Adrian Gore: Govt needs the private sector if it wants NHI to succeed

21st September 2023 By: News24Wire

 Adrian Gore: Govt needs the private sector if it wants NHI to succeed

Discovery CEO Adrian Gore
Photo by: Donna Slater

Discovery CEO Adrian Gore says while the health insurance group he founded 31 years ago supports the notion of universal healthcare, government’s planned National Health Insurance (NHI) needs the private sector's help to succeed.

"Our position is that the NHI is not workable without private sector collaboration," Gore told investors during the group’s annual financial results presentation on Thursday. Discovery, which has about 57.8% of the private health insurance market in SA, reported a modest 2.9% drop in net profit, which came in at R5.32-billion for the year to end June 2023.

"We don’t believe the status quo is sustainable," said Gore. "We do believe that universal healthcare for all South Africans is a crucial issue. It’s a noble goal and must be achieved. The NHI is a remedy for sure, and we have to try to make it workable. Our position is that you need private sector collaboration from the get-go so we can make it work."

Gore described the NHI Bill, which aims to achieve universal healthcare in SA via the establishment of a state-run NHI fund, as a "critical piece of legislation" that would likely take a "decade or more" to implement effectively. However, he said its main "pinch point" was the so-called section 33, which states that once the NHI is fully implemented, privately funded medical schemes will only be allowed to cover healthcare not already provided for by the NHI.

This is a mistake, Gore says.

"That effectively takes medical schemes out of the mainstay of healthcare. That takes private healthcare out of it because private healthcare is funded by medical schemes. That’s the primary way that you fund private healthcare. Without that funding private healthcare can’t survive," he said.

Gore said SA’s private healthcare sector should be regarded as a "national asset" given the scale and quality of the care it provides to the almost 9-million lives covered by open and closed medical schemes in the country. The roughly R260-billion spent on the private healthcare sector in SA each year provides medical scheme members with access to more than 42 000 hospital beds spread across 838 private facilities.

Discovery estimates that the system supports about 7 300 general practitioners; 47 000 nurses; 7 000 specialists; 3 500 dentists; 2 500 optometrists; and 3 600 psychologists, who provide world-class care to medical scheme members.

"It’s a massive, massive system and it’s funded by medical schemes - R260-billion flows through the system every year," said Gore. "It’s an orchestra – if you upset the funding structure; if you upset the cross subsidies; you don’t get it back. This is a system that shouldn’t be messed with and it’s a system that is right for collaboration in the context of the NHI and it’s very important we achieve that."

Complexity of funding

Gore said while SA spent about R250-billion a year on providing public healthcare, introducing universal healthcare via the NHI would require an additional R200-billion to be raised by the fiscus. While that is not dissimilar to the amount spent on privately funded medical schemes, Gore said the additional taxes required to raise this money could have drastic economic consequences.

Discovery estimates that to rake in the extra R200-billion required for the NHI would either require a 31% increase in personal income tax; or a 6.5 percentage point hike in the VAT rate from 15% to 21.5%; or a tenfold increase in payroll taxes.

"If you do that in one shot, you’ll create real difficulty, and real destruction, in the economy. Even if you did achieve that - how far does that extra R200-billion go?" Gore said.

Data compiled by Discovery shows that SA spends about R425 per person each month to provide public healthcare to those not covered by private health insurance. However, the additional R200-billion mooted for the NHI would only increase that amount to R684 per person per month, which Gore says is insufficient to offer comprehensive healthcare.

"If you go through the numbers, it doesn’t go very far and that’s the tragedy of our country," said Gore.

By comparison, Discovery estimates that private medical cover costs about R2 346 per person per month, 71% more than the R684 monthly per person rate the government would be able to provide through the NHI assuming it was able to raise the additional R200-billion per annum required for universal healthcare.

Should the NHI in its current guise come to fruition and effectively bar privately funded medical schemes from covering health costs already covered by state-provided universal healthcare, the country’s employed population would be left worse off, Gore believes. In that situation, he says, individuals who currently enjoy private healthcare would end up paying 31% more tax under the NHI while receiving 71% less medical cover.

"That would undermine the tax base and hence undermine the NHI," he said. "Very few countries don’t have a private healthcare sector."

Discovery’s research uncovered only 17 countries without a private health insurance market: Afghanistan, Azerbaijan, Brunei Darussalam, Cook Islands, Cuba, Eritrea, Iceland, Iraq, Kiribati, Lesotho, Malta, Nauru, Niue, Norway, Papua New Guinea, the Solomon Islands and Timor-Leste. Two of those include the remarkably wealthy countries of Norway and Iceland, both of whom have small, homogenous populations with very high per capita incomes.

"We have the opposite – a low GDP per head, massive inequality – so this is a complex issue," said Gore. "We believe that NHI cannot be workable unless you have private sector collaboration. We need to challenge certain aspects to allow that collaboration. It can be done so let’s do it and move forward."