Regulatory overview

By Fiona Robertson, Principal Officer Anglo Medical Scheme

One cannot escape the plethora of reports on the state of healthcare in the country without noticing the often conflicting and divergent views being expressed.

In December 2007 the ANC Polokwane conference reaffirmed the implementation of the National Health Insurance (NHI) system by further strengthening the public healthcare system and ensuring adequate provision of funding. At that time, NHI had not been legislated, but a promise was made to the Nation that it would be rolled out over the next 14 years.

The Minister of Health, Dr Motsoaledi admitted that NHI would not work if the public health system was not functional. Fixing the healthcare system became a priority.

Pilot projects are underway at 10 district hospitals across the nine provinces to test innovations that are needed for the implementation of the Scheme.

9 years later the Green Paper gave way to the White Paper on NHI earlier this year. Not much had change in the White Paper, which was disappointing as numerous industry comments were submitted. There is an opinion there are many flaws and contradictions in the current document which will stall its promulgation and subsequent implementation.

We read everything from there being no funds and a lack of will to implement NHI to claims that there is plenty of money in the system and the advent of NHI, as outlined in a white paper, will lead to the demise of most private medical aid schemes with a drastic decline in healthcare outcomes.

The Board of Trustees has maintained a close watch on the progression of the White Paper and immanent legislation, and is of the firm opinion that the detail provided, particularly around the funding mechanisms is nothing short of scant. As most schemes and administrators in the industry, the Scheme believes that this will not happen in the given timeframes and much water will need to flow under the bridge before we will need to make any drastic changes. There is a general view that a significantly watered down version will ultimately emanate from the current proposals.

Having attended an Industry gathering in August, it was concerning to observe the poor level of understanding, even within the medical scheme environment. While none of us can argue the fact that access to equitable healthcare is a noble ideal, at this juncture in our Country’s progress it may be nothing more than a lofty ideal.

We thought it pertinent to ask Esmé Prins Van den Berg, who has worked closely with the Scheme since early Momentum days, to give some clarity on the matter. She prepared a worthwhile read giving a factual summary of the White Paper.

A second issue that plagues healthcare is the spiralling cost escalation. To this end, the Minister of Health initiated a Health Market Inquiry through the Competition Commission into the possible structural defects in the pricing of services provide in the private sector. Schemes, hospitals, managed care organisations and practicing professionals all had to submit anonymised claims dating back to 2010. It is the largest single dump of healthcare data ever made in this Country. The Inquiry has held numerous public hearings and obtained an extension to the date of completion due to the complexity of the project.

Esmé has also provided a bullet point summary of events to date providing the facts as we have them at present.

Regulatory overview
By Esmé Prins Van den Berg, Consultant at HealthCare Navigator

National Health Insurance

The Minister of Health has published the White Paper on National Health Insurance (NHI) towards the end of 2015. Although certain details are still lacking from the White Paper, the policy direction is clear. The objective is to ensure access to good quality health care services for all South Africans.

Structure of NHI
NHI will be implemented through the creation of a single fund, the NHI Fund, which will be publicly financed and administered. It will fund all the services to be provided under NHI and also purchase these services on behalf of all beneficiaries from suppliers.

All South Africans and legal permanent residents will be entitled to the NHI services. Refugees will be covered in line with the requirements of legislation. Asylum seekers, who have not been granted refugee status, but are in possession of valid permits, will be able to access emergency health care services and services for notifiable conditions of public concern. All other persons such as tourists and foreign students will require health insurance cover. Beneficiaries of NHI will not be obliged to use the NHI services. Therefore persons will still be entitled to obtain services outside of NHI, but at their own cost.

Service Providers
Certified providers in integrated teams, structured as multi-disciplinary practices or networks, will be accredited by the Office of Health Standards Compliance. The NHI Fund will contract these certified and accredited public and private providers based on need, to deliver the services. Public facilities will form the backbone of NHI service provision. A “gatekeeping model” will be applied, which means that patients will not be able to access medical specialists and hospitals directly, but will require referrals from primary care practitioners.

Package of Health Care Services
It is envisaged that comprehensive quality care will be provided, based on a strong primary care component, according to need. Services will include preventive, curative, rehabilitative and palliative services subject to treatment guidelines, formularies and quality control mechanisms. The ability to provide comprehensive services will, however, depend on the funding available for NHI. A Benefits Advisory Committee will advise on the package of services to be covered. The package will not be condition-based, but be prescribed in terms of the services that will be available.

Payment of Health Care Services
Access to services will be obtained with an NHI Card for which purpose the population will be registered. All services will be prefunded through a combination of tax mechanisms and will therefore be free at the point of care. Providers will not be permitted to collect any payment, including co-payments, from or to balance bill patients.

Cost and Funding of NHI
The projected expenditure on NHI is R256 billion (at 2010 prices) by 2025/2026. It is stated that NHI will be funded through a combination of prepayment mechanisms, of which the details must still be finalised. A combination of various tax mechanisms, such as general taxes, surcharges on personal income, an increase in the VAT rate, payroll taxes or an NHI levy, that could potentially be used to raise sufficient funds for NHI will be further explored by government. Government subsidies for medical scheme contributions of state employees and tax credits will also be withdrawn as the implementation of NHI progresses. This will increase the money available to government in the form of general taxes. It has also been proposed that funds such as the Compensation Fund for Occupational Diseases and Injuries and the Road Accident Fund should be merged into the NHI Fund. The Davis Tax Committee is considering funding proposals at present.

