Prior Institute
Healthcare Management Consultants

SPEECH NOTES FOR THE ACTUAL PRESENTATION TO THE PORTFOLIO COMMITTEE, WEDNESDAY 18th MARCH


Introduction
Mr Sidders has been in the healthcare industry for over 20 years with a broad base of experience, but which has concentrated for the last 15 years on consulting. In recent years, with the acquisition of his own healthcare consulting company, this has focussed on the corporate environment and issues of national health, i.e. healthcare for all.

The vision is for a solution to the dilemma facing South Africa. Our key vision is to bypass medical aid administrators especially for the bulk of the workforce, encourage private industry to develop sufficient clinics to deliver all out-of-hospital services comprehensively and cost effectively and then to use State hospitals for hospitalisation only Medical aid administrators role will then be much reduced and consequently may cope more efficiently serving only at the top-end of employee market who want and who can afford costly private medical aid. This plan will require 2-3 years to evolve.

We have already written to Minister Dr Zuma and also addressed the Director for Department of Health Financing and Economics.

We do not presume to have all the answers as the issues arc complex, however, we definitely have extensive experience, creativity and an independent objective view.

1. Healthcare needs to be accessible and affordable to a much broader base of people in South Africa, but particularly the employed workforce not currently on any healthcare cover.
Our view is that the elderly and unemployed are the responsibility of the state. The employed masses however, should probably be a responsibility for the employer/employee, at least by way of participation and assistance financially.
2. Our view from the outset, in spite of the outcry in the industry, is that we agree in principle with much of Dr Zuma's concepts particularly regarding national health insurance to financially support state hospitals.
3. The mechanism for delivering healthcare has got to change as the old method of private medical aid schemes are too costly, too complicated, too inefficient and benefits are not comprehensive enough. The fee-for-service system also includes the hugely abused disincentive for suppliers to over-service members.
What is required is a simple comprehensive low cost method of providing healthcare on a broad basis. This can probably only be achieved via primary healthcare clinics Hence our vision and new model for South Africa. Private primary healthcare clinics for the employed. State primary healthcare clinics for the elderly and unemployed.
4. The premise that healthcare may or should only be delivered through the medical aid administration market and insurance industry once it is regulated under the Medical Schemes Act is perhaps wrong. A new, cheaper and different delivery mechanism is required.
If, however, this premise is accepted as correct, and most of the other changes recommended to the Medical Schemes Act are negotiated correctly and implemented, it follows then that membership for the total workforce onto medical aid would have to be compulsory. It is critical to prevent anti-selection to ensure an adequate spread of risk for the viability of the fluid or fluids in order to protect the balance of members and corporate employers who fund in-house schemes. The consequence to this issue is the problem that the medical aid administration would never be able to administer such a large membership. This, therefore is not a solution.
The bulk of medical aid cover to the high income earners (traditionally, essentially geared to whites) has been delivered via medical aid administrators.
The administration market has performed very poorly over the years. They have allowed, if not fueled, cost escalation and have not run particularly efficiently and have not built adequate reserves. Most administrators are currently in crisis due to their lack of foresight in preparing timeously and adequately for the changes taking place in the country. Whilst the administrators will probably always be required for elite and costly type medical schemes, yet we do not believe they hold the solution for the bulk of South Africa's workforce. On the contrary, we are convinced that the solution needs to exclude the administrators.
The system is too costly and especially too complicated and too technically intensive. This is evidenced by the fact that not even the higher income earners, who are usually more educated members currently on medical aids understand how their schemes work. It is just too complicated.
If they cannot administer the current 6 million, how will they ever cope with another 12 million.
A new more simple and different delivery mechanism is required.
5. The current fee-for-service system is sick and dying a costly death. This is because of the inherent adverse disincentive for care givers and service providers to over-service members and rape the schemes financially. This is no longer sustainable and cannot be perpetrated into the rest of the workforce potential membership.
