Date: 28/01/2004
Source: Ministry of Health
Title: Tshabalala-Msimang: SA Health Care Structure Symposium


SPEECH BY THE MINISTER OF HEALTH, DR ME TSHABALALA-MSIMANG, AT THE OFFICIAL 14TH ANNUAL SOUTH AFRICAN HEALTH CARE STRUCTURE SYMPOSIUM, 28 January 2004

Programme Director
Distinguished Guests
Ladies and Gentlemen

Thank you for inviting me to participate in this Annual South African Health Care Structure Symposium.

It is always a pleasure to attend such a gathering as it provides me a platform to share government's vision for the health sector, and also to hear the views and concerns of our stakeholders and partners.

As you are aware, the Department of Health has embarked on a number of policy and legislative changes that will have tremendous impact on the functioning of the health sector.

These far reaching changes are intended to address some of the fragmentation within our health system that we inherited in the past.

I do not intend to dwell much on the details of the legacy of the past, as I am quite sure that the people in this room know exactly what we inherited.

I am particularly pleased to see that this conference is also trying to find ways and means to address the problems faced by the private health sector.

We also see the private health sector as a significant part of our health system as it plays a complementary role to the public system, which provides health services to more than 80% of the population.

There is no doubt in our minds that it does and will continue to play a key role in the provision and financing of health care for our population.

For this reason, government will continue to take a keen interest in the developments in the sector, and in its influence on the performance of the health system in total.

However, we all know that the sector consumes more than half of the total health expenditure yet provides care for less than 20% of the population.

Due to these perverse inequities between the public and the private sector, the World Health Organisation in terms of health systems performance, ranked South Africa 175 out of 191 countries.

Ladies and Gentlemen, we cannot allow this to continue especially when we are celebrating a decade into our democracy and following the transformation agenda we have set for ourselves when the new government came into power in 1994.

At that stage, the government set itself a number of goals particularly in addressing issues of universal access to basic health care services, equity in access and distribution of health care resources, quality of care, community involvement and participation in health care design and delivery, etc., to mention but a few.

I am very proud to pronounce to you that we have made significant progress in a relatively short period of time.

We have created a unified, de-racialised national health system with decentralised functions.

We have created nine provincial departments of health and are consolidating the establishment of 53 health districts.

We have improved access to over 7 million indigent people by building or extending 701 clinics in the most remote areas of our country.

We have implemented free primary health care, which we believe is the cornerstone of our health system.

We have also implemented free health care for children under the age of six and pregnant women.

Last year we introduced free health services for people with disabilities.

We are now ready to implement the Comprehensive Programme for the Treatment, Management and Care of HIV and AIDS.

We have also created incentives to recruit and retain our most "sought after " highly trained professionals.

We have allocated R500 million for the first time this year to recruit and retain scarce professional and attract new recruits in rural areas.

The Medium Term Budget Framework provides for some expansion - to R750 million next year and to R1 billion in 2005/6 - for the recruitment and retention of health workers.

We are going to use this money to introduce a system of allowances for professionals with scarce skills and professionals serving in rural areas and to change the salary structures of health professionals.

The state of our public health facilities will remain one of our key focus areas for development in the medium to long term.

You will also be aware that we have embarked on an extensive hospital revitalisation programme, which is a multi-faceted programme to improve the planning, management and physical state of our public hospitals.

We now have 27 hospitals participating in this programme and we hope to increase the number of participating hospitals per province over a period of time.

We have invested R717 million for this financial year, R911 million for next year and just over R1 billion for the outer year of the Medium Term Expenditure Framework for this programme.

We have also piloted 17 hospitals for the Designated Service Provider Networks, which is aimed at preparing our public hospitals to provide services (Prescribed Minimum Benefits) for the medical scheme members on a contractual basis.

Our intention is to add more hospitals over time to participate in that initiative which is part of the public-private interaction that we all subscribe to.

This, ladies and gentlemen, shows our commitment and renewed confidence in positioning our public hospitals to serve both the indigent population and externally funded patients, to begin to address the cost escalation problems that seem to characterise this industry.

