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South Africa Proposes Major Changes to Health Care System

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South Africa’s health care system may face a major overhaul as the government moves ahead with plans to implement mandatory national insurance and reduce the cost of private care.

The revamp is part of an effort to broaden access to treatment in a country where more than 80% of the population lacks private insurance. This leaves many people relying on a public system with too few doctors and dilapidated hospitals and clinics. Of the 8.7% of South Africa’s gross domestic product spent on health care, less than half goes to state facilities, government data show.

“We need a massive reorganization of the public health care system,” Health Minister Aaron Motsoaledi told reporters in the capital, Pretoria, on Thursday. “What we are designing here, no-one has done in the world.”

(Related: New Global Insurance Chief Comes From South Africa)

A draft law published in the government gazette proposes setting up a national health-insurance fund that would buy services from accredited public and private facilities, which would then provide care for registered members. While the law is largely silent on how the system will be funded, Motsoaledi said taxpayer contributions would be compulsory.

Pricing Panel

A committee answering to the NHI fund board and the health minister would determine the prices the facilities could charge on an annual basis, while another advisory panel would decide what services should be offered. The government plans to fully implement the system by 2026.

“It will definitely be a longer-term plan,” Andre Bekker, an equity analyst at Arqaam Capital in Johannesburg, said by phone. “There seems to be a focus on primary care. It seems to be the most feasible option, where they can hit the hardest the quickest. The impact on the private hospitals in the short-term seems minimal.”

A separate draft law published Thursday proposes forcing private doctors and facilities to charge uniform prices for services and prohibiting top-up payments. Under the current system, medical insurers negotiate their own rates with hospitals and doctors, while patients face varying additional payments depending on their plan.

The draft law also proposes abolishing the use of medical-insurance brokers and scrapping prescribed minimum benefits in favor of comprehensive coverage.

To read more on the state of South Africa’s health care system, click here

Health-insurance companies now have close to 60 billion rand ($4.4 billion), or 33% of their income, in reserves — more than the 25% they’re legally required to maintain. The additional money should be used to improve their members’ benefits, the minister said.

“The Medical Scheme Amendment Bill is a much harsher and much more controversial bill,” Bekker said. “There should be much more focus on that. Getting rid of co-payments is a big deal. There is a risk that medical scheme contributions will have to go up.”

The public has three months to comment on the two draft laws.

An index of South African health care stocks fell 0.7% on Thursday. Hospital operator Netcare Ltd. dropped 1.7% in Johannesburg, while Discovery Ltd., the country’s largest health-insurance administrator, fell 0.8 percent.

The government first proposed phasing in national health insurance over a period of 14 years in 2009, but it’s been slow to get off the ground and operational problems have hampered several pilot sites.

Plan ‘Impractical’

The insurance plan is “unaffordable, impractical and unfair” because the government was unable to run an effective health care system, Lungiswa James, a lawmaker for the main opposition Democratic Alliance, said in an emailed statement. “It does not matter how the minister tries to spin the NHI plan, the fact remains that it simply is not feasible.”

Motsoaledi dismissed the criticism.

“This issue of the poor quality of public health care is being used as a big stick to beat back NHI,” he said. “Fixing the quality of public health care is an ongoing event.”

—With assistance from John Viljoen.

— Read South Africa’s Discovery plans $430 million stock saleon ThinkAdvisor.

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