National Health Insurance
Conclusions and Actions Needed
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Risk pooling is a function of health systems, regardless of how they are designed. Larger risk pools are preferable to small ones but as the WHO has argued, the argument for large pools is not an argument for a single pool. While there are many arguments in favour of a single pool, the reality of transforming the current multi-tier South African system is that there is likely to be a continuation of a multi-tier system. In other words, a tax-funded public sector will co-exist alongside some sort of mandatory health insurance system for those earning a sufficient amount to be able to contribute to healthcare in the form of some sort of social security contribution. As in the ANC Health Plan of 1994, competitive risk pools are envisaged as the vehicles for this mandatory system.
In regulating multiple competitive pools it is important to encourage the formation of the largest possible pools. In South African medical schemes there is still substantial fragmentation due to the proliferation of options, the design of options and the lack of legislation facilitating mergers in particular industries. These are all issues that can be tackled by the Council for Medical Schemes. Implementation of more standardised benefit packages would assist consumers and providers of healthcare and should substantially reduce the complexity of administration.
The most critical element for the medical schemes environment is to introduce a system of risk-adjustment between medical schemes, as envisaged since 1994. This will effectively create a single risk pool amongst all medical scheme beneficiaries for the common benefits. The mechanism needed for risk adjustment, named the Risk Equalisation Fund, will not only improve risk cross-subsidies between medical schemes but can also be the vehicle for implementing income cross-subsidies between medical scheme members, again as envisaged by the ANC Health Plan of 1994. The absence of a risk adjustment mechanism severely undermines both risk cross-subsidies and income cross-subsidies which are the desired results of pooling in healthcare financing.
A risk adjustment mechanism between provinces and perhaps health districts will also be needed to ensure equity between the regions. This approach is commonly found in public systems and further work is needed in South Africa on the design of a suitable formula. A national risk adjustment fund is postulated as a way to ensure equity between public sector purchasers and private competing funds. This would be a logical way to distribute the per capita subsidy which is envisaged might replace the current tax break given to medical scheme members.
The most critical element of reform that is needed in 2010 in medical schemes is to implement the long-awaited Risk Equalisation Fund.
Produced for IMSA by
Professor Heather McLeod
All views expressed are those of the author.
January 2010
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