PRIVATE HEALTHCARE MARKET INQUIRY REPORT: IMPLICATIONS FOR NHI

This article was published on 4 October 2019 in the Law Society of SA Legalbrief Weekly, an initiative of the Law Society of South Africa & Juta Law

Recommendations in the recently released Competition Commission’s health market inquiry report were made with the aim of providing a better-functioning environment for national health insurance (NHI). According to the report’s executive summary, this is noting that NHI implementation ‘is some years away’ and that the fund proposed in the 2019 NHI Bill is ‘scheduled to be operational by 2026 at the earliest’. The six-year inquiry found the private healthcare sector to be ‘neither efficient nor competitive’ and characterised by low levels of ‘value-based purchasing’, poorly regulated practitioners and accountability ‘failures’ at many levels. In the panel’s view, this has left consumers ‘disempowered and uninformed’ – especially in the prevailing ‘highly concentrated’ funder and facilities markets. The Department of Health is partly to blame, not having used its ‘existing legislated powers’ to conduct the ‘regular reviews … required by law’ and hold regulators ‘sufficiently accountable’.

Key recommendations include establishing a supply-side regulator (among other things to formulate a ‘needs-based system of licensing’); making a standardised, single benefit package a mandatory medical scheme option; introducing a risk adjustment mechanism (among other things involving income cross-subsidisation and disincentivising risk-based competition between medical schemes); and putting in place a ‘reliable outcomes measurement system’ (allowing consumers to compare and select healthcare providers, and funders to contact those offering value for money). In addition, the report calls for changes in the ‘ethical rules’ of the Health Professions Council of SA (to promote ‘innovation in models of care’ that allow for ‘multidisciplinary group practices and alternative care models’, ending the dominance of the fee-for-service payment mechanism); the development of guidelines for health professional associations (‘to ensure that they are not at risk of potentially anti-competitive behaviour’); and compulsory training for undergraduate and postgraduate students on the cost implications of healthcare technology and the impact of health system financing models on patients’ healthcare choices.

While President Cyril Ramaphosa’s remarks at the health sector anti-corruption forum launch this week tended to point to a focus on the plethora of illegal practices bedevilling state-run healthcare institutions, he nevertheless noted the importance of curbing ‘false invoicing, collusion and price fixing’ by private service providers. Also speaking at the launch, Justice & Correctional Services Deputy Minister John Jeffery said the Council for Medical Schemes has estimated that private healthcare system fraud amounts to ‘approximately R22bn annually’. According to Health Minister Zweli Mkhize, ‘over-servicing’ consumers and ‘over-pricing’ products in some markets are the ‘big issues’ requiring attention as his department rolls out NHI (Engineering News).

Meanwhile, the National Assembly’s Health Committee has extended the deadline for written submissions on the NHI Bill by seven weeks – to 29 November. This will allow ‘important’ healthcare delivery stakeholders two weeks more than they requested to prepare input in anticipation of parliamentary hearings likely to be held next year – although no dates have been announced. The decision may have been influenced by recommendations in the Competition Commission report, which committee chair Sibongiseni Dhlomo believes point to the need for government intervention. Public hearings in all nine provinces are scheduled to begin on 25 October in Mpumalanga, followed by the Northern Cape on 1 November.

NHI BILL: PUBLIC PARTICIPATION PROCESS

The thinking behind Parliament’s decision to hold provincial public hearings this year on the National Health Insurance (NHI) Bill has not been clearly communiciated in the mainstream media. A Parliamentary Monitoring Group (PMG) sound recording of the meeting at which National Assembly Health Committee chair Sibongiseni Dhlomo announced what is envisaged confirmed that several stakeholders have already approached the committee for more time to prepare detailed written submissions and, subsequently, to present their views during parliamentary hearings. Given the importance of allowing committee members enough time to study these submissions and others already received, according to Dhlomo it seems likely that parliamentary hearings will only take place next year – possibly also allowing more preparation time for those requiring it.

