Lee Callakoppen, principal officer of the Bonitas Medical Fund, has warned against any suggestions to use medical aid reserves to help fund South Africa’s upcoming National Health Insurance (NHI).
Callakoppen said that some form of universal healthcare is imperative in South Africa as it is not sustainable to have only 16% of the population on private medical aid.
However, he cautioned that a proposal by the Health Professions Council (HPCSA) to use the current private medical aid reserves, of around R92 billion, to fund the NHI is not the answer – saying it is irresponsible and the group strongly opposes it.
Bonitas is the second biggest open medical scheme in South Africa with 336,000 members, and 720,000 beneficiaries.
“The proposal is fraught with illegalities and is in direct conflict with the Medical Schemes Act 31 of 1998 (MSA) and prevailing regulations and quite frankly, unethical,” he said. “The Act promulgates medical schemes in South Africa hold solvency capital equivalent to 25% of their annual gross contribution income.
“This means medical schemes must have sufficient assets for conducting its normal business and to act as a buffer if there is an unusual event, such as the pandemic.”
Callakoppen said that there is also no guarantee that transferring the medical scheme assets will be sufficient to fund NHI, especially as there has never been any clear funding guidelines presented.
Aside from regulations, the reality is that the transfer of funds will place a huge burden on the state which does not have the necessary infrastructure to support this at this point, he said.
“It would be irresponsible and irrational without clearly articulated NHI legislation or funding guidelines and protocols. Checks and balances in our industry are very stringent and regulation controlled strictly by the MSA and the Council of Medical Schemes (CMS).”
Callakoppen said that the CMS, which governs the medical aid industry, has a statutory obligation to protect the interests of medical schemes and their members and monitor the solvency and financial soundness of medical schemes.
Moreover, medical schemes are not-for-profit entities, owned by their members. This means that the reserves are made up of financial contributions by members, he said.
“We strongly oppose the notion of using member’s money in this manner, nor can we accept such a gross contravention of the MSA.”
Callakoppen said that the funding of the NHI has always been a grey area and that more clarity is needed.
“We understand that the tax credits for medical contributions might fall away and be reallocated to the NHI and that all South African citizens will have to contribute towards the fund with a separate tax, even if they are on a private medical aid.
“But the rechannelling of assets, from a private entity to fund a government health insurance, is not legal and cannot be considered as a funding option.”
“Universal healthcare is a right, not a privilege. However, nationalising the reserves of private medical schemes is not only unethical but illegal.”
The funding conundrum has to be solved, though, as health spending in South Africa is already struggling to meet demand for services – while government’s budget constraints mean health spending is at risk.
Healthcare at risk
Writing for GroundUp, Helen Suzman Foundation economist Charles Simkins outlines the clearest picture we have for health spending in South Africa.
According to Simkins, it is possible to piece together most health expenditure in the country, with the exception of a few key items, such as local government spend on healthcare out its own revenue, out of pocket spend by medical aid users, as well as out of pocket spend by those outside medical aid schemes.
Aggregate expenditure on health is estimated at R462 billion in 2019. Of this total, 48.7% was spent in the public sector and 51.3% in the private sector. However, things are still heavily weighted in favour of medical aid beneficiaries.
1.8% of aggregate health expenditure benefited all South Africans, 43.9% benefited medical aid beneficiaries, and 2% the medically insured.
Just over half (52.3%) of aggregate health expenditure was for people covered neither by medical aid nor by medical insurance – this is the sum of public spending plus what was spent by this group at private facilities. 40.2% of aggregate expenditure was financed by medical aid benefit expenditure.
From here, however, things are only going to get pricier, the economist warned.
Simkins estimates that government’s health budget will increase from R209.7 billion in the 2018/19 financial year to R245 billion in 2023/24.
“Add onto this another R10 billion in 2023/24 for the Compensation Fund and Road Accident Fund. Private health expenditure, including medical aid, out-of-pocket, insurance, workplace and other forms of expenditure will rise from R222.6 billion to R285 billion,” he said.
While the health system will hold together, it will be under increased strain, the economist said.
“In the public sector, it will not be possible to increase the size of the provision to compensate for a rising population, and if value for money in procurement is not improved, services will have to be cut.
“In the private sector, continuing rises in medical aid premiums above the inflation rate will press against modest rises in household consumption expenditure, prompting some to trade down in options provided by medical aid, or even to cancel it altogether,” he said.
Simkins added that if unions blow a hole in government’s budget around wages, or if South Africa’s economic recovery does not meet requirements, the health sector is in for an extremely difficult time.
Irregular spending also remains a big concern. The Department of Health revealed last week that irregular spending at all nine provincial health departments skyrocketed over the last five years, totalling over R12 billion.
While the Covid-19 pandemic is being used as a ‘prime example’ for universal healthcare is needed, it has also been a breeding ground for personal protective equipment corruption and ‘Covidpreneur’ opportunists, with health departments caught up in scandal.