A guide to the essentials features of the NHI Bill, 2019

On 18 June 2018, the Minister of Health published two draft bills for public comment - the Draft National Health Insurance Bill and the Draft Medical Schemes Amendment Bill. Some 197 written comments were received and certain departments and groups were consulted.

On 8 August 2019, the Minister introduced the National Health Insurance Bill in the National Assembly.

This article describes the essential features of NHI.

1. It is compulsory insurance

An NHI Fund is to be established as a single purchaser and single payer of healthcare services in South Africa.

Stated plainly, it is akin to a very big state-run medical scheme or insurer, but without competitors. So it is like SAA without Comair or Safair, GEMS without Discovery.

Under current legislation, a medical scheme member generally chooses the doctor, hospital and specialist and the medical scheme refunds that expense to the member, or for convenience directly to the provider of the service.

Under NHI, the Fund purchases the health care service "on behalf of the user" (mainly South African citizens and permanent residents) at accredited healthcare providers free of charge at point of care. The Fund will also determine the payment rates for services and "must negotiate the lowest possible prices for goods and health care services without violating applicable law".

The Fund will be:-

  1. big to provide cross subsidisation or "social solidarity" as it is defined in the Bill; and
  2. a national public entity like the Road Accident Fund, SA National Parks, Eskom, SABC and SAA.

2. What about medical schemes?

The current role of medical schemes will be restricted to only providing cover for health services not covered by the Fund. This is defined as complimentary cover or one that fills the 'gaps' as was stated in the White Paper on the topic.

This restriction could apply to voluntary private health insurance schemes as well, although they are not mentioned in section 33 of the Bill but in section 6.

3. Where are such services provided?

Services covered by NHI will be obtained at both public and private providers provided that:-

  1. Such a provider is accredited – meaning it is certified by the Office of Health Standards Compliance, registered by the required health professions council (if needs be) and it meets certain prescribed specific performance requirements; and
  2. A user will need to be registered with the Fund and at a particular healthcare provider. Portability of health services will be prescribed, and the 'referral pathways' must be followed starting at primary healthcare at the first port of call before specialists and hospitals.

The National Health Act of 2003 has at its objective the establishment of a national health system (to include public and private providers of health services) and to provide the best possible health services that available resources can afford (in terms of section 27 of the Constitution).

4. What services/benefits will be covered by NHI?

At this stage, such information is not available.

The Bill does envisage a formulary and a Benefits Advisory Committee, who in consultation with the Minister and the board of the Fund, will determine the benefits provided by the Fund. Section 8 of the Bill states that a user will be personally liable for (a) treatment not included in the formulary, (b) services that are not medically necessary and (c) services due to noncompliance with the referral pathways.

5. Who will fund the NHI?

The chief source of revenue for the Fund will be from general tax revenue, including:-

  1. shifting the provincial equitable share and conditional grants to the Fund;
  2. relocating the medical scheme tax credits paid to medical schemes;
  3. payroll tax; and
  4. surcharge on income tax.

6. How much will it cost?

According to reports, National Treasury will sometime later provide a revised costing to the one they produced for the White Paper in 2017. The White Paper estimated that the additional funding required in 2025/26 needed if baseline (i.e. pre-NHI) health expenditure increases at 3.5% per annum in real terms is R71.9 billion in 2010 prices. The source for this is a National Treasury projection of 2012. The White Paper found that the funding shortfall increases if the baseline resources grow by a smaller margin, say if 2% each year will lead to a shortfall of R108 billion in 2025/26. It concludes that 'over the long run, the pace of economic growth is an important indicator of overall growth rate in health expenditure". This is ominous given the poor economic growth that actually took place over the past years.

In reply to a question on a recent radio interview, the Deputy Director General:- National Health Insurance stated that it is the department's intention for NHI to be cheaper than current medical aid.

