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1
MMI submission on the funding of National Health Insurance
Presented to Davis Tax Committee
1 November 2016
Boshoff Steenekamp
Industry Relations Team
MMI Health Centre of Excellence
2
Content
What NHI and Universal Health Coverage are
Whether the health system is underfunded or
underperforming
What should be funded
─ Health system reform proposals
How to increase revenue to fund the health
system
3
Universal health coverage is an old concept that was popularised by the 2010 World Health Report, and now enjoys world-wide attention
UHC can never be fully achieved – the box keeps on growing. Does not imply a specific delivery system or financing mechanism.
4
Equity in healthcare financing
Young and
healthy
Sick and old
High income
Low income
Achievable through compulsion and cross
subsidisation
Achievable through compulsion and cross
subsidisation
Kutzin, Joseph, Yip, Winnie and Cashin, Cheryl. Alternative Financing Strategies for Universal Health Coverage. [ed.] Richard M Scheffle. World Scientific Handbook of Global Health Economics and Public Policy. s.l. : World Scientific Publishing Company Pty Ltd, 2016, pp. 267-309.
5
National Health Insurance (NHI)
White Paper describes a National Health
Service, similar to NHS in the UK.
Presents a purchaser-provider split,
publicly funded, public and private
provision, with supplementary private
insurance.
6
Social Development Index Quintiles by country, 2015
Institute for Health Metrics and Evaluation (IHME). Rethinking Development and Health: Findings from the Global Burden of Disease Study. Seattle, Washington : Institute for Health Metrics and Evaluation, 2016. ISBN 978-0-9910735-7-3.
7
Health related SDG index
Measuring the health-related Sustainable Development Goals in 188 countries: a baseline analysis from the Global Burden of Disease Study 2015 The Lancet DOI: 10.1016/S0140-6736(16)31467-2
8
Difference between observed and expected
Health related SDG index
Measuring the health-related Sustainable Development Goals in 188 countries: a baseline analysis from the Global Burden of Disease Study 2015 The Lancet DOI: 10.1016/S0140-6736(16)31467-2
9
Fin
anci
ng
Fin
anci
ng
Where additional funds are required
Creating resources Creating resources
Revenue collection Revenue collection
Service delivery Service delivery Stew
ard
ship
, go
vern
ance
, ove
rsig
ht
St
ewar
dsh
ip, g
ove
rnan
ce, o
vers
igh
t
Pooling Pooling
Purchasing Purchasing
Ben
efit
s B
enef
its
Functions Intermediate
objectives Coverage
goals
Equity in resource distribution
Equity in resource distribution
Efficiency Efficiency
Transparency and accountability
Transparency and accountability
Utilisation in relation to need
Utilisation in relation to need
Financial protection and equity in
finance
Financial protection and equity in
finance
Quality Quality
Steenekamp, Boshoff. Review of South African healthcare financing: towards Universal Health Coverage. A contribution towards the debate on achieving Universal Health Coverage in South Africa. Centurion, South Africa : MMI Health, 15 July 2016.
McIntyre, Diane and Kutzin, Joseph. Health financing country diagnostic: a foundation for national strategy development. Health Systems Governance & Finance. Geneva : World Health Organization, 2016. ISBN 978 92 4 151011 0.
10
A health financing strategy should define…
…changes to revenue raising, purchasing, benefit design, and overall system architecture and governance…
…to address specific, identified problems that limit progress towards UHC (final and intermediate) objectives…
… and provide a solid foundation for future development of a system…
…that can be feasibly implemented given current and expected future contextual constraints.
Joe Kutzin, Study material, WHO advanced course on health financing for universal health coverage for low and middle income countries.
11
Contextual constraints hindering NHI implementation
Poverty, unemployment and inequality
Narrow PIT & CIT taxpayer base: R23bn revenue shortfall*, additional taxes of R13bn in 2017-18
*
High tax-to-GDP ratio
Confidence is low
Politically charged
GDP growth < 1%
Higher education funding: R17.6bn more than projected*
Rating agencies
Uncertainty around NHI policy in relation to Comprehensive Social Security policy
* Ensor, Linda. Pravin Gordhan’s medium-term budget in a nutshell: big tax increases, spending cuts. Business Day. 26 OCTOBER 2016.
