Case Study

SOUTH AFRICAN SOCIAL HEALTH INSURANCE DEVELOPMENT IN THE 1990s: HOW DESIGN INFLUENCED ACTORS’ POSITIONS

LucyGilson

CentreforHealthPolicy, UniversityofWitwatersrand

Thiscasestudy may becopiedandusedinany formalacademicprogramme.However,itmustbe reproducedwithappropriateacknowledgementofauthor(s). Thiscasestudy has beenderivedfromGilsonetal.19991.Centre forHealthPolicy/HealthEconomics Unit

1GilsonL.,DohertyJ.,McIntyreD.,ThomasS.,BrijlalV.,BowaC.andMbatshaS.(1999)TheDynamicsofPolicyChange:HealthCare FinancingnSouthAfrica,1994-99.MonographNo.66,Johannesburg:Centrefor HealthPolicy,UniversityofWitwatersrand/CapeTown:HealthEconomicsUnit,UniversityofCapeTown.

1. OBJECTIVESOFCASESTUDY:

TousetheSouthAfricanexperienceofSHIdevelopmentinthe1990sto:

•understandtheinfluenceofactorsoverSHIdesignandimplementation;

•explorethe typesofSHIobjectivesanddesigndetailslikelyto impacton different actors;

•considertheformalandinformalmechanisms thatgiveactorsinfluenceinpolicy development;

•provideafoundationfordeterminingthetypesofstrategicactionsthatcanbe usedtosupportSHIdevelopment.

2. STRATEGYFORUNDERTAKINGCASESTUDYWORK:

Step1:Introduction to South Africa and its process of SHI

proposaldevelopmentbetweentheearly1990sand1999

Step2:Discussioninsmallgroupsfocussedonthetaskslistedin section4. Thesetasksfocusattentionon theresponsesof keyactorstothedetailsofpastSouthAfrican SHI proposals.

Step3:Reportbackinplenary.Eachsmallgroupwillreportback primarilyontheirdiscussions ofTaskB,butwillalso contributetoplenarydiscussion ofTasksCandD.(See section4).

Step4:Wrapupofcasestudydiscussions.

3. KEYFEATURESOFTHESOUTHAFRICANCONTEXT:

Demographicandsocio-economiccontext2

Population

•totalpopulationof40.6million(1996)

•54%livedinurbanareas(1996)

•13.7millioneconomicallyactivepeople(1996)

•34%ofeconomicallyactiveunemployed(1996)

•36%ofeconomicallywereemployedintheformalbusinesssector(1998)

Incomeinequality:

•middleincomecountry:percapitaincomeofUS$3160(1995)

•Ginicoeffficientofnearly0.6(mid1990s)

•thepoorest40%ofhouseholdsaccountforonly11%oftotalincomebuttherichest

10%ofhouseholdscapture40%oftotalincome(mid-1990s)

2 StatisticsSouthAfrica(2000).Statisticsinbrief2000.Pretoria:StatisticsSouthAfrica;MayJ (ed)(1998)PovertyandInequalityinSouth Africa. Report prepared for Office of the Executive Deputy President and Inter-Ministerial Committee for Poverty and Inequality. Durban: Praxis Publishing

TheSouthAfricanhealthsystem:theapartheidlegacy3,4

•Thehealthsystemiscostly,fragmented,inefficientandinequitable

•SAspendsarelativelylargeamountonhealthcare(about8%ofGDP)buthas relatively pooraverage healthstatusindicatorse.g.infantmortalityrateestimatedas

54/1000livebirthsin1990/91(revisedto45per1000 bythe1998 Demographicand

HealthStatusSurvey)[Zimbabwe,incontrast,had aninfant mortalityrateof48/1000 in1990/91buthadanincomelevelaroundaquarterofthatofSouthAfrica(US$650)

andspentonlyaround3%ofGDPonhealthcare]

•SAhaslargeinequalitiesinhealth:forexampleafivetosixfolddifferenceininfant mortality ratesbetween theAfricanandwhitepopulationsandathree-folddifference betweenthehighestandlowestincomehouseholds

TheSouthAfricanhealthsystemisdividedbetween

•thepublicsector,servingthemajorityofthepopulation,thelowerincomegroups, and

•the privatesectorprimarilyservingthemiddleandhigh-incomegroupsthatrepresent theminorityofthepopulation

In1992/93theprivatesector:

•routinelyservedonly23%ofallSouthAfricans

•accountedfor58%oftotalhealthcareexpenditure

•capturedthemajorityofalltypesofhealthpersonnel(exceptnurses)

Thepublicsector=services provided directly by government and funded from conventionaltaxrevenue

Theprivatesector=severaldifferent sub-sectorsfundedthroughvariouscombinations of insurance premia, employer contributionand out of pocket payments.

