Investment and reform: Facing structural challenges, a system overhaul is under way to improve provision

With the continent’s largest health care sector, South Africa’s government has focused heavy investment in the industry, and its thriving private sector is keeping pace, accounting for about half of overall spending. Between them, per capita spending on health care is among the highest on the continent, and outstrips that of many other emerging markets.

While resources are relatively ample, South Africa faces serious challenges, both in terms of public health and in the structure of the health care system, which provides very unequal outcomes. As a result, the sector is in need of reform and modernisation. The proposed National Health Insurance (NHI) scheme, which is intended to provide universal access to high-quality health care, could have a huge impact on the sector. However, the plan is still in its early days, with many years of planning required to implement it fully.

High Spending

Improving the quality of care is one of the government’s foremost priorities, a fact reflected in the substantial investments it is making in the system. South Africa commits considerably more resources as a proportion of national wealth to health care than most countries. Indeed, while the World Health Organisation (WHO) recommends spending 5% of GDP on the sector, South Africa spent 8.3% from public and private sources in 2011, a level it has maintained in recent years. The public-private split is fairly equal – around 4.1% of GDP goes on private sector spending, and 4.2% in the public sector – even though only 16.2% of the population uses private care, according to Africa Intelligence, a South African research and strategy firm. Per capita spending on health care is $521, the third highest in Africa, and indeed above that of countries including Romania and Bulgaria, members of the EU.

Costs & Benefits

The relatively high level of health care spending relative to GDP can partly be explained by the burden of disease in South Africa. But critics of the health care system in its current state argue that these resources, while ample, are poorly allocated, and that South Africa gets poor value for the substantial amounts of money it invests. Aaron Motsoaledi, the minister of health, told local press in September 2012 that South Africa is “a country spending more on health but having poor outcomes”. A 2012 report by market intelligence firm GlobalData suggested that the health sector’s growth is being impeded by poor infrastructure in rural areas and the lack of a universal system.

Budget 2013 

The draft 2013 budget allocates R133.6bn ($16.3bn) for health care, which is equivalent to around 8.5% of total government expenditure.

Priorities include investments in facilities and infrastructure, increasing retroviral coverage and preparing for the rollout of the NHI, which is expected to boost demand for health care services substantially.

Spending on infrastructure has continued to grow – it jumped from R3.3bn ($402.3m) in 2009/10 to R5.4bn ($658.3m) in 2012/13, and is expected to grow to R6.5bn ($792.4m) over the next three years. In 2013 much of this funding will go towards building or refurbishing 1967 health facilities and 49 nursing colleges nationwide. The higher investment is linked to preparations for the introduction of NHI, as the government wants to ensure that the system is prepared to deliver the universal quality care that the insurance scheme promises, and thus is laying the groundwork well before NHI is introduced. This move also entails extensive training for sector personnel. The draft budget allocates more than R800m ($97.5m) to expanding anti-retroviral treatment, and the Treasury has identified the need for a further R100m ($12.2m) in 2014/15 and R348m ($42.4m) in 2015 to cover funds lost from cuts to the US President’s Emergency Plan for Aids Relief.

“South Africa’s poor health care system is not simply an issue of spending,” Brian Daniel, CEO and country manager of pharmaceuticals company Pfizer, told OBG. “The government allocates 8.5% of its spending on health, which is more than most countries. The problem is that it is poorly managed. The new minister understands how dire the situation is and that the public system is broken, and therefore, he is championing the NHI and knows what is needed. Clearly, for it to succeed, it must leverage the help of the private sector. There’s a huge skills gap and human resources shortage amongst government employees.”

Vital Statistics

South Africa is one of the few countries to have seen a fall in life expectancy at birth over the past two decades, from age 63 to 55 between 1990 and 2009, according to the WHO. This drop is largely attributed to the spread of HIV/AIDS, which makes those infected vulnerable to diseases such as tuberculosis (TB) and pneumonia. These often prove fatal given the victim’s depressed immune system. However, the spread of anti-retroviral drugs in recent years is expected to help stall this fall in life expectancy.

South Africa’s HIV prevalence rate is 10% – one of the highest rates in the world, with some 5m people affected – according to official statistics from 2013. Some 200,000 South Africans are expected to die from HIV-related illnesses in 2013. Alarming though these statistics are, the infection rate is stabilising, and HIV-linked fatalities are sharply declining thanks to substantially improved interventions for patients.

