SOCIAL HEALTH INSURANCE POLICY DIRECTION

1
SOCIAL HEALTH INSURANCE POLICY DIRECTION

• AIDS LAW PROJECT
• 10 February 2004

2
Presentation

• Brief context
• Taylor Committee proposals
• Departmental position
• SHI Description
• Work plan

3
Policy Context cont.

• SA - Health System 2002/2003

Public sector R33.2 billion
Serves 37.9 m
Serves 6.9 m
Private sector R43 billion
Pcap R875.98 R72.99 pm pp
Pcap R6231.88 R519.32 pmpb
4
Policy Context
Public sector Private sector
Cover Indigent (pop. growth) Low-income (pop. growth) High income (no change) Good risks (no change) Poor risks (decrease)
Burden of disease HIV/AIDS Infectious Communicable Chronic HIV/AIDS (limit cover) Infectious (na) Communicable (na) Chronic (reduce cover)
Providers Medical Nursing Pharmacy
5
Key Strategic Challenges

• Inequity in access to health care
• Ensuring that public health system remains
  backbone of SA health system care
• Address systematic cost increases
• Develop low-cost market address high private
  hospital costs
• Reduce financial risk to individuals at the time
  of accessing health care

6
Concept of social security

• Three basic pillars
• Pillar 1
• basic social endowment for all citizens
• Pillar 2
• contributions from those able to contribute over
  and above pillar 1
• Pillar 3
• social security-type benefits that are more
  discretionary in nature

7
Health interventions

• Pillar 1
• Free health care for children lt6
• Free health care for pregnant women
• Free primary health care services
• Free health care for disabled
• Pillar 2 Social health insurance
• Pillar 3 Voluntary medical schemes

8
Characteristics Of NHI and SHI

• Mandatory contributions for entire population or
  certain groups like (public sector employees)
• Usually employment related, payroll deductions
• Contributions from employers and employees
• Premiums are income related and benefits are
  standardized
• Creates large risk pool and avoids adverse
  selection
• Cross subsidization (healthy and the sick,
  wealthy and poor

9
NHI versus SHI

• National health insurance
• Benefits for contributors and non-contributors
• Cross subsidies, dedicated health tax
• Social Health Insurance
• Benefits contributors only
• Can increase resources available for public heath
  care

10
Key departmental objectives

• Strengthen public health care system by
  increasing revenue
• Obtain prepaid contributions from those who can
  pay
• Reduce inequities in health care financing
• Improve access of lower income groups to quality
  health care

11
Taylor Committee proposals

• Four key policy proposals
• Move towards NHI
• State medical insurance, risk equalisation,
  social health insurance
• Tax subsidy reform, cross subsidisation
• Recentralisation of health budget

12
Departmental position

• We still require significant tax funding for
  public health sector
• Need to compare progressivity of tax funding
  versus NHI
• For the medium term,will only commit to SHI

13
State medical insurance

• Taylor Committee proposals
• State-sponsored medical scheme
• Low cost for low income earners
• Sets benchmark price for minimum benefits
• Benefits in differentiated amenities in public
  hospitals plus private primary care

14
State medical insurance

• Taylor Committee proposals
• Civil service medical scheme cover
• Dedicated low cost restricted scheme
• Compulsory under employer mandate
• Benefits similar to state-sponsored scheme
• Could evolve into state-sponsored scheme

15
State medical insurance

• Taylor Committee proposals
• Risk equalisation
• Below average risk schemes contribute above
  average risk schemes receive
• Enlarges risk pool, schemes compete on cost and
  quality rather than risk selection
• Aims to stabilise medical scheme market

16
Mandatory medical scheme cover

• Taylor Committee proposals
• Mandate to begin with high income earners
  /qualifying employers
• Voluntary membership for others
• Out of pocket fees for public hospital treatment
  in basic amenities abolished
• Low income mandates after high income mandate

17
Department response

• Endorse general approach
• One state scheme, should evolve from civil
  service scheme
• Support SHI, not ready to commit to NHI
• Accept abolition of out of pocket fees, except
  possibly bypass fees

18
Departmental response

• We endorse
• SHI plus tax funding
• Incremental mandates for medical scheme
  membership
• Civil service medical scheme as starting point
• Civil service scheme to evolve to state-sponsored
  scheme

19
Departmental response

• Basic minimum floor of benefits should be
  established
• Mandatory benefits Prescribed minimum benefits
  plus primary health care services

20
SHI in SA context

• Government mandated health insurance
• Income cross-subsidies among contributors
• Risk-related cross-subsidies among contributors

21
Risk Related Cross subsidies

• MSA requires all schemes to provide PMB for all
  scheme members
• Scheme have different risk profiles, resulting in
  different cost structures
• Research done by CARE found that price of PMB in
  one scheme was 17 cheaper while for another
  scheme 130 more expensive than industry average,
  just because of different age profiles
• Clearly, schemes have incentive to risk rate in
  order to reduce their costs

22
Risk Related Cross subsidies

• Risk equalisation should ensure that all medical
  scheme members face the same community price for
  PMBs
• It should
• remove the incentives for medical schemes to
  select preferred risks, by ensuring that each
  scheme must bear the cost of a risk profile equal
  to the risk profile of all covered lives.
• Create incentives for schemes to improve its
  efficiencies and cost controls, by not
  incorrectly penalising efficient schemes.

23
Income Cross subsidies

• In most countries with social insurance systems,
  contributions tend to be based on income
• High income earners cross-subsidise low income
  earners
• In SA, medical scheme contributions are community
  rated
• Income related cross subsidies difficult to
  achieve
• Need to change tax subsidy to improve income
  cross subsidies

24
Income Cross subsidies

• Tax deductions on medical scheme contributions,
  and the tax deductions on medical expenses in
  excess of 5 of income estimated at R7,8 billion
• Impact is regressive b/c of link to contributions
• Out of pocket expenditure may be more
  progressive, but depends on submission of tax
  returns
• Need to restructure this subsidy to achieve
  greater subsidies for lower-income earners

25
Income and risk-related cross subsidies

• Support restructuring of tax subsidy, but with
  greater subsidies for lower-income earners
• Support risk equalization to stabilize medical
  scheme environment and prevent schemes from
  profiting via risk selection

26
Budget Centralisation

• Budget centralisation to follow a political
  process
• Will enlist Treasury support for implementation
  of revenue retention framework in all provinces

27
Supporting policies

• Preparation of public hospitals
• Hospital revitalisation project
• Designated provider network pilot
• Civil service scheme development
• Revenue retention policy development

28
Programme of work 2004

• Sign DSPN contracts with medical schemes 1 April
  2004
• Finalise technical work on Risk Equalization and
  income cross subsidy issues
• Support DPSA process to implement civil service
  medical scheme
• Obtain Treasury support for revenue retention
  enforcement
• Finalise policy decision on phasing of mandatory
  cover