Raising South African taxes for NHI - not good

Raising taxes to pay for NHI ‘premature’

Before the government considers raising taxes to pay for national health insurance (NHI), it should meet its own promise to allocate 15% of its budget to health.

CAPE TOWN — Before the government considers raising taxes to pay for national health insurance (NHI), it should meet its own promise to allocate 15% of its budget to health in line with the Abuja target, according to University of Cape Town health economist Prof Di McIntyre.

The government also needed to improve public health facilities and win the trust of the public before increasing the tax burden, she said ahead of today’s publication of a European Union- funded study on the financial implications of alternative scenarios for health sector reform.

The study concludes that an NHI-style model was the most affordable.

“I don’t believe people should be asked to pay the tax until they see tangible benefits,” said Prof McIntyre, who is also a member of the ministerial advisory committee on the NHI, set up by Health Minister Aaron Motsoaledi last year.

The Abuja target was set by African heads of state in 2001 and reaffirmed this year in August in Kampala. SA still has a considerable way to go to meet this goal, as health got just 11,5% (R104bn) of the R907bn budget for the 2011- 12 fiscal year .

Prof McIntyre’s comments follow the release last month by the African National Congress (ANC) of a discussion paper on NHI, and add to the debate about health sector reform.

The ANC is proposing the introduction of a central fund to pay for public health services, financed by increased government spending of up to 14,5% of the national budget, a mandatory NHI contribution of up to 8% (split between worker and employer), and possibly increasing value added tax. The party is proposing to phase in NHI over 14 years, starting in 2012, and projects costs will rise from R128bn to R376bn by 2025.

The Strategies for Equity in Less Developed Countries study examined health inequalities in Ghana, SA and Tanzania and investigated how these gaps could be closed by reforms.

In the South African component, Prof McIntyre and her team modelled the costs of phasing in three different scenarios over 15 years: leaving the status quo unchanged (with about 16% of the population belonging to medical schemes), introducing mandatory medical scheme membership for everyone in formal employment, and an NHI-style “universal coverage” model which would have more people relying on state- funded healthcare.

It concluded that the most affordable option for SA would be the “universal coverage” model.

This would require public spending on health of between 5% and 24% of gross domestic product (GDP) by 2025, with the “best guess” being 6,4%, said Prof McIntyre. The wide cost variation was largely due to different estimates of the unit costs of services. If the “best guess” scenario was introduced today it would cost R196bn (with R102bn coming from the public purse) and rise to R394bn (with R295bn from public funds) by 2025 in current terms. In this scenario, administration costs would be tightly controlled, and unit costs for services would be lower than current private sector rates.

Under this scenario, medical schemes would continue to exist but with a smaller membership base, and so they would account for spending equivalent to 2,2% of GDP by 2025. About 40% of medical scheme members would be likely to drop out. About 8% of SA’s GDP is spent on health at present, said Prof McIntyre.

The range of services offered by the state under this scenario would have to be limited, she said. “There is going to be rationing,” she said, implying that those who could afford to would continue to buy from the private sector the services not provided by the state. “There is rationing in the (UK) National Health Service, there is rationing everywhere.”

Source - Businessday.co.za

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Metropolitan and Momentum merger potential job losses reviewed

Tribunal raps insurers over job losses

The Competition Tribunal rebuked insurance giants Metropolitan and Momentum for a lack of clarity over potential job losses resulting from the proposed merger between the two.

THE Competition Tribunal yesterday rebuked insurance giants Metropolitan and Momentum for a lack of clarity over potential job losses resulting from the proposed merger between the two, leading to a lengthy discussion that lasted most of the day.

The hearing, which was initially expected to run from 10am to 1pm, dragged on for about six hours as the tribunal searched for clarity on the exact details of the proposed job cuts. The tribunal criticised the two companies, who plan to merge into JSE-listed MMI, for the lack of clarity in their documentation detailing their proposed merger. A merger would create a company with an embedded value of R30bn.