Thefourmainsub-sectorswithintheprivatesectorare:

(1)Medicalaidschemes(themainformofprivatemedicalcover):

•employer-based,voluntaryschemesofferingcomprehensivebenefitstomembers andtheirdependents

•schemes are not themselves allowed to make profits but are managed by administratorswhoareprofit-making

•membersandtheiremployersmakemonthlycontributionstotheschemes;atax deductionisavailableontheemployercontribution

•theschemesreimburseproviders,primarilyonafee-forservicebasis (with some co- payment).Theuseofthispaymentmechanismisoneoftheimportantreasonsfor thehighlevelsofcostescalationexperiencedwithintheSouthAfricanprivatehealth sector.

3McIntyreD,BloomG,DohertyJ,BrijlalP(1995).HealthexpenditureandfinanceinSouthAfrica.Durban: Health Systems Trust and World Bank.

4 vandenHeeverA(1997)Regulatingthefundingofprivatehealthcare:thesouthAfricanexperience. Chapter10inBennettS.,McPakeBandMillsA(eds)Privatehealthprovidersindevelopingcountries:

Serving the public interest?London: Zed Press

•asemployeesofallbackgroundsaremembersofthesamemedicalschemethe schemesusuallyinvolveacross-subsidyfromhealthtounhealthyandrelativelyhigh torelatively lowincome(butnottothelowestincomegroupsservedbythepublic sector).

•in1994therewere169suchschemes.

(2)Healthinsurance(aformofprivateinsurancethatgrewsubstantiallyoverthe1990s):

•offeredbyinsurancecompaniesasoneofavarietyofinsuranceproducts,onafor- profitbasis

•benefitsareexplicitlydefined,comprehensivecoverisnotsupported

•benefitsarefundedthroughamixofapremiumandco-payments

•thereisnocross-subsidybetweenhealthy/unhealthyandhigh/lowincomegroups throughtheseproducts

•theproductshavespecificallysoughtto attractthehigherincome/morehealthy peopleawayfrommedicalschemes byofferingthemalowercostproduct(because thereisnocross-subsidytoothergroups)

(3)Employer-providedcare:

•servicesdirectlyprovidedandfinancedbyemployers(suchasthelargemining companies),primarilyforlowerincomeworkers.

(4)Out-of-pocketpayments:

•thepurchaseby all incomegroupsof privateprimarycare,particularlytheservicesof generalpractitioners,throughdirectpayments.

Althoughtheinstitutionalised racismoftheapartheiderareservedtheprivatesectorfor thewhitepopulation, thepowerfultradeunionmovement begantodemandaccesstoit foritslowerincome,AfricanandIndianmembersoverthe1980s.Thisledtothe provisionofsomeemployer-basedmedicalbenefitsforpeoplewho had previouslyrelied exclusivelyonthepublicsector.Butasthesewerestilllargelyfundedseparatelyfrom thetraditionalmedicalaidschemes,virtuallynoincome-related cross-subsidyoccurred withinthenewerschemes.Nonetheless, thisdevelopment didincreasedemandfor privately-fundedmedicalbenefitsfromlowerincomegroups–particularlyin thefaceof a perceiveddeclineinthequalityofpublicservices.

Theevolutionofsocialhealthinsuranceproposals

Anticipating a new government, towards the end of the 1980s the health policy community insideSouthAfricabegandebatingpolicymatters.Akeyelementinthese debateswastheformthatthehealthsystemshouldtakeaftertheelection ofa democraticgovernment, andtheroleoftheprivatesectorwithinthatsystem.Some favouredatax-funded nationalhealthsystemalongtheUKlines.Otherssuggestedthat

someformofinsurance-basedsystemwouldbemoretechnically andpoliticallyfeasible

asanimmediate goal.Thesecondgroup’sviewswontheday.Theybegantodevelop initialideasaroundthedesignofaninsurance-based systemandtheAfricanNationalCongress’sHealthPlan,publishedin1994,recommended thatacommissionbe establishedtoinvestigatetheappropriateness andfeasibilityofaninsurance-based option,throughconsultationwithinterestedparties.