Furthermore, in response to some of the challenges facing the health sector in general, particularly from the legislative and regulation point of view, we have seen the passage of the National Health Bill, which is intended to provide a framework for a structured, uniformed health system for this country, and the Medicines and Related Substances Control Amendment Act, which is intended to activate mechanisms to increase access to essential medicines.

We have also published the draft Regulations relating to a Transparent Pricing System for Medicines and Scheduled Substances made in terms of this Act.

These Regulations are critical in ensuring that South Africans have access to affordable, good quality medicines.

The massive saving will accrue to consumers who stand to benefit between 40% to 70% reduction in the cost of medicines when these Regulations becomes fully operational.

These draft regulations are now open for public comment for a period of three months.

I will be pleased to receive your written comments, as I am aware that these regulations will have a significant impact not only on the medicines sector but also on the private health sector in general.

In addition, the introduction of the 25 Chronic Disease List; as part of the Prescribed Minimum Benefits, which is intended to protect the chronically ill, and mostly elderly people like myself, also came into effect early this month.

Ladies and Gentlemen, all these changes are intended to protect consumers like you and me so that we can get value for the money that we pay for our health care.

Indeed the 'tide has turned in Health'.

We are also working on a key policy intervention, which will have a major impact on the structure of our health care system that we in the health department and in the African National Congress have been talking about for more than a decade now.

You will recall that the President in his State of the Nation Address committed government to accelerate the move towards a social health insurance system for this country.

We are convinced and more than ready to implement (social health insurance) SHI as we have created an enabling environment for this key policy framework.

When we first spoke about SHI in the 80s and early 90s, you will remember that we were faced with quite a number of challenges particularly in the medical schemes environment, which was unregulated at that time.

We took the advice of the 1997 Departmental Committee, to first prioritise the implementation of the Medical Schemes Act, which would then serve as a springboard for a move towards a mandatory contributory environment.

In terms of the Medical Schemes Act, there were fundamental principles that we believed were key if we were to ensure that private health care could be accessible to those who are able to make some contribution towards their health care.

Firstly, we re-established the notion of community rating to ensure that the principle of solidarity could be entrenched in the medical schemes environment.

Secondly, we introduced open enrolment, to improve access to medical schemes for people who were previously excluded, subject to adverse protection mechanisms like late joiner penalties.

I am aware that various concerns have emerged on the application of this late joiner penalty and its potential negative implications for unfairly excluding people from cover and whether these penalties are a good vehicle to achieve their objective.

Obviously, the use of late joiner penalties will have to be reconsidered in a mandatory environment.

Thirdly, we mandated a set of Prescribed Minimum Benefits to ensure that members of schemes have adequate coverage and that "dumping" onto the public health sector was minimised.

I am proud of the splendid work by the Council for Medical Schemes and the Registrar of Medical Schemes to ensure adherence to the Act.

In fact, the sterling oversight identified the loopholes and provided us with the basis for enacting the amendments to both the Act and its Regulations.

The Council for Medical Schemes has for the first time embarked on risk mitigation strategies to be able to be proactive rather than reactive in regulating the industry and I have welcomed this initiative.

It is also against this backdrop that we are now even confident that SHI can be implemented.

A great deal of work has been done around the SHI policy direction and I would just like to reiterate on the key principles and objectives as to why we are moving towards this direction.

This work is informed by inputs and deliberations with key stakeholders during our extensive consultation process following the release of the work of the Taylor Committee of Inquiry into a Comprehensive System of Social Security for South Africa.

Although we agree with many aspects of their proposals, our firm view is that a SHI system is the most feasible option to be pursued in the short to medium term.

Our objectives in moving towards a SHI system are manifold:

* To improve access of lower income groups to quality health care
* To reduce inequities in health care financing by improving income and risk-related cross-subsidies
* To strengthen the public health care system by increasing the revenue available to it
* To obtain pre-paid contributions from those who are able to pay for health care

Our thinking within the department is that there should be three (3) components that are most critical for our homegrown SHI and those relate to:

* Government-mandated health insurance cover for specified groups
* Income cross-subsidies among contributors
* Risk-related cross-subsidies among contributors

Government mandated health insurance

We hold a strong view that medical scheme contributions should be mandatory for those who can afford to make some contribution towards their health care.

