Forget the NHI – do this instead
The Board of Healthcare Funders (BHF) has put forward two proposals that it says will be able to deliver more affordable private healthcare in South Africa with immediate effect.
The BHF is a non-profit company representing the interests of over 40 medical schemes and administrators covering 4.5 million beneficiaries in South Africa.
Ahead of finance minister Enoch Godongwana’s medium-term budget this week, the BHF said that allowing medical aid schemes to offer low-cost benefit options (LCBOs) and permitting collective tariff negotiations would immediately bring more affordable healthcare to the country.
Both interventions have been recommended and proposed by industry players and authorities for years and are ready to go—but the state has held them back.
“These interventions can be introduced immediately and will empower people to choose their own healthcare solutions while alleviating the impact of national budget cuts on the public healthcare system,” the BHF said.
“In contrast, the NHI Act, if implemented in its current form, will not deliver the expanded healthcare access that South Africans need today.”
According to Katlego Mothudi, Managing Director of the BHF, the group supports the principle of universal healthcare, but opposes the NHI as “the only solution” to achieving it, saying that government’s claims to this effect are misleading.
“Permitting medical schemes to offer LCBOs, and to negotiate tariffs with private healthcare providers, could make a tangible contribution to attaining this goal,” he added.
“Furthermore, these additional solutions could help national government address the current public healthcare funding crisis by sustainably improving access to quality, affordable private healthcare for millions more citizens where additional capacity exists.
“South Africans shouldn’t have to endure limited access to healthcare while waiting for the uncertain solution offered by the NHI Act, especially when practical, impactful options are available now,” he said.
Low-cost benefit options
Currently, just over 9 million South Africans belong to a medical scheme, with 68% coming from previously disadvantaged groups.
The BHF estimates that an additional 10 million people from low-income households could have access to private healthcare coverage if medical schemes were permitted to offer low-cost benefit options (LCBOs).
LCBOs are pared-down medical aid packages that offer essential primary healthcare services.
Offering LCBOs to an additional 10 million beneficiaries would, in turn, reduce pressure on the overburdened public health system that has been crippled by ongoing budget cuts.
However, there has been very little progress on this over the past seven years.
In April 2017, the Minister of Finance, in consultation with the Minister of Health, published the demarcation regulations, which stipulated that only medical schemes could offer primary healthcare and hospital indemnity insurance LCBO products.
The Council for Medical Schemes (CMS) was then tasked with developing an LCBO framework that would exempt medical schemes from having to offer PMBs, so they could offer LCBOs to their members.
While this framework was being developed, the CMS established an exemption framework which allowed a limited number of insurance companies to continue offering these products on an ongoing basis.
This exemption framework was initially valid from April 2017 to March 2019. However, it has been continuously extended due to the CMS failing to finalise the LCBOs framework for medical schemes.
The BHF went to court in 2022 to compel the CMS to allow medical schemes to offer LCBOs, and this court challenge is still ongoing.
“Permitting medical schemes to offer LCBOs would enable access to private healthcare for millions more South Africans. With the 2017 demarcation regulations already in place, all the CMS needs to do is allow medical schemes to offer exemptions by finalising the LCBOs framework.
“With a stroke of a pen, 10 million more beneficiaries could immediately enjoy expanded access,” said Mothudi.
Collective tariff negotiations
The second way that government could immediately address the high cost of private healthcare is to permit medical schemes to collectively negotiate tariffs and pricing with private healthcare providers and make the negotiated tariffs publicly available.
This measure, a key recommendation of the Competition Commission’s 2019 Health Market Inquiry Report, would mean transparency around pricing and empower consumers to compare differences between the mutually negotiated fee and the fee charged by a healthcare provider.
“Furthermore, it would go a long way in lowering increases to medical scheme contributions, which have consistently increased by more than 5% above inflation,” the BHF said.
However, since the publication of the Health Market Inquiry Report five years ago, and the Competition Commission exemption framework for COVID-19 related health services in 2020, the Department of Health has taken no steps to set up a negotiation forum between private healthcare role players or appoint a third-party regulator as per the report’s recommendations.
The BHF said it applied to the Competition Commission in 2021 for an exemption from the Competition Act, so it could negotiate with private healthcare providers on behalf of its members, but the Commission has yet to make a decision on this.
“An exemption from the Competition Act would be the quickest way to reduce healthcare costs in the private sector. However, it has been three years since our application was submitted to the Competition Commission and we are still no closer to a resolution,” said Mothudi.
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