12
Debt to GDP ratio Forecasts and actual
Ensor, Linda. Pravin Gordhan’s medium-term budget in a nutshell: big tax increases, spending cuts. Business Day. 26 OCTOBER 2016.
13
GDP growth Forecasts and actual
Ensor, Linda. Pravin Gordhan’s medium-term budget in a nutshell: big tax increases, spending cuts. Business Day. 26 OCTOBER 2016.
14
Government wage bill trend % of non-interest expenditure
0
5
10
15
20
25
30
35
40
45
FY15/16 FY16/17 FY17/18 FY18/19 FY19/20
% o
f N
on
-in
tere
st e
xpe
nd
itu
re
2016 Budget 2016 MTBPS
van Papendorp, Herman and Packirisamy, Sanisha. MTBPS 2016: Additional taxes and spending cuts used to negate weaker growth impact on fiscus. Macro Research and Asset Allocation. Pretoria : Momentum Collective Investments (RF) (Pty) Ltd, 26 October 2016.
15
Government wage bill comparison % of GDP
0 3 6 9 12 15 18
PhilippinesKenya
MaliMalaysiaRomania
Cote d'IvoireNetherlands
MoldovaGhana
UKKosovo
El SalvadorIreland
JamaicaHonduras
PortugalSA
FranceTunisia
Zimbabwe
Government wage bill as % of GDP
van Papendorp, Herman and Packirisamy, Sanisha. MTBPS 2016: Additional taxes and spending cuts used to negate weaker growth impact on fiscus. Macro Research and Asset Allocation. Pretoria : Momentum Collective Investments (RF) (Pty) Ltd, 26 October 2016.
16
Four NDP prerequisites for building NHI
Improve the quality of public health care
Lower the relative cost of private care
More professionals in both sectors
Health information system that spans public
and private health providers
These reforms will take time, require
cooperation between the public and private
sectors, and demand significant resources.
National Planning Commission. National Development Plan 2030 Our future - make it work. Department of the Presidency. Pretoria : Republic of South Africa, 2012. ISBN: 978-0-621-41180-5.
17
Risk adjustment mechanism for medical schemes Risk adjustment mechanism for medical schemes
Norms and standards for equitable financing in provinces Norms and standards for equitable financing in provinces
Priority setting authority (NICE or HITAP) Priority setting authority (NICE or HITAP)
Coding, remuneration, and outcomes authority Coding, remuneration, and outcomes authority
Transversal contracts for medicines, surgicals, labs and equipment Transversal contracts for medicines, surgicals, labs and equipment
Prepare for a purchaser provider split, improve service delivery Prepare for a purchaser provider split, improve service delivery
State sponsorship for missing middle State sponsorship for missing middle
Stewardship, governance and oversight Stewardship, governance and oversight
Creating resources Creating resources
Revenue collection Revenue collection
Single health information platform
Single health information platform
Service delivery, creating resources, stewardship, governance and oversight Service delivery, creating resources, stewardship, governance and oversight
Revenue collection Revenue collection Pooling Pooling
Purchasing Purchasing Benefits Benefits
Virtual single risk pool
Virtual single risk pool
Interventions towards NHI
Based on: MMI Health. MMI Comments on NHI White Paper. Pretoria : MMI Holdings, 31 May 2016.
18
Economic framework for cost containment OECD publication
Based on: Moreno-Serra, Rodrigo. The impact of cost-containment policies on health expenditure. [book auth.] OECD. Fiscal Sustainability of Health Systems. Bridging Health and Finance Perspectives. Paris : OECD Publishing, 2015.
