How government should fund South Africa’s vaccine rollout – including a tax: CEO
South Africa is due to receive its first consignment of the Covid-19 vaccine – one million doses of the Oxford University-AstraZeneca vaccine from the Serum Institute of India (SII) – on Monday.
The government is in talks with the private sector and medical aids to help with the rollout programme, which president Cyril Ramaphosa has described as the largest and most complex logistical vaccine undertaking in South Africa’s history.
Described countless times as ‘overly ambitious’, the target of vaccinating 40 million South Africans (said to be 67% of the population) before the end of 2021 has put into question the state’s ability to fund this critical endeavour.
Government has said it will be the preferred provider of the vaccination.
Private providers and medical aid schemes are likely to purchase the vaccines at a ‘single exit price’ (SEP) from the government, and at a price high enough to fund the cost of multiple doses.
Ryan Noach, chief executive of Discovery Health, recently told Reuters that medical schemes will pay above cost for doses for their members – approximately seven million adults – subsidising procurement for another seven million people without private medical cover.
Chief executive officer of medical aid scheme Profmed, Craig Comrie, has however, expressed concern over the idea that private medical schemes should be required to fund double the cost of their members’ vaccinations by also funding the dose of an uninsured South African for every member they vaccinate.
Comrie believes that there must be a better way to create funding through a more voluntary process, similar to the Social Solidarity Fund that was established to cover the PPE and testing initiatives.
The expectation that schemes’ reserves that belong to members should fund non-scheme members is in fact outside the legal and ethical decision-making powers that medical schemes can make, he said.
“This is an overwhelming obligation and expectation that creates huge questions around why the Department of Health would target scheme reserves in this way. There are many other businesses with reserves who have not been approached with the same magnitude of responsibility.
“The private business sector will benefit equally if the broader population can be vaccinated. We haven’t yet agreed to this arrangement and will be reluctant to do so without a clear undertaking of how medical scheme members will get guaranteed access to vaccines sooner rather than later,” said Comrie.
“While we are looking to see how we can help the funding processes for the public sector, we simply cannot volunteer our funds as this belongs to our members,” he said.
The current funding estimations indicate that, effectively, the request by the Minister of Health is for medical schemes to pay, upfront, more than half of the total costs of the vaccines, while business and national treasury pay for less than 45% of the vaccines.
The numbers indicate that of the 60 million South Africans, the target is to vaccinate 67% of the population, which results in around 40 million people.
“Children are then excluded from this number and then the target reduces to 27.5 million. The initial costs effectively have medical schemes paying R6.8 billion of the overall estimated R12.1 billion total cost,” said Comrie.
“Medical Schemes are already committed to cover R3.4 billion worth of vaccines for all scheme members. Add another R3.4 billion to fund vaccinations for non-members – this will mean that some medical schemes may struggle to fund future healthcare costs.
“We have advice that, with the rise of several Covid-19 variants, annual vaccines may be required, which will place significant strain on medical schemes in the future. Medical schemes will need to hold reserves to cater for these future uncertainties,” said Comrie.
He suggested that medical aid members, businesses, and citizens across the country are given the opportunity to donate to the solidarity fund to support the vaccination drive of their own free will.
“We live in a free and democratic country and we should be allowed to donate to support this process if we choose to. Not every scheme can afford to double their spending or expect their members to cover that cost.
“In terms of basic social solidarity principles, a call for voluntary donations could see a flood of donations similar to what we saw when the solidarity fund was founded, if not more,” said Comrie.
He said that if South Africa is to venture into regulated and mandatory donations, then the remaining funding should come from tax, which is already the established and fairer manner to cross-subsidise national interests.
“A more equitable funding approach is a balance between voluntary donations and taxes.”
Beyond that, Comrie said many schemes may not be in a position to fund additional vaccines due to their financial position or solvency levels. A real effort must be made to keep the vaccine cost at the lowest possible rate, unencumbered by artificial inflation that will entrench opportunistic profiteering in a consolidated government procurement and rollout strategy.
“We are all in this together and I can only hope that the ambitious vaccination plan is achieved. As a private medical scheme, I can tell you that we will do everything in our power to contribute to this rollout constructively, but we only exist because of our members and they will always come first,” said Comrie.
Vaccination phases
The first phase of the rollout programme will prioritise around 1.2 million frontline health workers.
Phase 2 will prioritise essential workers including teachers, police, municipal workers and other frontline personnel.
People in institutions like old age homes, shelters and prisons, people over 60 years of age and adults with co-morbidities, will also be prioritised in phase 2, with a total number of around 16 million people intended to be reached.
With increased manufacturer supplies, government will in phase 3 vaccinate the remaining adult population of approximately 22.5 million people, and will then have reached around 40 million South Africans, which is considered to approximate herd immunity.
Read: Here’s how some of South Africa’s top medical aids have been impacted by Covid-19
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