Access to quality health care in South Africa: Is the health sector contributing to addressing the inequality challenge?
Information on the affordability of health services
The affordability of health services is influenced by the costs of health care on the one hand
and household resources to cover these costs on the other hand. The way in which health
services are financed is critical to affordability, particularly whether this takes the form of
out-of-pocket payments (i.e. direct payments by a patient to a health care provider, usually
at the time of using a health service) or on a pre-payment basis (i.e. either through tax
payments, some of which are then allocated to funding health care, or contributions to a
voluntary or mandatory health insurance scheme).
Out-of-pocket (OOP) payments are the most concerning from an affordability perspective
given that there is considerable uncertainty about when a person may fall ill and what
financial resources they may have available at that particular point in time. Internationally,
millions of people are impoverished, i.e. pulled below the poverty line, by paying for health
services on an OOP basis39. Figure 7 shows that although levels of impoverishment due to
OOP payments for health care are relatively low in South Africa, they are far greater in the
poorer than richer provinces.
It is unquestionable that the introduction of the ‘free care’ policies, first the 1994
introduction of care at any public sector facility free of any charge to pregnant women and
children under 6 years and in 1996 free services at all public sector primary health care
facilities, both of which were formalised in the National Health Act of 2003, has contributed
to improving affordability of health services in South Africa. While there was a substantial
increase in utilisation of services immediately after the first free care policy was introduced
in 1994, this appears to have been largely related to addressing previously unmet need as
levels of use declined over time and that increases in use arising from the free care policies
overall were not statistically significant 41. These findings are important as it indicates that
the concern about abuse or overuse of free health services is not well founded. What the
policy did was to improve the affordability of services for the poorest, with OOP payments
for a public health service declining as a percentage of household income between 1993 and
1995 42.
However, these policies have not been fully implemented in some areas 43; for example,
public hospitals in some provinces continue to charge pregnant women a ‘registration fee’44.
In addition, user fees remain in place at public hospitals; although the poorest can apply to
be exempted from these fees, once again there is variable implementation. Patients who
are employed in the formal sector but are not medical scheme members are liable to pay
user fees that are near cost-recovery level at public hospitals. These fees can impose a
substantial burden on households in the case of inpatient care and for high-cost procedures.
There is growing international consensus that user fees at public sector health facilities are
not an advisable way of financing health services. As noted by the WHO Director-General Dr Chan in her address to the World Health Assembly last year: “User fees punish the poor.
User fees discourage people from seeking care until a condition is severe and far more
difficult and costly to manage. User fees waste resources as well as human lives." The World Bank president, Jim Kim, has also supported this position.
It is also important to recognise that fees paid to health care providers are not the only
direct cost of using health services. Depending on the availability of health facilities,
relatively high transport costs are incurred, particularly in rural areas and for services
requiring frequent clinic visits, such as tuberculosis 45. A household survey found that over
20% of those in the poorest quintile who delayed seeking care when ill indicated that this
was due to unaffordable transport costs. This survey also found that 19% of the poorest
quintile who did use an outpatient service (e.g. a clinic) when in need incurred transport
costs for that visit that exceeded 10% of their total household monthly expenditure.
There are also high levels of OOP payments in the private health sector. Some of this relates
to use of private providers, particularly general practitioners and retail pharmacies, by those
who are not medical scheme members. In general, this reflects an explicit choice on the
part of the patient, e.g. an employed person who cannot take time off work to use a health
service and nearby public facilities are not open after-hours and do not operate
appointment systems. In some instances, such use relates to availability problems such as a
public facility not having the necessary medicines and patients having to purchase these
medicines at a private pharmacy.
The largest share of OOP payments (over 60%)47 are in fact made by medical scheme
members, either in the form of co-payments or for services not covered by their scheme or
when their annual scheme benefits have been exhausted. These payments are not
insignificant, amounting to over R27 billion in 2015, which is over 18% of health care
expenditure by medical scheme members 48. This is in reality an underestimate of the OOP
payments by scheme members as it is based only on the difference between claims
submitted to schemes and scheme payments; members often do not submit claims for
services that they know their scheme will not cover. A third of these OOP payments by
scheme members are made to specialists (indicating the wide gap between fees charged by
specialists and reimbursement levels by schemes), a quarter is spent on medicines (either in
the form of co-payments or for over-the-counter medicines), 12% for hospital services
(which is relatively low due to the prescribed minimum benefits requiring schemes to cover
most inpatient care) and 11% for allied health professional services.