Meanwhile, members of the general public will air their views during provincial hearings scheduled to begin on 25 October in Mpumalanga . Hearings in the Northern Cape province will follow on 1 November. Although dates for the remaining provinces have yet to be announced, four days have been allocated to each province thus far. According to the PMG recording, Dhlomo believes it is important that committee members have an opportunity to hear first-hand the perspectives, concerns and expectations of ordinary South Africans before considering those of stakeholders with the resources to make more detailed written submissions and travel to Parliament to present them in person.

A presidential health accord signed in July maps out what needs to be accomplished during the next five years if NHI is ever to get off the ground. Among other things, the compact entails ‘engaging the private sector’ on improving healthcare service access, coverage and quality.

NHI NEWS FLASH:

During a meeting of the National Assembly’s Health Committee on 29 August, Department of Health DG Precious Matsoso told members that work has already begun on drafting amendments to Acts likely to be affected when the National Health Insurance Bill becomes law. They are listed in a schedule to the Bill and include the 2003 National Health Act. Last week, in a written reply to questions from the DA’s Mbulelo Bara, Health Minister Zweli Mkhize provided some insights into ‘direct powers’ likely to be ‘allocated’ to provincial governments in amendments to this Act.

Readers are encouraged to bear in mind that:

  1. Any proposed amendments to the Act will need to be released as a draft Bill for public comment;
  2. Once finalised, that Bill will then need to be tabled in Parliament for processing; and
  3. Public hearings will then need to be held in the National Assembly and, as the Bill proceeds through Parliament, also in the NCOP and provincial legislatures.

This is just one example of the extent to which NHI implementation is likely to be postponed until other legislation affected by the NHI Bill has been synchronised with it. Realistically, that cannot be done until the Bill has been finalised and passed by Parliament.

The same will apply to any proposed amendments to the 1998 Medical Schemes Act. Although a draft Medical Schemes Amendment Bill was released in June 2018 for comment, its proposals appear not to be in line with the NHI Bill – tending to imply that it is being reworked and will therefore need to be released again for public input. It will then need to be tabled in Parliament and undergo the same process as any other Bill.

Against that backdrop, the NHI Bill’s passage through Parliament is likely to be long, arduous and fraught. It could take many years, begging the question: Has this has ever been explained to grassroots ANC members and supporters? If the party’s 2019 election manifesto is any indication, probably not.

ON THE VEXED ISSUE OF ‘PRESCRIBED ASSETS’:

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In the absence of a clear policy statement, speculation is rife about the likelihood of government introducing ‘prescribed assets’ as one measure to rescue struggling state-owned companies and boost economic growth. Vague comments on the subject from President Cyril Ramaphosa and ANC national executive committee member Enoch Godongwana have been quoted endlessly in the mainstream media. However, apart from an undertaking in the ruling party’s 2019 election manifesto to ‘investigate the introduction’ of prescribed assets on the funds of financial institutions – with the aim of ‘unlock(ing) resources for investments in social and economic development’ – only one Cabinet member has made an official comment on the matter.

In June – addressing pension fund trustees at a function in Johannesburg – Trade & Industry Minister Ebrahim Patel urged them to play their role in stimulating economic growth by investing in ‘real assets’. This was noting that government ‘is looking not just to foreign direct investment’ to stimulate the economy but also – ‘and very strongly’ – to domestic investment. The Minister believes fund trustees ‘have a responsibility … to help lift the long-term rate of growth of the South African economy as a key means of realising the pension promise’.

‘A sluggish economy impacts directly on the performance of your overall portfolio,’ Patel is quoted as having said in a Department of Trade & Industry media statement at the time. Against that backdrop, he invited the Council for Retirement Funds to ‘engage with government to learn more about ‘the new administration’s vision’ for promoting sustainable development, along with the interventions being considered. In the Minister’s view, the situation in which SA now finds itself calls for for ‘a longer-term perspective on returns’.