Thisproposalwasthenfedintoaseriesofadhoccommitteesestablishedafter1994to advisegovernmentontheseissues.Thethreemaincommitteesthatconsidered SHI between1994and1999were:

TheHealthCareFinanceCommittee(HCFC)of1994:

•establishedbythenewnationalMinisterofHealthasabodytoadviseherona rangeoffinancingissues

•comprised 17 members drawn from the South African academic community, government structuresandprivatesector(1memberfromthemedicalaidscheme environment),withthreeinternationaladvisors

•workedovera6monthperiod,behindcloseddoors

•proposedthreeinsuranceoptionsinaconfidentialreporttotheMinister:oneofthese came to be known as ‘the Deeble option’, after the international adviser who proposed it,andfollowingaleaktothepressbecame thesubjectofmuchmedia debate

TheCommitteeofInquiryintoaNationalHealthInsuranceSystemof1995:

•establishedbythenationalMinisterofHealthtoprovideadviceonhowtofundthe provision ofprimarycareaccesstoallSouthAfricans(eitherthroughaninsurance- basedsystemorthroughatax-fundedalternative)

•akeystartingpointofitsdeliberationswasthegovernment’sintentiontoremoveall publicprimarycarefees(finallyannouncedin1996)

•inpracticeitsdeliberationsincludedabroaderinvestigationofinsuranceoptionsand ofhowtoregulatetheprivateinsuranceindustry

•comprised13members,drawnfromtheSouthAfricanacademicandgovernment community,with2privatesectoranalysts,2Department ofFinancerepresentatives and3internationaladvisers

•workedoveronlyafourmonthperiod,andinvolvedbothdetailedfacetoface discussionswithkeystakeholderssuchasthemedicalaidschemesaswellaspublic consultationsaroundthecountry

•publishedadraftreportforpubliccommentinmid-1995andafinalreportin1996

TheSHIWorkingGroupof1997:

•establishedbytheDepartmentofHealth’sDeputyDirectorGeneral(equivalentto deputyprincipal/permanentsecretary)

•comprised only 6 members drawn from the academic community and national

DepartmentofHealth

•specificallytaskedwithdevelopingdetailedproposalsforanSHIschemeforlow incomegroupsthatwouldsupportpublichospitaluse

•metperiodicallythroughout1997

•proposals were submitted to and approved by the structure ten national and provincialministersofhealth

However,despitetheworkofthesethreecommittees, SHIhadnotmovedintoanimplementationphaseby1999,theendofthefirstgovernment’stermofoffice.Instead, followingadecisionofthe1997nationalmeetingoftheAfricanNationalCongress,

socialhealthinsuranceiscurrently(2000)beingre-consideredwithinthecontextofabroaderreviewofsocialsecurity.

Yet, incontrast,theSouthAfricanparliamentpassedtheMedicalSchemesAct in1998- legislationthatissupportingthere-regulation oftheprivateinsurancesector.Although initiallyintendedtobedeveloped withSHI,theregulation proposalswereeventually developedthroughaseparateprocess.

ThedesignofdifferentSHIproposals,andthekeyactorsinvolvedinSHIdebates

Tables1and2providesomefurtherinformationfromtheSouthAfricanexperience. Table1givesdetailsofthedesignofdifferentsetsofSHIproposals; andTable2 identifiestherangeofrelevantactorsinthesedebates,their interestsand thelevelsand sourcesofpowertheybroughttothedebates.

4. TASK(useTables1and2):

(A)Spendaninitial10minutesquicklyreviewingTables1and2(especiallyTable

2!).

(B)Yourgrouphasbeenallocated1or2keyactorsbythefacilitator.Giventhe informationyouhavereceived,howdoyouthink each ofthese actorsresponded totheSHIproposalsof1995and 1997?(SeeTable1:notethatthe detailsofthe

1994‘Deebleoption’areonlyincludedasbackgroundinformation)

(C)OfthefullrangeofactorsidentifiedinTable2,whichtwodoyouthinkarelikely tohavehadmostinfluenceoverSHIproposaldevelopment-andwhy?

