S.Africa’s healthcare industry in need of reform before NHI implementation - CNBC Africa

S.Africa’s healthcare industry in need of reform before NHI implementation

Southern Africa

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“The problem that we have currently in the medical schemes environment is that you have the demand side regulation, which is actually a shortcoming because you have to regulate both the demand side of the equation as well as the supply side,” Council for Medical Schemes researcher and health economist Nondumiso Khumalo told CNBC Africa on Wednesday.

“The supply side regulatory interventions that we need, in order to be able to control the escalation of cost in the private healthcare industry, include having a reference price list that the schemes can use when they enter into negotiation with the private providers to reimburse services provided on behalf of their members.”

Khumalo added that the sector also needs a regulator to monitor the conduct of private hospital groups as the market in particular is heavily concentrated.

This means that medium to low schemes do not have enough economies of scope and scale to be able to negotiate preferential tariff increases for their members. As a result, larger schemes manage to negotiate preferential tariff interests for their members, which Khumalo explains is unfair.

Planned reforms to South Africa’s medical aid industry could lower the cost of premiums for members and contributions could be 30 per cent cheaper if government completed its proposed reforms.

 “One of the biggest problems that we have is that when the Department of Health started putting in regulations into the act, the original intention was to make sure that the regulations were fair and equal to both sides of the demand as well as the supply side. Unfortunately what’s happened is that half of the regulations have been put in place,” said Graham Anderson, principal officer at Profmed Medical Scheme.

“The intention originally was to put in regulations to assist the funders to manage the costs and those two were universal coverage, so we would’ve had a bigger risk pool, and secondly a risk-equalisation fund, so that it’s almost like a central insurance where all the schemes would pay into it and the high-risk patients would come out of that.”

The proposed National Health Insurance (NHI) scheme for South Africa is still in the process of being approved since its proposal a few years ago. It aims to improve quality healthcare access for the entire population as well as well as the refurbishment of hospitals and clinics.

While some say it could be approved and up and running by 2025, others adamant that it could take between 40 to 50 years.

“Any health sector reform that is as big as NHI, it often takes time. We are trying to see how best can we facilitate the process of industry-wide risk adjustment because we also understand that you need a bigger risk pool so that you’ll have sufficient cross subsidies, and the premiums will still be affordable for members,” said Khumalo.