An article along these lines appeared in Legalbrief Today on 12 June, under Policy Watch

IN PARLIAMENT LAST WEEK:

DEBT RELIEF:

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It could take as long as two years to implement the 2019 National Credit Amendment Act, according to Department of Trade & Industry officials. Briefing members of the National Assembly’s Trade & Industry Committee on Tuesday, they emphasised the importance of avoiding any ‘unintended consequences’ identified during a socio-economic impact assessment concluded in May. One could be that credit providers ‘implicitly’ draw a distinction between higher- and lower-risk low-income earners applying for credit – creating a ‘dual credit system’ and pushing the very people the Act seeks to assist away from legitimate credit providers into unregulated, informal markets.

Signed into law last month, once operational the Act will make long-term debt intervention accessible to consumers with a monthly income of R7 500 or less and unsecured debt not exceeding R50 000. However, regulations will need to be developed, released in draft form for public comment and finetuned before the Act can be implemented. In addition, the National Credit Regulator and National Consumer Tribunal will need additional resources to deal with what will inevitably be an increased demand for their services. That said, Trade & Industry Minister Ebrahim Patel made it very clear that the expectations of low-income consumers will need to be carefully managed. The Act will not ‘write-off’ their debt.

LAND EXPROPRIATION WITHOUT COMPENSATION:

The process of developing a Bill to amend section 25 of the Constitution – specifying the circumstances in which land may be expropriated without compensation – could take longer than expected. During Wednesday’s meeting of the ad hoc committee established by Parliament to draft the Bill, it was agreed that, while every effort should be made to meet the 31 March 2020 deadline for tabling it in the National Assembly, constituency work and demands on the time of members chairing other committees may well cause delays.

In keeping with the constitutionally enshrined principle of public partifcipation in the process of drafting new legislation – not to mention the Rules of Parliament – a draft Bill will be released for comment and public hearings held in the National Assembly, NCOP and provincial legislatures.

Before beginning the drafting process, the committee intends holding a workshop at which it will be briefed by experts and key stakeholders on the thinking behind recommendations in a broader report produced by former President Kgalema Motlanthe’s high-level panel, as well as a more recent report compiled by the presidential advisory panel on land reform and agriculture. However, while these recommendations will inform the process of developing the Bill, they are not binding.

Committee members (courtesy of the Parliamentary Monitoring Group): Click on each name for additional information.

GOING FORWARD …

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CHANGING TACK …

This site provides reliable, accurate information on public policy and law-making issues of concern to ordinary South Africans. The mainstream media tends to sensationalise new developments out of context. Journalists rarely if ever take time to read the documents available to them or to develop a sound understanding of new policy and legislative proposals. As a result, misinformation abounds.

Until recently, the site was used for archived articles published in Legalbrief Today under Policy Watch. It was linked to Twitter alerts designed to promote the product. That has changed. In future, information posted here will draw on the author’s observations in Parliament but will not replicate Legalbrief Policy Watch articles.

The author’s observations will not include personal opinions but will focus on facts supported with documentary evidence cirulated by Parliament itself. That said, they should not be construed as representing the views of Juta Law, which publishes Legalbrief Today and CompliNEWS – to which the author continues to contribute as an independent contractor.

The site is not designed to field comments or answer questions. Its purpose is to make reliable information on contentious issues freely available. With that in mind, for the foreseeable future it will focus on:

  • national health insurance (NHI)
  • land expropriation without compensation (EWC)
  • debt relief
  • prescribed assets
  • the role of the South African Reserve Bank
  • hate crime and hate speech
  • cyber security.

The site will be updated only when new information on these topics becomes publicly available. If nothing has been posted recently, it is more than likely that no new information has been officially released by Parliament or government. The author does not have access to any other reliable source material on public policy developments and does not use unsubstantiated mainstream media reports.

HOW ‘TRANSPARENT’ WILL THE NHI BILL’S PARLIAMENTARY PROCESS BE?