Also influenced by the high HIV/AIDS rate, communicable diseases are the leading cause of mortality, with 983 annual fatalities per 100,000 people. Fatality rates from non-communicable disease and injuries are 635 and 72 per 100,000, respectively. The rate of death from injuries reflects South Africa’s troubling occurrence of violent crime, much of which is linked to substance abuse. “Lifestyle diseases such as obesity, diabetes and hypertension also have very high rates in South Africa,”

Ann-Marie Hosang-Archer, managing director of pharmaceuticals firm Lilly South Africa, told OBG. “Progress is being made, in terms of public education to encourage healthier living, and more public-private partnerships will further improve the quality of care.”

On some basic measures of public health, South Africa performs well, especially by African standards, but still lags well behind the developed world. The under-five mortality rate is 57 per 1000 live births, less than half the African average of 119, but well above the European level of 14. Maternal mortality is 300 per 100,000 births, compared to an African average of 480.

South Africa suffers from a shortage of doctors: it has 7.6 physicians per 10,000 people, according to the WHO – this is more than three times the African average of 2.5, but not much more than half the global level of 14.2. On the other hand, due to its tradition of hospital-based care – now slowly being reformed – it has a relatively high number of hospital beds, at 28 per 10,000 people, just below the global average of 30.

Reviewing Progress

In April 2013 the Health Systems Trust (HST), a local non-governmental organisation engaged in promoting health system development and reform, published its 2012/13 South African Health Review (SAHR). The report noted that the country is currently implementing a range of health sector reforms “aimed at transforming the public and private health landscapes and overcoming ever increasing inequities between its society’s wealthiest and poorest”, and notes progress made in tackling HIV and TB.

Parallel to the SAHR, the Health Systems Trust issued its seventh District Health Barometer (DHB), which provides data and analysis on health system performance at a regional and local level. The DHB found more variable results in the fight against infectious disease. Between 2007 and 2010, the cure rate for new TB patients who test positive rose from 51% to 73%. Some 98% of antenatal clinics surveyed now perform HIV testing, with 63% using the rather effective polymerase chain reaction tests, up from 5% in 2007. However, it also found that only 44% of children born to HIV-positive women receive anti-retroviral treatment. The findings show considerable progress in priority areas, but also indicate that there is some way to go to ensure that HIV/AIDS and TB are contained. The report seems positive, as it shows that South Africa can improve public health outcomes greatly when policy and resources are in place, and that sound foundations exist.

National Health Insurance

South Africa’s health sector depends on both continued investment and reform of the system. The most significant ongoing development in the sector, the implementation of the planned NHI programme, entails both substantial investment and radical reform. Simply put, NHI is intended as a system that ensures that all South African citizens – and legal long-term residents – have access to essential health care, regardless of income. To an extent, the NHI springs from South Africa’s existing constitutional stipulation that all have the right to obtain health care. But the government acknowledges that, in reality, this is currently not the case. It sees the extension of NHI as essential to tackling the country’s disease burden – as the majority of the population, including those who tend to suffer the greatest ill health, cannot access good quality health care presently.

Coverage

The NHI will be a compulsory scheme, with every citizen earning over a set income obliged to contribute, even if they are also covered by private health insurance. It aims to provide access to a “defined package of comprehensive health services”, from primary through specialised secondary to highly specialised tertiary and quaternary levels of care. This also includes preventative and rehabilitative treatments.

The government has ruled out covering a number of services, including discretionary cosmetic surgery, expensive dental procedures undertaken for aesthetic purposes, diagnostic procedures outside approved guidelines and expensive spectacle frames. Except in exceptional circumstances, the NHI will not cover medicines not included on the essential dugs list. Reflecting shifting priorities in the health system, the NHI will put an emphasis on prevention of disease, though concrete details have yet to be revealed.

The whole programme is expected to take 14 years to implement, meaning that it should be complete by 2025, though sceptics, pointing to the substantial cost and administrative complexity of putting such a vast scheme in place, predict that 2030 is more realistic.

Improvements

Absolutely central to the NHI’s roll-out is a massive programme of upgrades to the country’s existing public health facilities. The government sees improvements in the system as a prerequisite for creating an environment in which universal insurance can function, taking the view that providing funding to give people access only to shoddy facilities and poor-quality care defeats the object of the programme.

The NHI plan includes three mechanisms that aim to ensure that the care delivered is of good quality: first, the investment programme in buildings and equipment; second, the implementation of core standards, with a watchdog called the Office of Health Standards Compliance; and third, “radical change” to health care management. The aim is to standardise care countrywide and ensure that managers of hospitals have the specific skills and qualifications required to run them.

