South Africa


  • Service: Advisory, Performance & Technology
  • Type: Business and industry issue
  • Date: 2011/06/07

The South African proposal for health sector reform 

With 10% of the world population and 25% of the global disease burden, Africa accounts for less than 1% of global health spend and 2% of the global health workforce.

Most health expenditure in Africa continues to be through impoverishing out-of-pocket spending (African Union, 2006). Given this scenario, it is widely acknowledged that the continent has massive health financing challenges.


The South African Government is tackling some of these issues through the introduction of a National Health Insurance (NHI) system.


Rationale for a NHI


Two key characteristics of the current health sector in South Africa have, generally, driven the decision by Government to introduce a NHI.


Firstly, inequitable access to quality health services between those with health insurance and those without continues to pose a challenge to Government. Those covered with private health insurance (15%) use internationally comparable private hospital services while those without (85%) use the ailing and overstretched public health system.


Secondly, medical costs in the private sector have escalated to levels widely considered to be unacceptable, with medical inflation becoming increasingly higher than the Consumer Price Index (CPI). Between 2000 and 2008, overall medical inflation increased 3.65% per year more than CPIX and was 8% higher than CPI by 2010.


Experience from countries such as Canada, that has a well established national health insurance system in place, demonstrates that the creation of a single payer (one national scheme) can substantially decrease medical costs. This is because the central body has optimal control of prices that may be charged by health service providers, such as hospitals and clinics, that will therefore need to manage costs accordingly.


The decision to introduce National Health Insurance is therefore an attempt to curtail the private sector cost escalation and improve access to quality services for the majority of the population.


The National Health Insurance proposal


The proposal is to introduce the NHI scheme in three phases over 14 years starting in 2012. Some of the defining features include:


  • Compulsory membership of all citizens for universal coverage
  • Cross subsidisation of the unemployed by employed tax payers
  • A publicly funded, tax-based system, administered through both public and private health facilities
  • A single payer system with one central health authority administering contracts with service providers
  • Accreditation of both private and public health facilities to enable participation in the NHI, using a single set of standards
  • The option to continue with a private medical scheme over and above mandatory NHI contributions
  • Provision of free service at the point of treatment to South Africans and other legal residents who need it – from primary health care to highly specialised services.


Response to the proposal


Criticism of the proposed system has primarily revolved around affordability. South Africa has high levels of unemployment (around 24% in the last quarter of 2010) and a large informal sector. The costs involved in upgrading the public health system are extensive and the small pool of tax payers, about 7 million individuals in 2010 (14% of the population), are set to carry much of the burden.


Concern has also been expressed about governance and accountability mechanisms. The shift of the national authority from provider of services to purchaser involves a significant role and skill shift – with little information as to how this gap may be filled. In addition, centralised buying is regarded as conducive to corruption, given the number of large contracts awarded from a single office.


Finally, should Government apply the principle fundamental to the functioning of the Canadian system – no private health provider outside of the NHI may charge for a service already offered by the NHI – both private hospitals and medical schemes could face substantial shrinkage. Private medical schemes would be limited to covering ‘top ups’ and specialised services such as ophthalmology and plastic surgery not covered by the NHI. Private hospitals would be faced with the decision of either contracting into the NHI, at prices controlled by the central authority, or offering ‘top up’ services only. Either way, the sector is likely to face significant efficiency challenges.


Perhaps central to Government’s success in taking the plan forward will be opening up the detailed plans and costing to public scrutiny. There is a wide range of health sector stakeholders whose input and buy-in could substantially bolster tax payer confidence in the changes to come.


A policy on NHI has been promised for release, which offers a long overdue opportunity to rally support.



Kathy Tyacke
Principal Advisor Healthcare Consulting
Performance & Technology
Tel: +27 (0)11 647 8625