6. In order for Government to spread the costs, the answer is to encourage private industry to develop sufficient clinics to deliver all out-of-hospital services comprehensively and cost effectively, and then use State hospitals for hospitalisation only.
Medical aid administrators' role will then be reduced so that they can cope more efficiently with their members.
As funding will always be a major impediment to providing healthcare to the masses, it is critical to include private enterprise in as far as possible as they are able to fund many of the ventures and enterprises. The target should perhaps be to endeavour to get private industry to fund healthcare for the total workforce and leave the state to funding health for the elderly, under-privileged and unemployed. This may obviously have to be phased in.
Corporate organisations will support cost effective healthcare programmes, provided the entry cost is low enough.
It is apparent that private enterprise will have to be involved in the delivery of healthcare, this means participation and financing.
In order to maximise this potential, creative legislation and incentives are required to both entice and guide this huge resource. One needs to be careful not to stifle private enterprise who must be a key participant -but we recognise the need for State to keep this correctly focussed.
7. The government's concept on how national health should work is on the whole sound and practical for our environment, provided:
- the monthly premiums are not too high to start off with;
- that it is mandatory for employees as well as employers to subsidise this premium by all equal 50%;
- Collection of contributions for NHIS.
Although the ideal vehicle would seem to be the medical aid administrators, who already collect monthly contributions for 1/3 of the workforce, however, as this is not done efficiently we do not believe they will be able to collect for another 2/3rds of the workforce. A different collection method is required. Note that there are currently 2 companies in South Africa who can collect contributions and pay out the fees to clinics and state hospitals.
- it is compulsory for all employees (this is obviously quite controversial both to labour (unions) and to corporate employers who fear the entry cost. One could perhaps exclude only staff on company's medical aid schemes, but this could cause a huge problem in the long-term and not achieve the Department of Health's intention of funding state hospitals adequately. Consequently, it should be compulsory for all who are working);
- this income goes to subsidise State hospitals;
- state hospitals are then upgraded with the money and made into profit centres;
All this facilitates our concept to a new, low cost delivery mechanism.
8. Open enrolment is only fair and workable if a medical membership was compulsory for all employees as this would then ensure adequate spread of risk and stop anti-selection. However, medical aid cover is not the answer for the majority of the workforce. As stated, it is too complicated, inefficient and impractical, besides being too costly. Employers will only support cover provided the entry cost is financially realistic for them.
9. As a result of all the above, our vision becomes a practical all-embracing solution. Staff will have access to low cost primary healthcare clinics for all out-of-hospital services and then good State hospitals for all hospitalisation.
10. The cost for employers' healthcare programmes will then be substantially reduced and/or the money spent with high-income earners only could then be spread amongst all staff on a more equitable basis. In this way South Africa's complete workforce would have access to good healthcare without costing the State very much.

THE MODEL
For a new delivery mechanism in South Africa that must be low cost and simple, yet offering comprehensive benefits.

As it is unlikely that the administration market will ever cope with administering 18 million members on medical schemes, we must leave the administration market to cater for the higher income earners only who want and can afford private medical aid. This will probably be half or two-thirds of the current membership.

Step 1
Primary healthcare clinics or Care Centres
For a low capitated fee members would have unlimited access for all out-of-hospital services in one place.
The clinic would maintain membership records and medical histories for all patients.

Step 2
The clinic will be the perfect gatekeeper and only on referral can patients be hospitalised, ideally to State hospitals (this will phase in as the Government's new National Health Insurance Scheme works and the hospitals are upgraded). In the meantime some of the members, i.e., medium income earners would be capitated on especially negotiated contracts to private hospitals for these services.

Certain higher income earners would be on hospital cover options on normal schemes.

A key to accessibility is obviously going to be the speed at which clinics are built. Several companies are going ahead and we expect some 30 - 40 clinics to be built in key urban and industrial areas in the next year.

Clinics or Care centres will offer more services than the recent primary healthcare clinics, i.e.; there will be a doctor, more drugs as well as radiology and pathology, etc.