South Africa

NHI uphill battle

The government’s National Health Insurance (NHI) scheme established a universal healthcare system for South Africa. However, several concerns loom over the legislation’s current form, which could see it tied up in court for decades.

The NHI Act, which President Cyril Ramaphosa signed into law on 15 May, promises a complete overhaul of the country’s healthcare system.

This plan aims to establish a universal healthcare coverage system, ensuring all South Africans have access to essential medical services.

Under the NHI, a single public fund will act as the sole purchaser and payer for healthcare services, drawing from both the public and private sectors.

The government has promised that signing the NHI into law will result in universal healthcare free at the point of delivery. Many experts warned that this ambition is far from reality.

While businesses and civil society support achieving universal healthcare, they have said that the scheme will not achieve it as it cuts out private funding, is unconstitutional, and is unworkable.

Cliffe Dekker Hofmeyr’s joint heads of the Healthcare and Pharmaceuticals sector, Susan Meyer and Roxanna Valayathum, recently outlined their concerns about the government’s NHI scheme.

“It is undisputed that access to healthcare in South Africa is inequitable and that the crisis requires urgent recalibration,” they said.

“Unfortunately, solving our healthcare difficulties and systemic complications appears to be considerably more challenging than acknowledging the problem and showing a simple will to change it.”

Despite its difficulties, the government insists that the NHI will be pushed through and is ready to engage in lawfare against the Bill.

Minister of Health Joe Phaahla has said that despite the looming legal challenges, his department will be able to follow the two-step implementation process of the NHI.

NHI concerns

Cliffe Dekker Hofmeyr’s joint heads of the Healthcare and Pharmaceuticals sector, Susan Meyer and Roxanna Valayathum

Meyer and Valayathum explained that the NHI Act effectively creates “one risk pool” for most healthcare services.

This means the NHI Fund will pay registered healthcare providers for specific medical treatments provided to users.

South Africans will contribute to this fund through a mandatory pre-payment system, which will grant them access to “free at the point of care” services.

However, despite the promise of universal coverage, the NHI Act has been the subject of much criticism.

“One of the immediate concerns with this is that there will be insufficient resources to meet the needs of all South Africans, thus curtailing overall healthcare standards in South Africa,” Meyer and Valayathum explained.

Another point of contention concerns the role of private medical schemes. The NHI envisions their continued existence – with limitations.

Private schemes will not be able to cover services already provided by the NHI Fund, raising questions about their future viability and the choices available to South Africans.

Below is an overview of all the factors the NHI fails to address in its current form.

Scope and funding challenges

The potential cost of NHI and sources of finance for the fund have raised controversy, with many critics saying South Africa cannot afford it.

“The Department of Health appears to envisage a consolidation and centralisation of the government’s various provincial and health department budgets, a ‘shifting’ of private sector medical scheme contributions,” they explained.

This has the potential to raise general taxes or even create new tax mechanisms.

“The concern is that the only ‘viable’ means of funding may be a substantial increase in taxes,” they warned.

However, there is no assurance that overburdening taxes would be directed towards improving access to healthcare, whether due to competing national priorities, mismanagement, fraud, or corruption.

“Even the government itself acknowledges the challenges faced with increasing taxes to produce revenue for use in the fiscus,” they said.

“A further source of controversy is the lack of clarity on the nature and scope of the healthcare benefits to be offered under the NHI,” said Meyer and Valayathum.

“A transparent benefit determination process is required to ensure that there is sufficient financing to make good on the promised cover.”

While the NHI Act expressly intends to purchase primary healthcare, it remains unclear exactly which services will be available.

A key concern has been raised about whether the creation of the Fund will improve service delivery in South Africa’s public health sector.

“With approximately 85% of the population currently using the public sector, the government must focus its attention on improving crippling public sector infrastructure and access to quality preventative primary healthcare services – the latter is proven to reduce the burden on secondary and tertiary care services.”

The NHI Act provides that only healthcare service providers and health establishments that are accredited by the Office of Health Standards Compliance (OHSC) can deliver healthcare services purchased by the fund.

“Practically, we understand that, to date, most public hospitals remain OHSC non-compliant. This suggests substantial investments will need to be made in the public sector infrastructure before the NHI can get off the ground,” they said.

Shortage of healthcare workers

Meyer and Valayathum explain that, among other things, “the NHI Act envisages all healthcare practitioners are to be remunerated by the state at a rate set by the government”.

Considering how South Africa already faces an increasing shortage of medical doctors and other healthcare practitioners, the NHI Act has sparked concern that there may be a further exodus of qualified medical professionals.

Many organisations have warned that the NHI Bill will chase medical professionals out of South Africa.

Cas Coovadia, the CEO of Business Unity South Africa, told 702 that the organisation is worried about implementing the NHI and its potential impact on healthcare workers.

“Doctors are very concerned, and we might see an exodus of doctors out of the country,” he warned.

The South African Medical Association has also said it is deeply concerned about the passage of the NHI through Parliament despite their numerous objections.

It said the signing of the NHI Bill excluded suggestions by medical professionals, including doctors, which poses a risk of an exodus of these sought-after skills from the country.

This is also supported by a study conducted among doctors by the Solidarity Research Institute, which found that 94% of respondents believe private health practitioners may decide to work abroad because of NHI.

Another 47% indicated that they would start the emigration process as soon as the NHI is accepted in South Africa, and 19% said that they had already initiated the process to emigrate.

None were medical practitioners responded that they are optimistic about the NHI.

Legal challenges

The NHI Act faces potential legal challenges, with some stakeholders expressing their intention to contest its constitutionality.

“Even if the Constitutional Court elects not to intervene at this stage, further objections may be brought in time as the NHI Act begins to be implemented in its various stages,” Meyer and Valayathum said.

“Controversially, the NHI Act also seeks to limit asylum seekers and illegal foreigners from accessing services other than emergency medical services and services for notifiable conditions of public health concern.”

Many industry stakeholders have stated their intention to take the government to court over the NHI.

Coovadia said that, in response to the NHI becoming law, the organisation would consider its options, including legal action.

On 24 May, Solidarity also filed court papers seeking to overturn the NHI. “Solidarity believes the NHI is unconstitutional as well as being unworkable and unaffordable,” the labour union said.

“It deprives healthcare workers as well as healthcare users of choice.”

South Africa’s main opposition party, the Democratic Alliance, has also said it will sue the government over the implementation of the NHI.

Phaahla has said the government is ready to defend the NHI in court and understands that some corners of South Africa are willing to engage in ‘lawfare’ to prevent the scheme from being implemented.

He said the threats of legal action are nothing new as throughout the Parliamentary process business groups, civil society, political parties, and trade unions threatened legal action.

“We will be ready to engage with aggrieved parties in the courts, but our hope is that we will be able to begin implementing the Act as soon as possible,” he said earlier this year.

The NHI Bill is also further complicated by competition law considerations.

A six-year study by the Health Market Inquiry (HMI) revealed the need for reform in South Africa’s private healthcare sector. The report, released in 2019, recommended a package of changes, but only a few have been implemented.

“However, the HMI did not recommend the removal of private medical scheme coverage. It has been argued that the NHI, in its current form, may result in threats to the sustainability and affordability of medical schemes,” said Meyer and Valayathum.

They explained that the NHI Act seeks to exempt the fund from South Africa’s competition legislation, which ordinarily applies to government-owned entities.

“From a theoretical anti-trust law perspective, the creation of a single fund has the potential to cause competition law harm through the possible creation of monopsony buyer power and favourable or exclusive contracting arrangements with preferred providers,” they said.


Top JSE indices