This article appeared in the 30 August edition of Legalbrief Today, under Policy Watch

An opinion document on the constitutionality of the National Health Insurance (NHI) Bill presented orally to members of the National Assembly’s Health Committee before a briefing from Health Minister Zweli Mkhize was withheld from journalists – despite reportedly having been made available for copying and public circulation well before the meeting. Prepared by the Office of the State Law Adviser and read verbatim to the committee by acting head Ayesha Johaar in the presence of media representatives and health sector stakeholders, the document was only distributed to committee members after lunch, by which time Johaar had left. Her presence at the meeting was apparently requested at surprisingly short notice. When the morning session ended and committee chair Sibongiseni Dhlomo was approached for permission to make copies available to members of the public, he declined – claiming not to have seen or read the document.

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Why Dhlomo adopted this stance is not clear. Underpinned by provisions in sections 27 and 146(2) of the Constitution, as well as sections 3 and 25 of the 2003 National Health Act, Johaar’s opinion is that the Bill is ‘constitutionally sound’. Section 27(1)(a) of the Constitution makes access to health care services a universal right. Section 146(2) spells out the conditions in which national legislation uniformly applicable ‘to the country as a whole’ prevails over provincial legislation. Section 3 of the Act deals with the responsibilities of the Minister, the national department, provincial departments and local authorities in providing healthcare services. Section 25 sets out the general functions of provincial departments in that context.

A committee media statement issued two days before the briefing – refuting allegations that the Bill had been ‘suspended’ because of concerns about its constitutionality – also noted that, having met ‘one of the state law advisers’ to discuss the matter, Dhlomo was ‘comfortable’ with the advice he received. Johaar is the adviser to whom he was referring. However, widely publicised reservations by some stakeholders about government’s capacity to fund NHI, manage it financially and deliver quality services – not to mention speculation about the future role of medical schemes – may explain Dhlomo’s obvious distrust of media representatives. This is especially given the extent to which some journalists tend to sensationalise issues without scrutinising the documents on which they report. The indignant tone of DA Evelyn Wilson’s input during the meeting probably did little to smooth already ruffled feathers. She has much to learn from party colleagues Siviwe Gwarube and Haseena Ismail, whose equally candid approach was noticeably more deferential.

Against that backdrop, the Minister, his deputy Joe Phaahla, Health Department DG Precious Matsoso, deputy DG Anban Pillay, presidential adviser Olive Shisana, NHI office head Nicholas Crisp and other departmental officials fielded an avalanche of questions about the Bill and NHI in general from the DA, FF Plus MP Philippus van Staden and the EFF’s Naledi Chirwa – but did little to assuage their fears. Neither the model to be used in implementing NHI nor the mix of options available to fund it are cast in stone. However, conceding that government ‘will need to invest strongly’ in improving the standard of public healthcare services and facilities, Mkhize said that, where there is evidence of ‘neglect’ it ‘must be corrected’. ‘We are at such a low level of quality that we will have to fight hard to improve it,’ he told the committee, referring to NHI as a ‘vision’ and an opportunity to ‘up the game’. According to Pillay, the need for ‘robust’ monitoring and evaluation was simply confirmed by the pilot phase.

In the Deputy Minister’s view, while NHI promises to be a ‘disruptive intervention’ – especially for the 15% of citizens able to afford private healthcare – ‘fear of the unknown’ cannot be allowed to prevent government from moving forward with plans to honour not only its constitutional obligations but also binding international commitments. While Phaahla did not elaborate on the role of medical schemes under the NHI system and little was said on the issue, Pillay confirmed that it will be spelled out in regulations. References by Shisana to presidential health compact partnerships and by Crisp to the introduction of NHI as ‘a journey, not an event’ were vague – tending to point to a long road ahead, albeit with ample opportunities for public consultation. Funding proposals will be the focus of a separate draft money Bill.

