasingly scarce healthcare skills and resources. Implementing NHI will be a Herculean and potentially multigenerational task. Healthcare will be stronger if the internationally competitive healthcare financing systems we have in South Africa have the opportunity to contribute constructive strategic input now,” Makatini concludes.

About the Health Funders Association (HFA)

The Health Funders Association (HFA), which was established in 2015, is a non-profit organisation representing stakeholders involved in the funding of private healthcare in South Africa. The organisation at present represents some 73% of the country’s more prominent medical schemes and 50% of South Africa’s total medical scheme membership base.