TABLE1:SOUTHAFRICANSHIPROPOSALS,1990s
1994(the‘Deebleoption’) / 1995 / 1997
Main objectivesof proposals / 1. Controlprivatesector
2. Expandcoverageandpromote greatercross-subsidisation betweenpeopleand public/privatesectors / 1. Generaterevenueforthepublic sector
2. Expandcoverageandsome increasedcross-subsidisation
betweenpeopleandbetween
public/privatesectors
3. Improveefficiencyofservice provision / 1. Generaterevenueforthepublic sector
2. Expandcoverageandsome increasedcross-subsidisation
betweenpeopleservedbythe
publicsector
3. Improveefficiencyofservice provision
Beneficiary group / Totalpopulation / Formallyemployed / Formalsectoremployees, particularlytargetingthelower incomeandcurrentlyuninsured
Contributors / Allemployed / Onlyformallyemployed / Onlythoseformallyemployedand currentlyuninsured
Basisof membership / Compulsory / Voluntary / Compulsoryfortargetgroupand voluntaryforinformallyemployed
Benefit package / Primarycareonly / Definedpublichospitalpackage(
withbetterhotelservicesforinsured) / Definedpublichospitalpackage
Benefit provider / Networkofexistingpublicprimary carefacilitiesplusallprivateGPs
contractedtostate / Publicorprivatehospitals(top-up coverofprivateprimaryorhospital
careallowed) / Primarilypublichospitals(top-up coverfromprivatesectorallowed)
Benefitfunding mechanism(s) / Payrolltaxofabout3%onalltax payerswithequalpaymentby employerandemployee / Income-relatedemployer/employee contributions;
PLUSriskequalisationmechanism betweenmedicalaidschemes / Sharedemployer/employee contributions
Provider payment mechanism / Privateproviderstocontractwith insuranceschemeinruralareas; paymentbysomeformofrisk-related
capitation,plususerfees / Unclear / Someformofre-imbursement
Regulation / GPsrequiredtooffercomprehensive packageofpreventiveandpromotive
services / Todefinecorebenefitpackageand toensureadequaterisk-sharingin
insuranceindustry / Todefinecorebenefitpackageand ensuretargetgrouptakeoutpublic
hospitalinsurance
Administrative / Newpublicsectorbodytobesole / SpecialstatehospitalbodyOR / StatutorySHIauthoritylocated
TABLE1:SOUTHAFRICANSHIPROPOSALS,1990s
1994(the‘Deebleoption’) / 1995 / 1997
body / purchaser / throughexistingmedicalaid schemes / outsidecivilservicetomanage scheme(plussmalladministrative roleformedicalaidschemes)
TABLE2:ACTORSANDSHIDEBATESWITHINSOUTHAFRICA1994-99
ACTOR / PRIMARYINTERESTS / POTENTIALSOURCEANDLEVELOFPOWER/INFLUENCE
Thepublic / Theuninsured:
•Toimprovesecurityofaccessand senseofsocialprotection
Theinsured:
•Tomaintainandimproveexisting benefitsatreducedorlowercost. / Theuninsured:
•Somebroadpoliticalpowerthroughthedemocraticprocessandthrough membershipintradeunionsbutnodirectinfluenceoverSHIdebateswhich largelyoccurred‘behindthecloseddoors’ofgovernmentandcommittees.
Theinsured:
•SomebroadpoliticalpowerthroughthedemocraticprocessbutnodirectinfluenceoverSHIdebates.
Private providers / •Tosecureorimproveincomesand workingconditionsbyobtainingaccess toalargepoolofprivatepatients
•Toincreaseaccesstonewtechnologies inordertoimprovequalityofcare / •Potentialeconomicpowerpartiallycontainedbyfragmentationand competitionwithinsector
•Limitedpoliticalpowerinthepost1994-era
•Organisedmedicalprofessionweakbecausemainorganisationdiscredited byhistoryandconsiderablefragmentationamongalternativeorganisations
•RoleswithinSHIdiscussionslimitedtomakingsubmissionstosome committees
•Technicalknowledgeofownoperations.
Employers / •Tolimitcostsbykeepingpremiumslow
•Tosecurebenefitsforworkers
•Toimprovelabourrelations / •Economicpower,harnessedthroughvariousorganisationalstructures
•Limitedpoliticalpower
•NoformalroleinSHIdiscussionsbutregularmeetingswithgovernment andtradeunionsonbroadermacroeconomicandlabourissues
•Technicalknowledgeofitsownoperations
Trade
Unions / •Toexpandandimprovehealthcare coverageforpoorergroupswithin society
•Toconsolidateorexpandthecurrent benefitsavailabletotheirownmembers / •StrongpoliticalpowerthroughformalalliancewiththeAfricanNational
