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SOCIAL HEALTH INSURANCE POLICY DIRECTION

SOCIAL HEALTH INSURANCE POLICY DIRECTION. AIDS LAW PROJECT 10 February 2004. Presentation. Brief context Taylor Committee proposals Departmental position SHI Description Work plan. Policy Context cont. SA - Health System 2002/2003. Public sector R33.2 billion. Serves 37.9 m.

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SOCIAL HEALTH INSURANCE POLICY DIRECTION

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  1. SOCIAL HEALTH INSURANCE POLICY DIRECTION AIDS LAW PROJECT 10 February 2004

  2. Presentation • Brief context • Taylor Committee proposals • Departmental position • SHI Description • Work plan

  3. Policy Context cont. SA - Health System 2002/2003 Public sector R33.2 billion Serves 37.9 m Serves 6.9 m Private sector R43 billion Pcap = R875.98 R72.99 pm pp Pcap = R6231.88 R519.32 pmpb

  4. Policy Context

  5. Key Strategic Challenges • Inequity in access to health care • Ensuring that public health system remains backbone of SA health system care • Address systematic cost increases • Develop low-cost market – address high private hospital costs • Reduce financial risk to individuals at the time of accessing health care

  6. Concept of social security Three basic pillars • Pillar 1: • basic social endowment for all citizens • Pillar 2: • contributions from those able to contribute over and above pillar 1 • Pillar 3: • social security-type benefits that are more discretionary in nature

  7. Health interventions Pillar 1 • Free health care for children <6 • Free health care for pregnant women • Free primary health care services • Free health care for disabled Pillar 2: Social health insurance Pillar 3: Voluntary medical schemes

  8. Characteristics Of NHI and SHI • Mandatory contributions for entire population or certain groups like (public sector employees) • Usually employment related, payroll deductions • Contributions from employers and employees • Premiums are income related and benefits are standardized • Creates large risk pool and avoids adverse selection • Cross subsidization (healthy and the sick, wealthy and poor

  9. NHI versus SHI • National health insurance • Benefits for contributors and non-contributors • Cross subsidies, dedicated health tax • Social Health Insurance • Benefits contributors only • Can increase resources available for public heath care

  10. Key departmental objectives • Strengthen public health care system by increasing revenue • Obtain prepaid contributions from those who can pay • Reduce inequities in health care financing • Improve access of lower income groups to quality health care

  11. Taylor Committee proposals Four key policy proposals: • Move towards NHI • State medical insurance, risk equalisation, social health insurance • Tax subsidy reform, cross subsidisation • Recentralisation of health budget

  12. Departmental position • We still require significant tax funding for public health sector • Need to compare progressivity of tax funding versus NHI • For the medium term,will only commit to SHI

  13. State medical insurance Taylor Committee proposals: • State-sponsored medical scheme • Low cost for low income earners • Sets benchmark price for minimum benefits • Benefits in differentiated amenities in public hospitals plus private primary care

  14. State medical insurance Taylor Committee proposals • Civil service medical scheme cover • Dedicated low cost restricted scheme • Compulsory under employer mandate • Benefits similar to state-sponsored scheme • Could evolve into state-sponsored scheme

  15. State medical insurance Taylor Committee proposals • Risk equalisation • Below average risk schemes contribute above average risk schemes receive • Enlarges risk pool, schemes compete on cost and quality rather than risk selection • Aims to stabilise medical scheme market

  16. Mandatory medical scheme cover Taylor Committee proposals • Mandate to begin with high income earners /qualifying employers • Voluntary membership for others • Out of pocket fees for public hospital treatment in basic amenities abolished • Low income mandates after high income mandate

  17. Department response • Endorse general approach • One state scheme, should evolve from civil service scheme • Support SHI, not ready to commit to NHI • Accept abolition of out of pocket fees, except possibly bypass fees

  18. Departmental response • We endorse: • SHI plus tax funding • Incremental mandates for medical scheme membership • Civil service medical scheme as starting point • Civil service scheme to evolve to state-sponsored scheme

  19. Departmental response • Basic minimum floor of benefits should be established • Mandatory benefits = Prescribed minimum benefits plus primary health care services

  20. SHI in SA context • Government mandated health insurance • Income cross-subsidies among contributors • Risk-related cross-subsidies among contributors

  21. Risk Related Cross subsidies MSA requires all schemes to provide PMB for all scheme members Scheme have different risk profiles, resulting in different cost structures Research done by CARE found that price of PMB in one scheme was 17% cheaper while for another scheme 130% more expensive than industry average, just because of different age profiles Clearly, schemes have incentive to risk rate in order to reduce their costs

  22. Risk Related Cross subsidies • Risk equalisation should ensure that all medical scheme members face the same community price for PMB’s • It should: • remove the incentives for medical schemes to select preferred risks, by ensuring that each scheme must bear the cost of a risk profile equal to the risk profile of all covered lives. • Create incentives for schemes to improve its efficiencies and cost controls, by not incorrectly penalising efficient schemes.

  23. Income Cross subsidies • In most countries with social insurance systems, contributions tend to be based on income • High income earners cross-subsidise low income earners • In SA, medical scheme contributions are community rated • Income related cross subsidies difficult to achieve • Need to change tax subsidy to improve income cross subsidies

  24. Income Cross subsidies Tax deductions on medical scheme contributions, and the tax deductions on medical expenses in excess of 5% of income estimated at R7,8 billion Impact is regressive b/c of link to contributions Out of pocket expenditure may be more progressive, but depends on submission of tax returns Need to restructure this subsidy to achieve greater subsidies for lower-income earners

  25. Income and risk-related cross subsidies • Support restructuring of tax subsidy, but with greater subsidies for lower-income earners • Support risk equalization to stabilize medical scheme environment and prevent schemes from profiting via risk selection

  26. Budget Centralisation • Budget centralisation to follow a political process • Will enlist Treasury support for implementation of revenue retention framework in all provinces

  27. Supporting policies • Preparation of public hospitals • Hospital revitalisation project • Designated provider network pilot • Civil service scheme development • Revenue retention policy development

  28. Programme of work 2004 • Sign DSPN contracts with medical schemes 1 April 2004 • Finalise technical work on Risk Equalization and income cross subsidy issues • Support DPSA process to implement civil service medical scheme • Obtain Treasury support for revenue retention enforcement • Finalise policy decision on phasing of mandatory cover

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