“What does it mean that the parties will investigate opportunities for supporting the employees? What does this mean and can you enforce it? What’s the likelihood of reskilled people getting employment?” tribunal chairman Norman Manoim asked.

While the deal has received shareholder approval, there has been opposition from the National Education and Allied Health Workers Union (Nehawu). Last week the union said it feared the loss of more than 1000 jobs as a result of the deal. 

The exact number of potential job losses was a major point of contention at the hearing in Pretoria. During the six hours of discussions, the exact number of potential job losses at the two companies changed, falling from 1000 to between 300 and 500 based on the companies’ detailing of alleviation measures.

The tribunal had requested that conditions be placed on mitigating the effect of these job losses. These would be along the lines of training workers that were unskilled or semiskilled, for employment elsewhere.

When the tribunal asked Momentum CEO Nicolaas Kruger, who was representing both companies, why his group had failed to describe an accurate number of potential jobs lost, he replied it had come from “estimates”. This was partly because it was difficult to ascertain the exact magnitude of cost cutting that the companies would have to undergo. He said part of the reason for the estimations, particularly on the effects on staff, was the parties needed to avoid colluding before they had become one entity.

The tribunal also asked Mr Kruger if he had done any study into the social effect of retrenchments on workers’ families, bearing in mind that South Africans were highly indebted , and the economy was “not creating any jobs”. Mr Kruger said no such research had been done but if the merger went ahead, MMI would work to ensure that retrenchments would be capped at 1000 over next year and 2012.

He said just more than R5m would be available for the training of unskilled and semiskilled employees who lost their jobs through any merger.

Nehawu advocate David Unterhalter said if the merger was to take place, MMI had to weigh the new levels of efficiency it would achieve against whether or not job losses could be justified. Mr Unterhalter wanted clear details of how the job losses would be mitigated. “The endeavours which will be made to assist those who lose jobs are too vague and uncertain,” he said.

The companies expect the merger to save them as much as R750m. The hearing was adjourned until today at 9am

Source - Bussinessday.co.za

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Douglas Ramaphosa assisting NHI plan success

DOUGLAS RAMAPHOSA: Working together to make the NHI succeed

THE African National Congress (ANC) has announced plans to take its National Health Insurance (NHI) scheme forward and has given us a hint of what the health industry will look like from 2012.

THE African National Congress (ANC) has announced plans to take its National Health Insurance (NHI) scheme forward and has given us a hint of what the health industry will look like from 2012. Responses to the scheme range from guarded optimism to outright rejection.

In the spirit of Lead SA (pioneered by Radio 702,) and the ANC’s Batho Pele (People First) campaign, we have a responsibility to make the plan work, identify areas of concern and put workable proposals on the table.

Whether we like it or not, there will be an NHI in one form or an other. Now that we know the ANC’s intentions, we need to prepare proposals and engage with each other as businesses serving the healthcare sector and take our joint considered views to the ministerial task team for consideration. The ANC has committed itself to wide-ranging engagement and consultation on the issue.

One of the areas the ANC will focus on is the improvement and expansion of public healthcare infrastructure and services. This area, according to the ANC, is critical to realising the principle of universal access to quality care and reducing inequality of access. The quality of service, efficiencies, information technology (IT) infrastructure, project management and processes in a number of public healthcare facilities leave a lot to be desired.

The private healthcare sector has, over the years, invested a lot of resources and deployed world-class expertise in perfecting their systems and processes in a number of privately run clinics and hospitals. The government would be remiss not to enlist such expertise.

SA’s private health sector has arguably the best developed IT and administration systems, skills and capabilities in the world, and a successful track record. This includes the management of doctors’ debtor systems, electronic switching, price- file updates and the integration of the World Health Organisation’s International Statistical Classification of Diseases and Related Health Problems into doctors’ work routines, and so on. There is no need for the NHI to reinvent the wheel.

If it is true that we may see some medical scheme members opt out and rely on state services (Prof Di McIntyre of the University of Cape Town predicts as many as 40%), then the current patient-management administration systems in public medical facilities will not cope with the volumes.