THE Total Health Expenditure
THE Total Health Expenditure
HEO/I Health Expenditure
(Outpatient and Inpatient)
HEO/I Health Expenditure
(Outpatient and Inpatient)
HEPH Health Expenditure (Pharmaceuticals)
HEPH Health Expenditure (Pharmaceuticals)
HEADM Health Expenditure
(Administration)
HEADM Health Expenditure
(Administration)
PO/I Price
(Outpatient and Inpatient)
PO/I Price
(Outpatient and Inpatient)
QO/I Quantity
(Outpatient and Inpatient)
QO/I Quantity
(Outpatient and Inpatient)
PPH Price
(Pharmaceuticals)
PPH Price
(Pharmaceuticals)
QPH Quantity
(Pharmaceuticals)
QPH Quantity
(Pharmaceuticals)
19
Areas of influence for cost containment policies OECD publication
Based on: Moreno-Serra, Rodrigo. The impact of cost-containment policies on health expenditure. [book auth.] OECD. Fiscal Sustainability of Health Systems. Bridging Health and Finance Perspectives. Paris : OECD Publishing, 2015.
THE THE
HEO/I HEO/I HEPH HEPH HEADM HEADM
PO/I PO/I QO/I QO/I PPH PPH QPH QPH
Supply side Supply side Demand side Demand side Public management,
coordination and financing
Public management, coordination and
financing
20
Empirical evidence abounds for specific policies to influence cost containment
Based on: Moreno-Serra, Rodrigo. The impact of cost-containment policies on health expenditure. [book auth.] OECD. Fiscal Sustainability of Health Systems. Bridging Health and Finance Perspectives. Paris : OECD Publishing, 2015.
THE THE
Supply side Supply side Demand side Demand side Public coordination Public coordination
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
21
Based on: Moreno-Serra, Rodrigo. The impact of cost-containment policies on health expenditure. [book auth.] OECD. Fiscal Sustainability of Health Systems. Bridging Health and Finance Perspectives. Paris : OECD Publishing, 2015.
THE THE
Supply side Supply side Demand side Demand side Public coordination Public coordination
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
Relation between MMI proposal and OECD framework
Coding, remuneration, and outcomes authority Coding, remuneration, and outcomes authority
22
Based on: Moreno-Serra, Rodrigo. The impact of cost-containment policies on health expenditure. [book auth.] OECD. Fiscal Sustainability of Health Systems. Bridging Health and Finance Perspectives. Paris : OECD Publishing, 2015.
THE THE
Supply side Supply side Demand side Demand side Public coordination Public coordination
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
Coding, remuneration, and outcomes authority Coding, remuneration, and outcomes authority
Risk adjustment mechanism for medical schemes Risk adjustment mechanism for medical schemes
Relation between MMI proposal and OECD framework
23
Based on: Moreno-Serra, Rodrigo. The impact of cost-containment policies on health expenditure. [book auth.] OECD. Fiscal Sustainability of Health Systems. Bridging Health and Finance Perspectives. Paris : OECD Publishing, 2015.
THE THE
Supply side Supply side Demand side Demand side Public coordination Public coordination
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Provider payment mechanisms
• Provider competition
• Insurer competition and selective contracting
• Generic substitution • Joint purchasing • Workforce
legislation • Malpractice
legislation • Budget caps
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Cost sharing • Private insurance
subsidies • Gatekeeping • Formularies • Definition of health
benefit package
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
• Direct control on pharmaceutical prices/profits
• (De)centralisation of health system functions
• Sources of health system financing
• Health technology assessment
Coding, remuneration, and outcomes authority Coding, remuneration, and outcomes authority
Risk adjustment mechanism for medical schemes Risk adjustment mechanism for medical schemes
Priority setting authority (NICE or HITAP) Priority setting authority (NICE or HITAP)
Relation between MMI proposal and OECD framework
24
Impact on UHC dimensions
Missing middle Missing middle
Purchasing efficiency Competition challenges Coding, remuneration, outcomes authority Transversal contracts
Purchasing efficiency Competition challenges Coding, remuneration, outcomes authority Transversal contracts
Pooling problems Pooling
problems Priority setting Revenue collection Fiscal space
Priority setting Revenue collection Fiscal space
25
Risk adjustment mechanism for medical schemes Risk adjustment mechanism for medical schemes
Norms and standards for equitable financing in provinces Norms and standards for equitable financing in provinces
Priority setting authority (NICE or HITAP) Priority setting authority (NICE or HITAP)
Coding, remuneration, and outcomes authority Coding, remuneration, and outcomes authority
Transversal contracts for medicines, surgicals, labs and equipment Transversal contracts for medicines, surgicals, labs and equipment
Prepare for a purchaser provider split, improve service delivery Prepare for a purchaser provider split, improve service delivery
State sponsorship for missing middle State sponsorship for missing middle
Stewardship, governance and oversight Stewardship, governance and oversight
Creating resources Creating resources
HIV independent of donor funding HIV independent of donor funding
Total
Single health information platform
Crude estimate of funds required (Million Rands)
Virtual single risk pool Virtual single risk pool
1,000 1,000
20 20
10 10
10 10
20 20
20 20
5 5
10 10
6,600 6,600
5 5
100 100
12,800 12,800
5,000 5,000
26
How should NHI be funded?
