Despite the NHIs faults, innovation will rise to the top

Jeremy Yatt, Principal Officer of Fedhealth

When the NHI is implemented in 2026, the lives of medical schemes, their employees and their brokers will be in for a lot of changes. FAnews posed a few questions to Jeremy Yatt, Principal Officer of Fedhealth, who raised several concerns about the NHI.

What are your feelings towards universal healthcare?

Fedhealth – and I would bet most of the healthcare funding industry – is fully behind the concept of Universal Healthcare (UHC). 

Using existing medical scheme and private healthcare infrastructure is the fastest way to expand UHC to the public without unduly burdening the state. The more people who belong to medical schemes, the less demand there is on the public sector and the more affordable the private sector becomes. 

The other issue for debate is what would be covered in terms of UHC. It is unquestionable that the more diseases or conditions that are covered, the more expensive the system becomes. Both in a state and private sector environment, there have to be cut-offs; this is where the noise comes in. 

What are your specific concerns with the NHI in its current form?

Costing, competence and constitutionality. Our country cannot afford this. 

Then the general state of incompetence in state facilities, linked with the general approach to looting in State-Owned Enterprises (SOEs), does not inspire vast amounts of confidence. Accounts of incompetence, indifference and downright illegality are legion. So why would the NHI work? 

The last point is the one with which Fedhealth has the biggest issue. Providers are not going to simply accept this, so there will be a plethora of legal challenges and a number of valuable healthcare workers, specialists in particular, looking abroad. 

Both scenarios are bad. And current medical scheme members are not going to stand for a system of double taxing (income and payroll tax) and then get inferior service which they can right now access for free. Even if, by some miracle, the state is actually able to deliver on the promised healthcare service, it won’t ever be the same or even similar to what is being currently received. 

The single funder system and the dereliction of private sector skill, experience and competence are three of the main points that require a radical rethink. 

Do you feel that the reintroduction of medical tariffs will be a better solution to driving down industry costs?

Yes. The industry warned the Competition Commission years ago that doing away with tariffs would result in price increases. As usual, people who know very little about the medical funding industry wouldn’t listen. 

Tariffs and pricing are but one component of the cost drivers in medical schemes. We increase our hospital tariffs by 5%, yet our year on year costs increase by over 10%. 

These increases are driven by ageing and medical technology, issues that are hard to manage. The increases are also driven by lifestyle, non-communicable disease proliferation and by an environment that ties the hands of funders.

A removal of an appendix the old-fashioned way can cost nearly half of doing it by way of laparotomy with similar length of stay and complication rate. Yet, schemes are obliged to pay for the more expensive version.

 South Africa has among the highest rate of cesarean sections in the world, yet schemes are obliged to fund them without co-payment if they are deemed emergencies. So of course, every cesarean section that is performed is an emergency, even when it was pre-authorised months before.

 In its current format, what will the future of medical schemes be in an industry run by the NHI?

I just can’t see it (NHI) happening. There is a real risk of our already fragile healthcare system being placed under even further pressure leading to a total collapse.

Medical schemes will struggle to remain in existence if NHI does happen; there isn’t enough money in the system. 

In an ideal world, what would the role of medical schemes be in the NHI industry?

It would be a public-private partnership. 

It works like this: where there are things that are good for society and make money, medical schemes can provide the service with the necessary checks and balances. Where there are things that are good for society but don’t make money, that is the role of government to provide the service. 

By reducing the burden on the state, a more effective service provision is possible. We need regulation that helps make medical schemes more affordable and incentivises more participation. This will leave the state to provide for the poor and needy. 

In the event that the NHI is implemented as proposed, medical scheme brokers will probably have a swings and roundabout effect. They will lose a lot of commission from medical scheme membership but will at the same time probably make up for it with medical insurance products. 

What government fails to understand is that the market always finds a way. If medical schemes cease to exist (except for the complementary function) it will open the door for new products to emerge to help people fund medical expenses. People won’t accept what the Department of Health is proposing, and entrepreneurs will find a way to meet their needs. Brokers will be at the forefront of that.