The government’s Green Paper on the NHI published in August 2011 outlines the broad principles of the scheme and the basics for its implementation. Like other Green Papers, it seeks to attract public comment and engagement. It is due to be followed by a draft White Maternal mortality rate per 100,000, 1990-2010 Paper, expected in 2013, with firmer proposals on the form the NHI will take and how it will be implemented. Following the White Paper’s publication, there will be another stage of public engagement and consultation, after which the legislation will be written and submitted to Parliament. Finally, if Parliament passes the bill, the president will approve it.

The Department of Health (DoH) has already outlined a number of priorities for the first five years of NHI implementation, aiming to strengthen the system in six areas: management; quality; infrastructure; medical devices and equipment; human resources planning, development and management; and information management and systems support. GlobalData expects the NHI to reduce the costs of direct health care for low-income groups, particularly those in rural areas who currently experience higher levels of poverty and disease.

Large Impact

Government papers assert that NHI will “make the [private] sector more sustainable by making it levy reasonable fees”, and will encourage greater cooperation between the private and public systems, ensuring they complement one another. Private medical providers will be allowed to treat NHI patients provided they meet a number of criteria. Operators will have to comply with quality standards, offer a broad range of services including preventative care and health promotion, and accept capitation as a means of payment, as well as “appropriate pricing mechanisms”.

The extent to which private providers will be willing to treat NHI patients, which is likely to require them to lower prices in most cases, remains to be seen. “Doctors have said that as private providers, they want to be involved,” Dr Darian van Loggerenberg, former head of the private practice department at the South African Medical Association, told OBG. “They want to be paid a fair market-related rate, as every NHI patient that they see takes the place of a full-paying private client.”

Van Loggerenberg gives the example of a circumcision operation, which costs R1000 ($122) at private rates, but which the DoH wants to price at R200 ($24) on the NHI. He estimates that private health schemes will lose around 25% of their customers as the least affluent currently on private health care shift to the NHI. However, this will not necessarily be through direct migration; as many schemes “reset” every year, allowing customers to set the amount of expenditure, and as a result many will continue to use schemes to fund their health care interactions until their private coverage runs out before relying on the NHI.

One of the bigger questions for private health providers is if patients will be able to “top up” the funds they can access through the NHI with extra cash from their own incomes or other insurance schemes, which would make access to private health care easier withLife expectancy, 1990 & 2009 out the providers necessarily dropping their prices. Under current plans, this would not be possible, limiting the scope for NHI to allow a greater number of South Africans to access private practitioners and facilities.

Pilots

In April 2012 the DoH launched pilot NHI projects in 10 districts, chosen on a number of criteria, including standard of health facilities, demographics and public health profile. The DoH is particularly keen to see how the system can help tackle public health issues in rural and less affluent areas. While the projects are preliminary and intended as part of a development process for the NHI, the importance that the government places on them is clear from the R1bn ($121.9m) being invested by the Treasury.

The pilot districts are located around the country, and will be tasked with improving the public health system in preparation for the full implementation of NHI. They are expected to test the reformed health service structure, which puts an emphasis on primary health care and an improved system of referral that takes pressure off hospitals and enhances the quality of care. Key among the indictors will be reducing high maternal and child mortality rates through local interventions. The DoH hopes the pilots will teach it about how districts will handle the greater burden of responsibility they will be given under the NHI, as well as about the costs of nationwide implementation. The pilots will also monitor patterns of health care use, which will support forests of overall costs down the line.

Adrian Gore, CEO of financial institution Discovery Holdings, told OBG, “To the credit of the government, there’s a rationale to the scale of NHI and how long it will take to roll out. It’s a remarkably complicated initiative and the country cannot afford to get it wrong.”

Price Tag

The NHI was expected to cost R125bn ($15.2bn) in 2012, rising to R256bn ($31.2bn) in 2025, according to the Green Paper. The high expense has led some to question whether South Africa can afford the project. But as Di McIntyre, a health economics professor at the University of Cape Town, has said in the national press, “this is the total amount of money needed for publicly funded health services; it is not extra funding”. Indeed, the government already allocates more than R130bn ($15.85bn) to health care, and Treasury forecasts that the health budget will be worth more than R180bn ($21.9bn) by 2025. This means that the budget will need a further R75bn ($9.1bn) to cover the cost of NHI. She suggests that health care spending could rise as a proportion of the budget, or that taxes be imposed to make up the remainder.

Outlook

South Africa’s health sector could be entering the early phases of a large-scale overhaul. The NHI and the shift from a hospital-based care model towards primary care and a system of referral are two interlinked objectives. The NHI should help improve the public health landscape in South Africa through broadening access, but as the DoH acknowledges, it will not succeed without substantial investment, an extensive programme of improvements to the health system that includes facilities and staff training, and the creation of a more streamlined structure focused on primary care.