Apart from just refurbishing or building new clinics and hospitals, the expertise of the private healthcare industry will have to be enlisted by the government to ensure these are world- class public facilities and the IT support infrastructure required to operate these effectively is in place. Not only will the management and administration of the new generation of public hospitals require this infrastructure, but the medical staff will need to use secure and proven technology to transfer patient records within and beyond hospitals, as well as clinical data and images, among other records.

It is in the interests of the private sector that public facilities are improved so that there are minimal adverse effects on productivity in the workplace. A number of employees, who currently belong to medical schemes and will in future also belong to the NHI and will be contributing towards it, will certainly visit public facilities to get their money’s worth. If the systems and processes are not improved in such places, this will elongate the already long queues and result in repeat visits, which will affect the ability to provide universal access to affordable, quality healthcare — the main aim of the NHI.

From a private sector point of view, the government will have to establish workable public-private partnerships.

It will be prudent to establish a few facilities run by public-private partnerships as pilot projects before attempting a huge roll-out.

Pilot facilities will give the government time to refine processes and systems and learn from mistakes. Believe me, there will be mistakes.

We are in this together and once there is better clarity on a number of issues, we should all get down to establishing one of the best public healthcare systems in the world, one that we can be proud of.

- Ramaphosa is CEO of Bytes Healthcare Solutions.

Source - Businessday.co.za

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Momentum Health to increase premiums

Momentum CEO Anthon Swart said: "Research shows that all over the world where NHIs are put into place there is always a certain percentage that will opt for private healthcare."

Swart said that in South Africa the percentage of private medical aid members had risen above that figure: "In South Africa, it's gone up in the past two years to between 16% and 17%."

But University of Cape Town health economics professor Di McIntyre said NHI would affect the medical schemes. "How it impacts our medical schemes depends on the changes. If really good services are provided under a universal system it's quite likely that some of the current medical scheme members will decide to opt out."

However she said the number of people who would opt out of private healthcare depended on the level of service provided. "If bad health services are provided people will stay in private medical schemes."

But Swart said it was too soon to tell how many could opt out because "official policy documents still need to be circulated".

Speaking at a briefing in Johannesburg yesterday, Swart also predicted that mergers in the South African medical scheme environment would continue.

"There is pretty much consensus that we'll see much consolidation in the medical scheme environment," he said, adding that there had been a 40% reduction in the industry of registered schemes.

Ingwe Health Plan (15219 principal members) merged recently with Momentum Health (75508 principal members) whose holding company Momentum joined with Metropolitan.

The Government Employees Medical Scheme has been one of the contributing factors to the challenges pressurising the industry, said Swart.

Gems has grown significantly from only 91800 beneficiaries in 2006 to the third-largest medical scheme in South Africa.

Gems said on its website that the firm's fast growth is "due to cannibalism from other medical schemes, but more than half the government scheme's growth so far has been from people who were not on a medical aid before."

I-Net Bridge reports that the Competition Tribunal will rule tomorrow on the proposed merger between Metropolitan and Momentum.

Metropolitan intends to acquire 100% of the issued share capital of Momentum and has applied to the competition authorities for approval of this merger.

The transaction will affect the long-term insurance, medical insurance, retirement fund administration, asset management and property investment markets.

The proposed transaction has a significant public interest component, given that a large number of jobs might be made redundant as a result of the merger.

The majority of the employees of the merging parties are represented by employee representatives. Nehawu represents about 6% of the employees of Momentum.

The merging parties, however, have made certain undertakings in an attempt to lessen job losses. The Competition Commission has recommended to the tribunal that the merger be approved subject to employment-related conditions.

The tribunal was not satisfied with the limited employment-related information submitted to the commission and has, in a pre-hearing of September 15, requested a more information relating to potential employment effects from the merging parties. The anticipated employment effects and proposed conditions will be further addressed at the hearing. 

Source - timeslive.co.za

- Additional reporting - I-Net Bridge

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