THE 2019 NATIONAL CREDIT AMENDMENT ACT, UNPACKED

This article is based on one that appeared in the 20 August edition of Legalbrief Today, under Policy Watch

The controversial, recently gazetted 2019 National Credit Amendment Act – paving the way for the introduction of long-term debt intervention measures for qualifying consumers but not yet in force – has sparked outrage in some quarters, mainly because of provisions perceived to constitute the deprivation of property (Business Day). However, according to an opinion sought from Advocate Wim Trengrove by former members of the National Assembly’s Trade & Industry Committee, while the Act does indeed allow for this, the provisions in question do not amount to the arbitrary deprivation of property and are therefore ‘permissible and lawful under section 25(1) of the Constitution’. The version of the Bill on which Trengrove’s opinion was sought was later revised to address other issues he raised at the time.

Once operational, the new piece of legislation will provide not only for the ‘suspension or part-suspension of a credit agreement’ and ‘an alteration or extension of that suspension’, but also for ‘the extinguishing of the whole or a portion of the total of the amounts contemplated … under a qualifying agreement’. This is according to the committee report that accompanied the Bill to the House for a second reading. The term ‘debt intervention applicant’ will refer to anyone whom – at the time of applying – either receives no income at all (or whose monthly income during the preceding six months was less than R7500) and whose total unsecured debt does not exceed R50 000. When deemed appropriate, the Minister concerned will have the power to review and adjust these caps.

In addition, once in effect the new statute will require debt counsellors to report to the National Credit Regulator ‘any suspected reckless credit agreements’ identified when an over-indebted consumer applies for debt review; empower Magistrates’ Courts to lower the rate of interest, fees or other charges under credit agreements as a debt rearrangement measure; and enable the introduction of regulations for ‘targeted credit life insurance for all unsecured credit’, capped ‘lower than … existing insurance’. New enforcement measures will make it a criminal offence to intentionally misrepresent information when applying for debt intervention; engage in prohibited conduct in respect of credit agreements; and not to register as a credit provider, credit bureau, debt counsellor, payment distribution agency or alternative dispute resolution agent. Both the National Credit Regulator and National Consumer Tribunal ‘will require additional capacity’ to process the number of debt intervention applications likely to be made once these measures are in force. With that in mind, now that the Act has been gazetted, the necessary plans and related funding requirements can be finalised.

NHI BILL CONFIRMS LIMITS TO ‘UNIVERSAL’ QUALITY CARE

This article is is based on two that appeared in the 12 and 15 August editions of Legalbrief Today, under Policy Watch

Once in force, the National Health Insurance Bill tabled last week in Parliament is expected to facilitate universal access to ‘needed health care that is of sufficient quality to be effective’ – and ‘financial protection’ from its costs. This is according to a memorandum on the Bill’s objects. However, in expanding on this, clauses 4, 5 and 7 of the Bill (respectively dealing with population coverage, user registration and health care services coverage) point to distinct limitations. Together, sub-clauses 4(4), 5(1) and 7(2)(e) make it very clear that only public and private health care facilities accredited over time by the fund will be available to registered fund users. Registration will not be compulsory. In addition, sub-clause 7(2)(e) requires the fund to ‘enter into contracts with accredited health care service providers and health establishments at primary health care and hospital level based on the health needs of users and in accordance with referral pathways’. This tends to suggest that private health care practitioners and facilities will be able to choose whether to contract in or out of the NHI system – at least at this stage of the process.

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Regarding the role of medical schemes, clause 33 implies that – in the context of sub-clauses 4(4), 5(1) and 7(2)(e) – ‘once NHI has been fully implemented’ registered fund users who are also members of medical schemes will only be eligible for ‘complementary cover’ for ‘services not reimbursable by the fund’. Furthermore, sub-clause 39(1) clearly states that health care service providers and health establishments accredited by the fund will be required to deliver ‘services at the appropriate level of care to users who are in need and entitled to health care service benefits that have been purchased by the fund on their behalf’. This is noting that, according to sub-clause 57(1)(b), NHI ‘must be gradually phased in using a progressive and programmatic approach based on financial resource availability’.