Congressandroleinanti-apartheidstruggle
•Potentialeconomicinfluenceconstrainedbypoliticalallianceand allegiances(limitingstrikeaction,forexample)
•NoformalroleinSHIdiscussions
•Limitedtechnicalcapacitytosupportdirectengagementinthese discussions.
TABLE2:ACTORSANDSHIDEBATESWITHINSOUTHAFRICA1994-99
ACTOR / PRIMARYINTERESTS / POTENTIALSOURCEANDLEVELOFPOWER/INFLUENCE
Medical schemes / •Tomaintainmarketshareandrevenue levels,andif possibleexpandit
•Tocounterproposalshostiletoits interests
•Tosupportthenewgovernmentin expandingaccess / •Considerableeconomicpowerinitiallyharnessedthroughasinglestructure (theRepresentativeAssociationofMedicalSchemes:RAMS)butlater underminedbyfragmentationwithinindustry
•Limitedpoliticalpowerafter1994butconsiderabletacticalawareness,and somestrategicaction
•GivenformalplaceinSHIcommitteesof1994and1995
•Technicalknowledgeofitsownoperations
Government
: Department ofFinance / Allobjectivesrootedintherelatively conservativepost-1996 macro-economic
frameworkwhichaimedtopromote
economic growth by encouraging private internationalandnationalinvestment
•Toimproveefficiencyingovernment expenditure
•Tocontainpublicexpenditurelevels andreducethegovernmentdeficit
•Tocontainthetax:GDPratio
•Toprotectthe‘alreadyhighlytaxed’
middleincomefromfurthertaxation
•Toensureaccountabilityfor governmentexpenditure / •Strongpoliticalandeconomicpowerasthecentraleconomicministry withinthenewly-electedgovernment,chargedwithensuring implementationofthepoliticallyhighprofileandwell-acceptedmacro- economicpolicy(particularlyafter1996)
•Strongroleinallpolicyprocessesconcerninggovernmentpolicyon financingandexpenditureissues,althoughvaryingformalrolewithinSHI discussions
•Strongtechnicalcapacityonlyenhancedotherformsofpower
TABLE2:ACTORSANDSHIDEBATESWITHINSOUTHAFRICA1994-99
ACTOR / PRIMARYINTERESTS / POTENTIALSOURCEANDLEVELOFPOWER/INFLUENCE
Government
: Department ofHealth / Objectivesnotclearbutbroadlya combinationof:
•Improvingequitythroughstrengthening cross-subsidisationmechanisms (between sectorsofthesystemand betweenpopulationgroups)
•Revenuegenerationforpublicsector
Apparentlychangingovertimefrom strongeremphasis oncross-subsidisation towardsstrongeremphasis onrevenue generation / •Somepoliticalpowerfromleadingrolegiventothehealthsectorinformal ANCpolicydocuments,andfrompersonalstandingofMinisterin government;butcontainedbypositionasspendingministrysubjectto overallgovernmenteconomicpolicy
•Technicalandmanagerialcapacityunderminedbybroaderevolutionof governmentalstructures,appointmentofnewgovernmentpersonnel, limitedtechnicalknowledgeandunderstandingofnewpersonnelofhealth financingissues
Ministerof
Health / •To improve access to health care particularlyforthepoorandrural populations,preferably through government controlled funding arrangements
(andcautiousaboutprofit-motivatedprivate healthsector) / •Strongpoliticalpowerfrombeinginhealthsectorbase, itselfseenbythe ANCasasectorwherespeedychangetoredresstheapartheidlegacy couldbeimplemented,andfrompersonalstandingwithinANC(personal backingofPresidentandDeputyPresident)
•Strongformalroleinhealthandwiderpolicyprocesses,asnational
MinisterofHealthandcabinetmember
•Additionalinfluencefromclearvaluesandstatedgoals,andfromdecisive managementstyle
Health economists advising
government / •Todevelopatechnicallyandpolitically feasibleinsurance-basedfunding mechanismwithwhichtosupport overallhealthsystemdevelopment
(overtime,possiblyacceptingless emphasison cross-subsidyand more on revenuegenerationforthepublicsector) / •Noeconomicorpoliticalpower
•StrongformalroleinSHIcommitteeprocessesconstrainedbythewayin whichthecommitteesfunctioned(e.g.limitedtime,toomanyissues,little interactionwithseniorpolicy-makers)
•Technicalcapacityconstrainedbylimitedunderstandingoftheirrole amongDOHofficialsandbytheirownweakstrategy

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