The nature and state of health care financing and delivery in South

Africa: Obstacles to realising the right to health care

Di McIntyre, Health Economics UnitUniversity of Cape Town

Overview

Focus on equity issues & obstacles to Focus on equity issues & obstacles to access:access: Funding - according to ability to payFunding - according to ability to pay Delivery (expenditure) - according to Delivery (expenditure) - according to

relative needrelative need

Public-private mixPublic-private mix

Each sector - key regulatory issuesEach sector - key regulatory issues

Financing flows

General tax LG revenue Employers Households

National Depts.

Provincial Depts.

Local Govt. Depts.

Medical schemes

Insurance

Firms

Households

Public Providers Private Providers

43% 1% 17% 39%

38%

34%

18%

58%42%

4%

>2%

2%

1%

So

urc

es

Fin

an

cin

g In

term

edia

rie

sP

rov

ide

rs

Equitable financing ?

Government revenue:Government revenue: National level general tax - income tax National level general tax - income tax

progressive, but VAT regressive progressive, but VAT regressive proportional tax system?proportional tax system?

Local government - progressiveLocal government - progressive Private sources:Private sources:

Schemes - contributions not income-Schemes - contributions not income-related and coverage limitedrelated and coverage limited

OOP - most regressive form of financing; OOP - most regressive form of financing; level dependent on accessibility & quality level dependent on accessibility & quality of public servicesof public services

PPM in delivery

Expenditure - roughly 60:40 Expenditure - roughly 60:40 private:publicprivate:public

Personnel:Personnel: 3/4 doctors & pharmacists and >90% 3/4 doctors & pharmacists and >90%

dentists & psychologists in private practicedentists & psychologists in private practice Vast majority located in urban areasVast majority located in urban areas

Private hospitals:Private hospitals: Annual growth in beds 9.5% 1989-1994 Annual growth in beds 9.5% 1989-1994

and 8.9% 1994-1999 (despite moratorium)and 8.9% 1994-1999 (despite moratorium) Urban and provincial biasUrban and provincial bias

Medical scheme challenges

0

20

40

60

80

100

120

140

160

83/84 84/85 85/86 86/87 87/88 88/89 89/90 90/91 91/92 92/93

Rand

Medicines

Hospitals

Specialists

GP's

Dentists

Real expenditure per beneficiary

More recent trends

Sustained annual increases in schemes Sustained annual increases in schemes expenditure and in contributions (private expenditure and in contributions (private hospitals, medicines and administration)hospitals, medicines and administration)

Declining coverageDeclining coverage

Shift of membership to schemes with Shift of membership to schemes with personal savings accounts (limited personal savings accounts (limited cross-subsidies)cross-subsidies)

Increasing co-paymentsIncreasing co-payments

Other private sector trends

Declining coverage by on-site services Declining coverage by on-site services at workplace - growth in unemploymentat workplace - growth in unemployment

OOP payments:OOP payments: ‘‘Schemes gap’ growing rapidly and well in Schemes gap’ growing rapidly and well in

excess of R4 billion per yearexcess of R4 billion per year Non-scheme also growing rapidly and >R2 Non-scheme also growing rapidly and >R2

billion per year (OTC medicines 37%; billion per year (OTC medicines 37%; prescription medicines 11%; doctors & prescription medicines 11%; doctors & dentists 26%)dentists 26%)

Key regulatory issues

Private hospitals:Private hospitals: Certificate of need (including doctor Certificate of need (including doctor

shareholding or other perverse incentives)shareholding or other perverse incentives) Doctors:Doctors:

DispensingDispensing Certificate of needCertificate of need

Medicine pricesMedicine prices Medical Schemes Act amendments and Medical Schemes Act amendments and

related regulations - Addressing key related regulations - Addressing key challenges?challenges?

Public sector funding issues

Overall funding levels:Overall funding levels: Initial increases post-1994; more recent Initial increases post-1994; more recent

stagnation in real per capita fundingstagnation in real per capita funding Loss of local government funding with Loss of local government funding with

narrow municipal health services definitionnarrow municipal health services definition Equitable use of limited resources?:Equitable use of limited resources?:

Spend 12 times more purchasing medical Spend 12 times more purchasing medical scheme cover per civil servant than on scheme cover per civil servant than on public sector services per dependentpublic sector services per dependent

Free care:Free care: Removed some obstacles, created othersRemoved some obstacles, created others

Impact of fiscal federalism

Two key factors in provincial health budgets:Two key factors in provincial health budgets: Allocation of overall resources to provincesAllocation of overall resources to provinces Provincial level budget negotiationsProvincial level budget negotiations

-80

-60

-40

-20

0

20

40

60

80

100

Gauteng Northern Province

Dis

tan

ce

fro

m t

arg

et 1995/96

1996/97

1997/98

1998/99

1999/00

“Equitable shares” ??

