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19 JULY 2011
Solving healthcare challenges in South Africa

by Jonathan Broomberg: CEO of Discovery Health and serves on the Group Executive Committee.

The NPC diagnostic outlines many widely acknowledged problems in South Africa and invites proactive solutions. In our health system, the major driver of an unusually low national life expectancy is a multi-faceted disease burden, made up of HIV/AIDS, TB, diseases related to poor nutrition and exercise habits, and trauma from violence and road accidents. And struggling to cope with this is a public health sector which is described as a ‘collapsing’.

Firstly, in responding to these challenges, it is critical to note that health system challenges are not separate from the other challenges outlined by NPC. For instance:

  • High levels of unemployment undermine potential tax revenue and therefore limit funding for public healthcare;
  • The public health sector constitutes a large portion of the civil service, and therefore exhibits many of its problems as outlined by the NPC: weak productivity, accountability and capacity; high levels of corruption; and policy and organiational instability;
  • Divisions in society in terms of access to quality healthcare reflect the more fundamental division in society between the rich, who tend to be able to use private healthcare, and the poor, who largely rely on public services. This is morally and politically unacceptable.

So solving healthcare requires solving broader problems, but this article focuses on health sector solutions. While the challenges identified by the NPC refer mainly to the public health sector, the private sector also does not optimally serve the country’s needs. The solution therefore lies in addressing both systems, to generate an integrated national health system that can provide a solid foundation for reforms like the National Health Insurance.

Public sector reforms

Additional human resources are required

South Africa has low densities of the major health resources relative to its disease burden, and relative to peer countries. World Health Organisation statistics from 2010 indicate that SA has 5.2 physicians per 1000 people, while Brazil has more than triple that, and Mexico five times. To address this:

  • A massively increased training pipeline is essential. Reopening of nursing colleges, structuring PPPs to allow more nurse training, opening additional medical schools (with private sector participation, funding, etc.) and increased funding for academic medicine are imperative to train more nurses, GPs and specialists. The Department of Health is already making moves in this direction, with promises to open a new medical school in Limpopo, and to increase intake of existing medical schools;
  • To cut through immigration and certification bureaucracy which prevents many willing, foreign trained health professionals from working in SA;
  • ‘Task shifting’ enables the correct delegation of much care to the lowest appropriate level, e.g. primary care supervised by doctors, but run by nurses, can reduce the workload carried by scarce doctors;
  • Contracting with private providers (GPs, specialists, hospitals, radiology and pathology providers) will enhance the ability of the public sector to deliver cost-effective healthcare to public sector patients, as long as there is transparent tendering, monitoring and renegotiation of contracts;
  • Managing inequalities in the distribution of skilled personnel between the public and private sectors. The relative lack of resources in the public sector needs to be relieved by making pay and working conditions more attractive to public sector clinicians, and through private sector contracting to fill in gaps.

Improve cost-effective management of chronic conditions

South Africa’s disease burden is weighted heavily towards conditions requiring long-term treatment, such as TB, HIV, diabetes, hypertension, obesity, etc. This requires prevention strategies such as education on disease screening and lifestyle changes, which can significantly reduce these growing epidemics. The Minister’s recent announcements of initiatives to focus on health education at schools will start to address this in the long-term, but immediate campaigns to encourage healthy adult lifestyles are also required. This problem also requires restructuring of the healthcare system to provide accessible high quality primary healthcare to manage ongoing conditions. The Minister of Health has already announced strategies to resolve this by strengthening the district health system, improving capacity and confidence through better training and resourcing of staff at the primary care level and better enforcement of referral requirements to access secondary or tertiary care.

Improve systems and management

It is critical at all levels in the public health sector to improve the working of the basic financial, operational, procurement and logistical management systems and controls. This requires decentralisation of authority for staffing, financial management, procurement and disciplinary decisions to hospital level, accompanied by clear accountability at the same level, so that hospital managers are motivated to make choices that improve the operation of their facilities. Strong implementation of basic management processes includes improvement in planning, budgeting, clinical data collection, quality measurement and workforce incentivisation.

Additional funding is required

Additional funding is required to increase public spending from the 11.7% of total government expenditure (TGE) in 2010 up to 15% of TGE, as committed to by government in Abuja in 2001. This is money that should be raised through progressive general taxation. Much of this can be applied to revitalisation of public hospitals, which will then be in a better position to draw revenue from medical schemes for treating their members.

The distribution of health funding in the entire system is a topic that has received much attention in recent health debates. Health outcomes and access are certainly not equitable between rich and poor. However, as the NPC states, public health financing in SA is already progressive, with richer citizens supplying most of the taxes which pay for a public health sector they make relatively little use of; and they fund their private health care largely themselves. This would suggest that the solution to SA’s healthcare problems is less one of redistribution of funds but primarily one of utilising existing funds (in public and private sectors) more efficiently.

Private sector reforms

While the private health sector in South Africa delivers world class outcomes it is too expensive to be a viable choice for most South Africans. Reforms are urgently required here too:

Regulate medical schemes so they can contribute to national health objectives

Medical schemes are the primary source of revenue for private providers and cover medical risks for over 8 million South Africans. An incomplete regulatory environment has hindered the ability of schemes to control costs and therefore render private healthcare cover more affordable. If these regulatory deficiencies are effectively addressed, private healthcare can become more affordable and accessible to millions of working families:

  • Creation of a new regulatory category of medical scheme aimed at lower income individuals would increase access to private care and reduce the burden on the public health system;
  • Other technical reforms to the existing environment would allow schemes to control their costs more effectively including: implementation of the Risk Equalisation Fund, allowing schemes more discretion with waiting periods or exclusions, allowing schemes more room to control Prescribed Minimum Benefit costs, etc.

Improve provider side regulation and incentives

Fundamentally, the private healthcare system is structurally incentivised towards over-servicing, through the predominant fee-for-service reimbursement mechanism. Regulatory reforms allowing hospitals or other entities to employ doctors (currently prevented by legislation) would improve efficiencies, allowing the emergence of efficient, integrated healthcare care teams, as can be found in the mining industry. Encouragement of hospital reimbursement models based on single payments for clinically similar cases can be encouraged as these actively incentivise providers to avoid unnecessary services.

And despite the emergence since 1994 of a large, new, middle class demanding reasonably priced, private healthcare, various economic and regulatory rigidities have meant that no new range of appropriate services has come to market. In SA, less than 20% of all surgeries occur on a same day basis, whereas the equivalent number in the US and Europe is closer to 90%. To capture savings, government can encourage the development of alternative hospital and clinic facilities, by providing licenses for more day surgery centres or low cost hospitals.

Improve tax regulation

National Treasury has already proposed to convert the current medical scheme tax deduction into a tax credit. This is more equitable and will enhance the affordability of scheme coverage at lower income levels. To build on this, government could also provide an additional, explicit subsidy for low income employees, potentially matched by their employers.

In conclusion, while there are significant challenges facing the overall healthcare system, both public and private sector reforms as outlined above can start to address inequalities within the system, focusing on delivering accessible and high quality primary healthcare, making private healthcare more affordable to the general population, and linking the two into a sustainable, effective and integrated South African healthcare system.

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