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Paying for Intervention!| Opinion by *Jasson Urbach
How statutory intervention harms South African health care
Healthcare policy in South Africa is a highly emotive and contentious issue fuelled by the stark dichotomy between the public and private healthcare sectors.
Generally speaking, on the one hand, the public health sector is plagued with inefficiency and for the most part fails to meet the needs of the patients it is supposed to be serving. The result is that patients seldom receive the level of care that they deserve. On the other hand, the private healthcare sector provides a world-class health service with excellent facilities, advanced technology, well-remunerated staff and by and large better working conditions.
Public sector healthcare delivery is financed primarily out of general taxation whereas private patients typically cover their costs through medical schemes to which they or their employers make contributions. Private medical schemes thus provide the main channel for accessing private health care in SA. However it should be noted that a significant amount of out-of pocket healthcare purchases are also undertaken in SA in order to access private health care. Medical schemes operate on a non-profit basis but their administration is typically contracted out to for-profit companies whose main tasks are to collect premiums, process claims and contract with providers on behalf of medical scheme members.
Private insurance can also take the form of health insurance. Health insurance, like any other form of insurance, can be obtained from insurance companies and generally covers the individual for a set amount per day for hospital needs. Alternatively, the insurance provider may pay a set fee for specific procedures. Whereas medical schemes typically reimburse the service provider directly for procedures or services rendered by healthcare providers, health insurance requires the patient to settle the bills and complete the paperwork. Any surplus that the insurance company pays out, over and above the cost of the procedure, the individual is allowed to keep. Similarly, the individual is responsible for any deficits owing to the service provider for procedures that are not covered by the lump sum pay out.
Given the significant proportion of financial and human resources within the private sector, the continuation and expansion of this sector is of vital importance to SA’s overall health and welfare. Considering the concentration of resources in the private healthcare sector and the fact that private medical schemes provide the main vehicle for accessing private health care, it is surprising that the SA government has introduced draconian legislation that plans to limit the scope and extent of the private sector, particularly when one considers the poor record of the SA public health sector.
The number of individuals covered by private medical schemes has remained relatively static since 1997. The current medical scheme legislation is partly responsible for this relative stagnation in medical scheme beneficiaries. Moreover, the government’s intention to introduce a form of mandatory health insurance, with a target of covering 15 million people, incurs a number of unintended consequences. The move to increase the number of people covered by medical schemes should be welcomed by all South Africans but how best to achieve this objective should be carefully considered.
* Jasson Urbach is an economist with the Free Market Foundation.