Obviously, the mandates will have to be effected in a systematic and a phased approach, starting with high-income earners and a specific group of employers.

The mandates could then be broadened with the establishment of a state-sponsored scheme to meet the needs of lower-income people.

As proposed, the state sponsored scheme will offer hospitalisation in public hospitals and private primary health care.

This can be a stand-alone scheme or a scheme that is developed from the proposed Medical Scheme for Civil Servants, which we expect to come into effect next year.

We will have to engage other role players if we are to go this route.

Income solidarity amongst contributors

In many countries of the world where health insurance or sick funds are predominant, income solidarity seems to be a key characteristic of their social insurance system.

In a country like ours, where there are huge disparities in earnings, it is also of paramount importance to entrench income solidarity within the medical schemes environment.

We are aware and concerned those medical schemes contributions are community rated, which does not always translate to income-based contributions.

We would therefore wish to explore the possibility of achieving such income cross subsidies as we move into the mandatory environment.

The tax expenditure subsidy on medical scheme contribution, currently estimated at R7,8 billion, is an important reflection of government commitment to encourage people to provide for their own health care.

It is intended to make medical aid cover affordable for more people by subsidising their contributions. However, we have noticed that the tax expenditure subsidy is highly regressive and inequitable as it favours high-income people over low-income people.

We have taken a firm view that this subsidy needs to be restructured in such a way that it addresses this inequity.

We have established a task team comprising stakeholders such as you to explore all the configurations around this tax expenditure subsidy and to propose the most feasible way of restructuring it.

Risk related cross-subsidies among contributors

One of the key principles that we introduced in the medical schemes environment was the elimination of using health status or medical history as a key determinant for charging a medical scheme contribution.

This was informed by the fact that different groups face different health problems and the only way to deal with this was to introduce some form of health related cross-subsidies within the environment.

We have realised, however, that even though we have put measures to avoid risk selection, some schemes continue designing their benefits to exclude the high-risk patients and this is of great concern to us.

The proposed risk equalisation fund will address some of the problems of attracting only the young and healthy members and leaving the sick and the elderly vulnerable.

In simple terms, the risk equalisation fund will be a central fund, which receives contributions from below average risk schemes and allocates funds to above average risk schemes.

It creates a much larger risk pool and, instead of schemes competing on the basis of risk selection, they compete on the basis of cost and the quality of health care services purchased.

We are still committed to the dateline of 1 January 2005 for the implementation of risk equalisation fund within medical schemes.

Let me now focus on the progress of the work that is been done on the three components of SHI that I have just mention to you.

Firstly, let me thank all of you who participated in our call for a consultative forum and who made invaluable inputs into that process.

I have seen your work and was pleased to see the willingness from the industry to share their thoughts, resources and their time to make this process a success.

Progress made so far

Most of you were part of the 10 July 2003 meeting where the former DG, Dr Ntsaluba, outlined our key policy direction in terms of social health insurance.

He also indicated to you that we are more committed than ever before to now begin to introduce SHI in this country.

I want to assure you that I am also committed to see that this key policy gets implemented.

To take you back, there were two task teams that were established that day to look at the feasibility of risk equalisation fund and the restructuring of the tax expenditure subsidy.

Prof Heather McLeod from the University of Cape Town and the tax expenditure subsidy team by Mr Anton Roux who is a former Chief Executive Officer of Medscheme, chaired the risk equalisation team.

They have produced a report, which is now under discussion with a panel of international experts who have participated in risk equalisation fund processes in other countries.

In fact, on Monday I was in Cape Town where I had the opportunity to also engage the International Review Team, which includes the likes of Prof Wynand van den Ven from the Netherlands, Dr Thiede (previously from Germany, now South Africa), Dr David Dror (Israel, now France) Mr John Armstrong (Ireland), Dr Nigel Rice (England) and Prof John Deeble (Australia).

I am sure that their experience in this field will assist us to implement these far reaching changes with minimal disruption in the market and with caution.

Together we can build a strong and a viable health care system for all.

'The tide has turned'

I thank you!

Issued by: Ministry of Health, 28 January 2004
Source: Department of Health (htpp://www.doh.gov.za)