7. Can I opt out of the Fund?

  1. Payment to the Fund is mandatory and is collected as part of general tax revenue.
  2. The Bill does not expressly exclude persons from obtaining services privately and outside the Fund, however, as mentioned above, private insurers and medical schemes are not allowed to provide cover for services covered by the Fund. Hence, expensive treatments previously covered by medical schemes, such as hospitalisation, could become unaffordable without assistance from the Fund.

The Health Professions Act currently requires a practitioner to generally inform the patient of the intended fee, if it is requested by the patient or if it exceeds the usual charges. The amendments to be made by the Bill to the Health Professions Act limit this obligation to services outside those covered by the Fund. These amendments make no mention of services made privately and covered by the Fund.

8. Who runs the Fund?

  1. The Fund will be run by a Board of 11 persons – all appointed (after interviews by an ad hoc advisory panel) and removed by the Minister of Health with one board member actually representing the Minister on the Board.
  2. To be appointed, a board member needs to be (a) fit and proper, (b) have the appropriate skills, (c) perform effectively and in the interest of the general public, (d) not be employed by the State and (d) not be conflicted.
  3. To be removed, a board member may be removed by the Minister if that person is disqualified under any law, or fails or is unable to perform the functions of office. The Minister may also dissolve the board.
  4. The board will appoint a CEO.
  5. The board will appoint various committees as will the Minister. The Minister must establish the following as advisory committees of the Fund:-

    1. A Benefits Advisory Committee – to advise on the health service benefits to be provided by the Fund;
    2. A Health Care Benefits Pricing Committee (of not less than 16 and not more than 24 members) to recommend the prices of health service benefits to the Fund; and
    3. A Stakeholder Advisory Committee –comprising representatives of patients, providers, labour, civil society and public health entities.

9. Procurement

An office known as the Office of Health Products Procurement is to be established within the Fund to centralise public procurement of health related products, such as medicines, medical devices and equipment.

A District Health Management Office is to manage primary health care services, while there will be a Contracting Unit for Primary Health Care as well.

10. Will it be efficient?

The National Health Act of 2003 deals with the delivery of the services to be paid for by the NHI.

The memorandum on the objects of the Bill expressly states that the Bill will also create mechanisms for the equitable, effective and efficient utilisation of the resources of the Fund to meet the health needs of users and preclude or limit undesirable, unethical and unlawful practices in relation to the fund and its users.

In this regard, it is interesting to note that it is one of the few, if not the only, piece of legislation that expressly states that the "Competition Act is not applicable to any transactions concluded in terms of this Act".

In the schedule to the Bill, the Competition Act is to be amended to exclude the Fund as "a single public purchaser and single-payer of health care services".

The only other exclusions at present under the Competition Act are collective agreements under the Labour Relations Act and non-commercial socio-economic conduct. At present, the competition authorities have concurrent jurisdiction with any other regulator in any other industry.

The Competition Act itself acknowledges that "an efficient, competitive economic environment, balancing the interests of workers, owners and consumers and focused on development, will benefit all South Africans". Under this Act, competition is good thing and monopolies are prevented by merger control.

Issues dealt with by the Competition Act such as the prohibition of restrictive vertical practices, abuse of dominance and price discrimination will not be applicable to NHI. Perhaps of most relevance, the new provisions in the Competition Amendment Act prohibiting abuse of buyer power by a dominant firm, will not be applicable to the NHI. This exclusion will likely prevent the NHI from facing floods of complaints under the new section, given the immense scale of the NHI's envisaged procurement activities.

11. Implementation

  1. Under the Bill sent out for discussion in June last year a three phased approach was adopted. The first phase being from 2012 to 2017. This phase has passed.
  2. The Bill of 2019 has two phases – the first from 2017 to 2022 and the second from 2022 to 2026. Both phases have (amongst others) the common objective of initiatives to strengthen the health system. Section 57 of the Bill has objectives that must be achieved in Phase 1.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.