National Health Insurance
Single Tier vs. Multi-Tier Systems
McIntyre and Van den Heever wrote on the areas of major debate that still existed in 2007 with regard to National Health Insurance, identifying the issue of a single tier vs. a multi-tier system. “A key area of ongoing debate is the extent to which it is feasible to have a single tier system (where all South Africans have access to exactly the same range of services and types of health care providers) or whether a multiple tier system (where there are differences, particularly in terms of the type
of provider that can be used by different groups) is inevitable. Given the political history of legislated discrimination on the basis of race under apartheid, there is clearly a desire to avoid health system differentials on the basis of class.”
“The fundamental challenge underlying the ‘single' versus 'multiple tier’ debate is the need to achieve a balance between the type of health services that are affordable and sustainable given our macro-economic context on the one hand, and avoiding incentives for some to ‘opt out’ of a mandatory health insurance on the other (where opting out refers to allowing people to choose not to contribute to the mandatory insurance pool but to belong to a completely separate private insurance scheme instead). ... In order to avoid pressure on policy makers to allow opting out, mandatory health insurance should offer comprehensive care, rationing of services should not alienate higher income groups and the quality of care must at least be at a standard equivalent to that which high income groups are already accustomed to – in the South African context implying private sector care. ...”
“A single tier system, whereby all South Africans have access to private sector services, is simply unaffordable in the context of South Africa’s level of economic development. ... a single tier system for hospital and ambulatory services at private sector cost levels would require expenditure levels of R318 billion (or 20.8% of GDP). This is considerably more than high income countries (which generally spend 8-10% of GDP on health care) and even greater than the most expensive health system in the world, namely that in the USA which accounts for almost 15% of GDP in that country. Even if only ambulatory care in the private sector were provided for all South Africans (and hospital care restricted to the cost of public sector services), this would cost R187 billion (or 12.3% of GDP).”
“This strongly suggests that it is simply not feasible to eliminate ‘all’ health services differentials in South Africa ‘in the short-term’. Nevertheless, a NHI is feasible in the foreseeable future, with a comprehensive BBP and substantially improved public services as the core of service provision. It will not be possible to avoid the likelihood that the wealthy will insist on having the option of luxurious top-up cover which will enable them to use different facilities and access discretionary services outside of the comprehensive BBP. The fundamental issue from an equity perspective is that the wealthy should not be permitted to ‘opt out’ entirely”.
The core issue in the NHI debate will be what is considered to be equitable. While it is necessary to be careful not to conflate multi-tier systems and multiple purchasers, the arguments from Hussey and Anderson on social solidarity are also relevant to the debate on tiering. “A single-payer insurance system can ... foster citizens’ trust in the ability of the government to protect their welfare, enhancing the population’s view of the legitimacy of the government. However, in some cases multiple insurance pools might improve the political support of the government. For example, better-off individuals who feel that they are contributing more than their fair share towards insuring the health risks of others may oppose the health insurance system. Allowing them to opt out of a single-payer insurance system may provide greater social solidarity in a normative sense, by securing the political support of high-income earners for the public insurance system. This is particularly important in low- and middle-income countries where the high-income individuals and large industries must be willing to pay most of the cost of the reforms.”
The diagram below illustatres the point that universal coverage does not necessarily mean a single tier system. Universal coverage can be achived through a combination of funding methods (i.e. a multi-tiered system).
Social security systems have components that are commonly grouped into three tiers, defined by the way individuals contribute to each tier and draw benefits from that tier. In a single tier system there is only one system for everyone; this is typically found in the industrialized developed countries. In developing countries it is common to find multi-tier systems. ; for example a public health system as Tier 1; a mandatory contributory fund or funds for those employed as Tier 2; and purely private insurance and out-of-pocket spend in Tier 3.
Figure 5: Universal Coverage as a Combination of Different Tiers
Source: Kirigia et al, Health financing patterns and the way forward in the WHO African Region.
Kirigia and colleagues explain that “SHI has not taken root in the (African) Region. Its limited contribution to health financing could be attributed to wide spread poverty, and a high proportion of the population working in the informal sector.”
“However, due to inequities related to out-of-pocket payments and the need for sustainable funding for the health sector, the Fifty-eighth WHO World Health Assembly adopted a resolution entitled ‘Sustainable health financing, universal coverage and social health insurance’. The resolution urges Member States, among others, to ensure that health-financing systems include a method for prepayment of financial contributions for health care, with a view to sharing risk among the population and avoiding catastrophic healthcare expenditure and impoverishment of individuals as a result of seeking care”.
Governments in Africa are urged to develop plans that “.... should map-out the monitored transition from the current situation characterised by predominantly out-of-pocket payments to a visionary situation of universal protection against cost-of-illness”. This might include a combination of tax-based financing, mandatory social health insurance and private insurance in a multi-tier system. The fundamental issue from an equity perspective, as McIntyre and Van den Heever wrote, “is that the wealthy should not be permitted to ‘opt out’ entirely”. Much careful work is needed to find an equitable solution that accommodates a multi-tier system.
In the figure below, a national public health service funded from general taxation might form Tier 1. All employed, including public sector workers, might contribute on a mandatory basis to Tier 2 where there would be significant income cross-subsidies. This could encompass medical schemes, bargaining council schemes and other forms of workplace-based healthcare. Tier 3 cover would be a private matter and could be provided (for example), by medical schemes or insurance companies or paid by individuals out-of-pocket
Figure 6: Generic Multi-Tier Social Security Systems
Source: Van den Heever, September 2009
This idea is taken further in the figure below which uses four tiers rather than three to differentiate between levels of protection needed in the contributory element. In this version there is a split between the Tier 2 mandatory system and a further tier of private contributions. Tier 2 might cover minimum benefits while Tier 3 might be the balance of comprehensive cover usually found in medical schemes. Tier 4 then becomes the purely private layer.
Figure 7: Possible Multi-Tier Framework for Healthcare
Source: Van den Heever, NHI Research Workshop, November 2009
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