“Ideally, NDP priorities should be financed from increased tax revenues
generated as a result of stronger economic growth, improved tax
compliance, expenditure reprioritisation, elimination of inefficiency and
corruption and increased effectiveness of public spending.”*
The public health budget is “under acute pressure” (R40bn
expenditure cut over two years mostly affects the health system, the
provision of free basic services, the roads network and rural water and
electricity provision). * *
Additional funds are required to improve efficiency.
Removal of tax credits poses a significant threat to lower income
members of medical schemes.
Aim at 5% to 6% of GDP, or 15% of government expenditure – no
magic numbers.
* The Davis Tax Committee. The tax system and inclusive growth in South Africa: Towards an analytical framework for the Davis Tax Committee. First interim report on macro analysis for the Minister of Finance. 2014.
* * Ensor, Linda and Paton, Carol. Health and basic services to feel pain of R40bn spending cut. Business Day. 27 OCTOBER 2016
27
Taxes not suitable to fund NHI
Earmarked taxes not recommended
─ Rigidity
─ Payroll taxes and non-wage cost of employment
─ Political commitment to health is more important
“Novel” or “Innovative” taxes contemplated in WHO 2010 World Health Report not appropriate in SA
Personal Income Tax and wealth taxes
─ High rates on a narrow tax base
Corporate Income Tax
─ Rather improve the effective tax rate* from 17% to 28%
* The Davis Tax Committee. The tax system and inclusive growth in South Africa: towards an analytical framework for the Davis Tax Committee. First interim report on macro analysis for the Minister of Finance. 2014.
28
PIT and wealth taxes
Double estate duty tax : R2.3 bn
Increase the dividend tax rate from
15% to 20%:
R9.1 bn
New band taxing earnings above R1
million at 45%:
R5 bn
PIT: 1% tax increase across the board
(protecting low-income):
R10 bn
Total R26.4 bn
van Papendorp, Herman and Packirisamy, Sanisha. MTBPS 2016: additional taxes and spending cuts used to negate weaker growth impact on fiscus. Macro Research and Asset Allocation. Pretoria : Momentum Collective Investments (RF) (Pty) Ltd, 26 October 2016.
29
Potentially applicable taxes
Fuel levy – 44c/litre
VAT – increase to 14.6%
─ Exempted basic goods and social spending appears to negate the regressive nature of VAT
─ Simplicity linked with robustness, depth and breadth
─ Best vehicle for expansion of NHI as benefits expand through the proposed virtual single risk pool
Gamification
─ Give small tax credits to reward healthy behaviour
─ Rewards programme similar to wellness programmes in the market
30
In conclusion
“These reforms will take time, require
cooperation between the public and private
sectors and demand significant resources.” *
MMI passionately supports the drive towards Universal
Health Coverage for all South Africans. MMI’s purpose,
which is to enhance the lifetime financial wellness of
people, communities and businesses, is 100% aligned
with this objective.
* National Planning Commission. National Development Plan 2030 Our future - make it work. Department of the Presidency. Pretoria : Republic of South Africa, 2012. ISBN: 978-0-621-41180-5.
31 Lluis Masriera. Sombras reflejadas (1920)