A key objective of medical scheme cover, as with health insurance schemes around the
world, is to reduce OOP payments for health care through using a prepayment mechanism
(i.e. contributing to the scheme on a regular basis and in advance of using a health service,
with the scheme then covering the costs when a service is used). In an analysis that
compared health service use and OOP payments by individuals who are medical scheme
members with non-members, where these two groups have the same characteristics in
other respects, found higher OOP payments by medical scheme than non-scheme
members50. From this perspective, there are limits in the extent to which medical schemes
provide financial protection from paying for health services on an OOP basis. An important
aspect of legislation introduced since 1994 is the introduction of prescribed minimum
benefits (PMBs) as part of the Medical Schemes Act of 1998. Schemes are required to cover
the full cost of services that are part of the PMBs, thus limiting OOP payments by scheme
members for a range of chronic illnesses and inpatient services.
The affordability of medical scheme contributions also requires consideration. Household
survey data shows that for those who are not medical scheme members, “do not have
money” (or lack of affordability of medical scheme contributions) was by far the major
reason provided for not joining a medical scheme 51. Medical scheme contributions account
for a greater share of household income for lower income medical scheme members than
for the highest income scheme members, being about 14% and less than 6% of household
income respectively in 2005/06 52. Even though lower income individuals are likely to select lower cost medical scheme benefit options, the difference in contribution rates between benefit packages does not adequately coincide with differences in income across scheme members. What is of considerable concern is that some claim that “Virtually all open schemes deliberately overprice their low-cover options to cross-subsidise their
comprehensive options” 53. Others claim that middle-income scheme members tend to
cross-subsidise those with lower cost and those with comprehensive benefit options54.
Regressivity in scheme contributions across medical scheme members is exacerbated by
explicit design in the case of open schemes.
Medical scheme expenditure, and hence contributions, have been increasing at relatively
high rates on an annual basis, consistently exceeding general inflation. With little or no real
increase in wages in recent years, this means that medical scheme contributions account for
an increasing share of income for households whose income is from wages or salaries alone,
as opposed to also from investments, posing growing medical scheme affordability
challenges over time for such households. While there has been considerable debate about
the underlying causes of well above inflation increases in medical schemes’ expenditure and
contributions, there is agreement that these increases are of considerable concern. It is for
this reason that the Competition Commission’s Health Market Inquiry (HMI) was instituted.
Efforts to regulate fees of private sector providers, including where these have been to
provide guidelines without mandatory implementation such as the National Health
Reference Price List, have been met with legal action by the private health sector. Often this
has taken the form of challenging the process of arriving at recommended prices, including
what data and stakeholder views were taken into consideration.
There have been limited changes in expenditure on general practitioners, dental services
and medicines. Until 1992, expenditure on medicines experienced the greatest annual
increases. Several policy interventions, through the Medicines and Related Substances
Control Act of 1997, have limited the rate of these increases since then. These interventions
include the introduction of generic substitution, whereby pharmacists are required to offer
patients a generic equivalent for prescribed medicines, and the establishment of the
Medicine Pricing Committee and subsequent introduction of a transparent pricing system
and a ‘single exit price’, which requires manufacturers to sell a medicine at the same price to all providers.
Although there has been a relative ageing of the medical
scheme population, various studies have repeatedly found that this does not fully explain
cost increases in hospitals or other aspects of medical scheme expenditure, nor do changes
in the disease profile of medical scheme members. A report by the Council for Medical
Schemes clearly stated that the results of their analysis “show clearly that the aging medical
scheme population cannot explain the changes in costs and utilisation”56. Recently, the
Competition Commission’s HMI has released a report that has attempted “to identify the
‘unavoidable drivers’ of cost escalation in the private sector, thus isolating a residual
segment of increased costs that are amenable to intervention”. They note that their analysis
of schemes’ data “does suggest that South Africa has a problem with cost escalation”. After
adjusting for cost increases due to inflation, age of beneficiaries, changes in members’
benefit options, gender and disease profile, there remains an unexplained increase in
expenditure of approximately R3 billion per year (in 2014 terms). The HMI found that this is largely attributable to in-hospital services, and note that “this stands in sharp contrast to flat or declining hospital-based spending in many countries, once risk factors are adjusted for.” While there is some ‘explainable’ increase in utilisation, much of the increase in utilisation ofhospital services is unexplained and the average cost per admission has increased significantly. The HMI is investigating these issues more closely and have indicated that “the results of these analyses do not point to immediate policy solutions”.
Source:
University of Cape Town
Health Economics Unit
Di McIntyre and John Ataguba
Mozambique Doing Business - South Africa
2025
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