Universal Coverage Through National Health Insurance
In South Africa:
Do quality gaps between the public and
private sector matter?
Okore Okorafor
Health Policy Unit
Medi-Clinic Southern Africa
15 March 2011
Overview of the Presentation
• Setting the context
• Objectives of the Study
• Literature & Conceptual Framework
• Methods and results
• Policy Implications
Context: Dual Healthcare System
Medical Scheme
Contributions
General taxes
Medical Schemes (PHI)
Public healthcare
budget
Out of
pocket
payments
Public Providers
46% of Total Health Expenditure
Private Providers
54% of Total Health Expenditure
Is there a need for a Health reform?
Private
Sector
•Higher Quality of Care
•Wealthier members of the population
•Rising premiums a concern for
affordability
INEQUITY
Public
sector
•Lower Quality of Care
•Poorer members of the population
•Deteriorating quality a concern for
acceptability
Quality Comparison – Public vs Private
Quality Indicator
Public facility
Private facility
Facilities not clean
5.7%
1.4%
Long waiting time
40.9%
10.5%
Drugs that were needed, not available
16.7%
2.5%
Staff rude or uncaring, or turned
patient away
10.5%
2.4%
Data Source: 2008 General Household Survey
Palmer N. 1999. Patient choice of primary health care provider. South African Health Review. Durban: Health
Systems Trust
Gilson, L. and McIntyre, D. 2007. Post-Apartheid Challenges: Household Access and Use of Health Care in South
Africa. International Journal of Health Services, 37 (4): 673-391.
Burger, R and Van der Berg, S. 2008. How well is the South African public health care system serving its people?
2008 Transformation Audit: Risk and Opportunity. Cape Town: Institute of Justice and Reconciliation.
Quality: Challenges faced in the public sector
• Challenges faced in the public system
–
–
–
–
Lack of managerial capacity
Insufficient decentralisation of managerial authority
Lack of accountability within the system (DBSA 2008)
Severe shortage of health professionals (42.5% of posts are vacant)
(Econex 2009)
– Poor disciplinary procedures and corruption
– Poor technology management, unsatisfactory maintenance and
repairs
– Delayed response to quality improvement requirements (Shisana 2011)
• Concern around ability to improve quality of health care services
in public sector if additional financial resources are made
available!
NHI Proposal & Principles
• No official Government proposal; but ANC (2010)…
–
–
–
–
Free at the point of care/use
Choice of provider
Mandatory progressive contribution according to ability to pay
Universal access to health services that meet established quality
standards
– Single funder
– NHI Fund to be established in 5 years
– Full implementation of NHI in 14 years (2025)
• Public is free to continue with medical scheme (PHI) cover
only after contributing to the NHI Fund
Financing the NHI
• Funding sources considered..
–
–
–
–
–
Pay-roll taxes (from less than 1% to 7-8%)
Increase in VAT
Surcharge on taxable income
General taxation
Elimination of income tax subsidy (medical scheme members)
• Implicit – reduction of the private sector by increasing the
opportunity cost of voluntary private health insurance.
Objective of the Study
• Estimate the likely impact of the NHI on the medical
schemes market in South Africa
– NHI pay-roll tax
– Elimination of the income tax subsidy for medical scheme
members
• Two schools of thought
– Income shock will significantly reduce the demand for PHI
– Medical scheme members will re-prioritise their expenditure
basket to ensure that they are able to access private health care
Literature & Conceptual Framework
• A lot of work has been done on the demand for voluntary PHI
within the context of a universal NHS
– Heterogeneity of the population
– Existence of a quality gap
• Conceptual Framework
UPHI (QPHI, y – p, µ) > UNPHS(QNPHS, y, µ)
•
•
•
•
•
•
•
UPHI : utility derived from the use of private health care through PHI
UNPHS : utility derived from the use of public health care
QPHI : quality of care (perceived or actual) obtained in the private sector
QNPHS : quality of care (perceived or actual) obtained in the public sector
y: represents income
p: is the premium paid for private health insurance
μ: is the probability of being sick (greater than 0)
Conceptual framework (contd..)
• Even where QPHI > QNHS, it is necessary that:
U (QPHI – QNHS) ≥ |U (y – p)|
• Deduction
– Price elasticity of demand for PHI is higher if the quality gap
between the public and private sector is small.
– Price elasticity of demand for PHI is low if the quality gap
between the public and private sector is large.
Level of substitutability
Methods
• Data source: 2005/2006 Income and Expenditure Survey
(21,144 households and 84,978 individuals)
• Regression analysis (probit model)
Model 1:
PHI = f (α + β1Incomet + β2X2 + ... + βkXk)
Model 2:
PHI = f (α + β1Incomet+1 + β2X2 + ... + βkXk)
Incomet+1 = Income less NHI tax and Income subsidy
Other variables: education, presence of child/elderly in
household, household size and area of residence
Limitations of the Study
• Income tax subsidy should ideally be calculated based on
tax-rate of premium payer. Due to lack of information on
premium payer, average household tax rate (per household
is used)
• IES of 2005/06 (5 years old)
• SA tax brackets used as boundaries for progressive NHI tax
Results
Dependent Variable = Membership to Medical Scheme
Independent Variables
Per capita income
Household head level of education: category 1 (no schooling)
Household head level of education: category 2 (incomplete primary)
Household head level of education: category 3 (incomplete secondary)
Household head level of education: category 4 (complete secondary)
Household head level of education: category 6 (tertiary education)
Area type (rural or urban)
Household size
Presence of child under 5 in household
Presence of elderly over 64 in household
Obs. P = .172
Pred P= .106 (at x-bar)
Number of observations = 21068
Prob >chi2 = 0.000
Pseudo R2 = 0.3418
Coefficients
(dF/dx)
2.53e-06
-0.154
-0.161
-0.167
-0.073
0.044
0.085
0.015
-0.012
0.041
P>|z|
0.000
0.000
0.000
0.000
0.000
0.046
0.000
0.000
0.145
0.000
Results: Predicted change in medical schemes market
Predicted proportion with medical scheme membership (Incomet)
Predicted proportion with medical scheme membership (Incomet+1)
Predicted Change
0.1672
0.1654
1.08%
• The magnitude of the change in the medical schemes market
indicates a significant quality gap between the public and private
sector.
• Size of the medical schemes market more responsive to changes
in quality within the public sector
• Further Implications for the SA health sector!
Implications & Recommendation
• Government needs to focus much more on improving the
quality of care in the public sector.
– Systematic problems
– Additional finances will not improve quality on its own
• Inefficiency will be introduced in the system if the quality of
care in the public sector is not significantly improved
– Medical scheme members [NHI tax & income tax subsidy]
– Non scheme members [NHI tax]
Additional financial burden – No additional benefit?