According to the memorandum on the Bill’s objects, ‘in a favourable economic environment’, ‘new taxation options’ for the fund will be considered. In this regard, the Bill’s clause 49(2) refers to the ‘reallocation of funding for medical scheme tax credits’, ‘employer and employee’ payroll tax and a ‘surcharge on personal income tax’. An assumption on the part of some commentators that all listed options will automatically be factored into the mix could well be misplaced. Writing for Moneyweb, Bowmans tax partner Aneria Bouwer appears to agree. Like the 2015 NHI White Paper, the Bill tends to suggest that specific elements of the combined revenue source are still up for discussion. Meanwhile, the fund will depend on ‘some’ conditional grants being shifted from the Department of Health – as well as ‘some or all’ monies for ‘personal health care services’ traditionally factored into the provincial equitable share formula (clause 49). In this regard, reference is made to moving the national tertiary services grant and the HIV/AIDS and TB grant from the Department of Health into the fund. In appropriating money from the fiscus, Parliament will be guided by the principle of ‘social solidarity’ – which is defined as ‘financial risk pooling to enable cross-subsidisation between … young and … old, rich and … poor, … healthy and sick’.

National Assembly Health Committee chair Sibongiseni Dhlomo has confirmed that work on the Bill will begin with a briefing on its constitutionality from the Office of the State Law Adviser. This is expected to allay concerns expressed by DA leader Mmusi Maimane. The parliamentary process will include public hearings to be conducted separately by the National Assembly, the NCOP and the provincial legislatures.

NEW BILL CONFIRMS NHI VULNERABILITY

This article was published on the Legalbrief website on 8 August, when the Bill was tabled in Parliament. It was not included in that morning ’s edition of Legalbrief Today, which was posted before the Bill became available. A more detailed breakdown of the Bill ’s key provisions will follow next week.

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The National Health Insurance (NHI) Bill tabled in Parliament today seeks to provide South Africans with ‘access to needed health care that is of sufficient quality to be effective’, as well as ‘financial protection’ from its costs. According to a memorandum on the Bill’s objects, this is the aim of universal health coverage – as spelled out in the 2015 NHI White Paper. To that end, the Bill provides for the establishment of an NHI fund, setting out its powers, functions and governance structures.

The Bill proposes that – using ‘some’ conditional grants shifted from the Department of Health to the fund as well as ‘some or all’ monies for ‘personal health care services’ traditionally factored into the provincial equitable share formula – the fund will purchase health care services for all registered users. Reference is made specifically to moving the national tertiary services grant and the HIV/AIDS and TB grant from the Department of Health into the fund.

In addition, the fund’s executive authority ‘will bid for funds through the main budget as part of the budget process’. This is noting that, ‘in a favourable economic environment’, ‘new taxation options for the fund’ will be considered and could include either ‘a surcharge on income tax’ or ‘a small payroll tax’. Against that backdrop, it is envisaged that, over time, the fund will ‘expand coverage using certified and accredited public and private sector health facilities’.

In this regard, the memorandum refers to implementing ‘reforms’ in six phases, the first of which is apparently already a work in progress. Its focus is to improve ‘the quality of the health system by … certifying … health facilities to ensure (that) they meet the requirements of the Office of Health Standards Compliance’. The final phase will focus on expanding coverage to accommodate ‘maximum projected utilisation rates’ – and ‘gradually increasing the range of services to which there is a benefit entitlement’.

While the memorandum notes ‘legitimate’ concerns about ‘the affordability and sustainability of NHI’, it offers the assurance that ‘the nature of the proposed system’ and ‘the checks and balances that will be put in place’ will ‘limit unnecessary expenditure increases for supply-side as well as demand-side management’. The success or failure of NHI will be determined largely by the extent to which ‘high quality primary health care services’ ensure that ‘the majority of health problems’ are ‘diagnosed and treated at this level’.