Position of Medical Schemes
In terms of current proposals, medical schemes will only be permitted to offer complementary (“top-up”) cover. This means that they will only be able to provide cover for services not offered by NHI.

Preparation for the implementation of NHI has already commenced with various initiatives aimed at strengthening the health system and improving public health facilities and services. Various systems and processes are also being tested at eleven pilot sites. It is anticipated that NHI will be implemented in 3-4 phases over a 14-year period culminating in full implementation by 2025/26.

The successful implementation of NHI will depend on a number of critical success factors such as affordability, the contracting of sufficient health care practitioners, appropriate and sophisticated information technology systems, the provision of comprehensive good quality care and the implementation of cost containment, risk management and comprehensive fraud management programmes. In addition, significant reform of the entire health system will be required. Although reform has already commenced, timeframes might still be optimistic for the achievement of all the objectives.

Health Market Inquiry

The market inquiry into the private health care sector (“Health Market Inquiry” or “HMI”) is the first official inquiry initiated under the Competition Act. A market inquiry investigates the general state of competition in a market. High prices and price increases in the private health care market provided the impetus to an inquiry in this sector. The private health care market, which is the subject of the HMI, constitutes the portion of health care services funded by private patients through medical schemes, insurance or on an out-of-pocket basis.

The main objectives of the HMI were stated to be:

  1. An evaluation of the nature of price determination in private health care with reference to
    • Competition between the different categories of providers and funders;
    • Countervailing bargaining power between the different providers and funders; and
    • The level and structure of prices of key services, including an assessment of profitability and costs;
  2. An evaluation and determination of the factors, which led to the observed increases in private health care prices and expenditure in South Africa;
  3. An evaluation of how consumers accessed and assessed information about private health care providers and how they exercised choice;
  4. The conducting of a regulatory impact assessment that would review the current regulatory framework and identify potential gaps such as the interpretation of the Prescribed Minimum Benefits (PMBs) and the introduction of the Risk-Equalisation Fund (REF); and
  5. The making of recommendations on
    • Appropriate policy and regulatory mechanisms that would support the goal of achieving accessible, affordable, innovative and quality private health care; and
    • The role of competition policy and competition law in achieving pro-competitive outcomes in health care.

As a result of the inter-relationship between the funding, provider and medical device markets, stakeholders involved in the HMI, include:

  • Health care practitioners;
  • Hospitals;
  • Medical schemes;
  • Medical scheme administrators;
  • Managed health care providers;
  • Health care brokers;
  • Pharmaceutical and device companies (to a limited extent); and
  • The public.

The HMI officially commenced on 1 August 2014 and was scheduled to be completed by 15 December 2016 with the publication of a final report in the Government Gazette.

The HMI is led by a panel of experts under the chairmanship of former chief justice Sandile Ncgobo. Other panel members are:

  • Prof Sharon Fonn, a public health specialist;
  • Dr Ntuthuko Bhengu, a medical doctor with funding and hospital experience;
  • Dr Lungiswa Nkonki, a health economist; and
  • Dr Cornelis van Gent, an international expert in competition economics especially in health care markets

The HMI has used various mechanisms to gather information such as voluntary written submissions by stakeholders, targeted information requests and public hearings. A seminar on private hospital costs was also held subsequent to a research report published by the World Health Organisation (WHO) in which the cost of hospitalisation in OECD (Organisation of Economic Cooperation and Development) countries were compared with those of private hospitals in South Africa. The following key issues were raised by stakeholders in the written submissions and public hearings held to date as creating barriers to entry and competition-related concerns:

  1. PMBs for being too restrictive on the one hand, but open-ended on the other hand with reference to reimbursement;
  2. No transparency in the selection of Designated Service Providers (DSPs);
  3. The lack of information on the quality of care delivered by providers;
  4. The absence of tariff benchmarks;
  5. The absence of an oversight mechanism for clinical coding;
  6.  The imbalance of bargaining power among stakeholders;
  7.  Disadvantage experienced by small players in various relationships with reference to aspects such as bargaining power, DSPs, etc.;
  8. Hospital licensing, which was not uniformly applied across provinces;
  9. Provider and funder relationships, which were often acrimonious; and
  10. The uncertainty presented by NHI.

Strong support has emerged for the need of new models for the funding and delivery of care in South Africa.

It was expected that the final report of the HMI might address aspects such as

  • Collective bargaining mechanisms and/or the determination of benchmark tariffs for the private health sector;
  • The establishment of a process or authority to deal with clinical coding-related issues;
  • Mechanisms to address the information asymmetry in the sector;
  • The publication of data on quality especially in respect of providers; and
  • Other recommendations to enhance competition e.g. in respect of oligopolies.

Esmé Prins Van den Berg
Consultant at HealthCare Navigator

With over 20 years’ experience in the legal and medical fields, HealthCare Navigator is well-positioned to assist businesses to navigate the regulatory landscape.
Consulting services are provided by Esmé Prins-Van den Berg. She is a qualified attorney with a Master’s degree in Constitutional Law and Human Rights and specialisation in health law, health policy, ethics, corporate governance, the Consumer Protection Act and the Protection of Personal Information Act

Other articles in this issue:

AMS at a glance – our value proposition to our participating employers

A graphical representation of the Scheme’s key metrics.

The challenge and growing concern of global healthcare costs for South African citizens

A note by Dr Jonathan Broomberg, Discovery Health Chief Executive.

Leadership profile: Adrian Gore

A business personality profile of the Discovery Chief Executive and the 2016 All Africa Business Leader of the Year.