0.0

5.0

10.0

15.0

20.0

25.0

Prov

inci

al s

hare

Red bar:

Pre-fiscal federalism expenditure level

Blue bar:

Current allocation from national level using equitable shares formula

Green bar:

Potential allocation if relative provincial deprivation included in equitable shares formula

Geographic distribution

International experience:International experience: High % of health (and other social) service High % of health (and other social) service

expenditure at lower levels funded via expenditure at lower levels funded via special purpose/conditional grants and/orspecial purpose/conditional grants and/or

National policy guidelines or mandatesNational policy guidelines or mandates Norms and standards for SA?Norms and standards for SA?

Absorptive capacity:Absorptive capacity: Recent allowances may assistRecent allowances may assist

Quality of care issues

Key obstacles:Key obstacles: Lack of suppliesLack of supplies Generic medicines perceived as ineffectiveGeneric medicines perceived as ineffective Preference for direct access to doctorPreference for direct access to doctor

But …. private low-cost clinics have But …. private low-cost clinics have nurse as first contact & use generics:nurse as first contact & use generics: Health worker morale and attitudesHealth worker morale and attitudes Shorter waiting time and comfortable, Shorter waiting time and comfortable,

cleaner waiting areas etc.cleaner waiting areas etc.

Level of care reprioritisation

Definite relative shift towards PHC, but Definite relative shift towards PHC, but threatened when budgets cutthreatened when budgets cut Need for focus on hospital efficiency gainsNeed for focus on hospital efficiency gains

Conditional grants constrain shifts:Conditional grants constrain shifts: CGs as percentage of health budget: CGs as percentage of health budget:

Western Cape = 41%, Gauteng = 34%Western Cape = 41%, Gauteng = 34% Balance between stable funding for Balance between stable funding for

‘national assets’ and ability to address ‘national assets’ and ability to address priority service requirements priority service requirements move to move to highly specialised service granthighly specialised service grant

PPM revisited

Some progress, but remaining Some progress, but remaining challenges, in each sectorchallenges, in each sector

But … public-private mix deteriorating But … public-private mix deteriorating and overall health system inequities and and overall health system inequities and inefficiencies is key remaining challenge:inefficiencies is key remaining challenge: Relatively stagnant public funding, but rapid Relatively stagnant public funding, but rapid

growth in scheme & OOP spendinggrowth in scheme & OOP spending Increased demands on public sector - Increased demands on public sector -

declining coverage (unaffordable), main declining coverage (unaffordable), main provider of HIV/AIDS servicesprovider of HIV/AIDS services

Social Health Insurance

Key goals of early proposals:Key goals of early proposals: Address private sector cost spiralAddress private sector cost spiral Extend coverage of population covered by Extend coverage of population covered by

insurance through cross-subsidies (extend insurance through cross-subsidies (extend access to financial and other resources access to financial and other resources currently located in private sector)currently located in private sector)

But, two-tier system; vision of moving to But, two-tier system; vision of moving to national health insurance asapnational health insurance asap

Key question of new proposals:Key question of new proposals: Will they help to address PPM inequities?Will they help to address PPM inequities?

Key issues

Relatively piecemeal policy and Relatively piecemeal policy and regulations on private sector:regulations on private sector: Linkages NB, e.g. restrictions on dispensing Linkages NB, e.g. restrictions on dispensing

by doctors and dispensing fee proposalsby doctors and dispensing fee proposals Need comprehensive view of overall Need comprehensive view of overall

health system:health system: Developments in one sector have knock-on Developments in one sector have knock-on

effects for the othereffects for the other Need clear vision of respective roles and Need clear vision of respective roles and

potential for PPIspotential for PPIs

Early SHI proposals

Expand the pool (SHI)

Medical scheme plus other employed

Increased high- to low-income

cross-subsidy

Covers at least the cost of public

hospital fees

Increased cross-subsidy from

insured to public sector

$$

(Lack of) progress on SHI

Limited high- to low-income

cross-subsidy

SHI fund covers the cost of public

hospital fees

Limited cross-subsidy from

insured to public sector

Medical schemes

Other employed: SHI fund

Two separate pools

$ $