Moving forward with health financing reforms in South Africa: some considerations

South Africa is at a critical juncture with regards to financing the health sector to improve health and to deliver quality health services to all. The 2011 Green paper made clear that the NHI aims to improve access to quality healthcare services and provide financial risk protection against health-related catastrophic expenditure for the whole population (1). It also provided a plan of action to prepare for its introduction A series of national and international consultations and submissions have clarified views, expectations and showed the many challenges that come with changing the way health is financed so as to achieve universal coverage of quality health services (2,3). A series of reports from government and non-government sources have reviewed progress (4,5) and a number of research articles have provided the much needed analysis of the current status of South Africa’s financing of health, the challenges, and comparisons with other countries that are also moving to universal health coverage (UHC) (6). A recent publication on the progress and challenges with reforms in the health sector over recent years showed how changes to health financing, envisaged under the NHI, is just one of many changes underway to achieve UHC in the country (7). This paper provides a personal view of some of the key next steps the country will need to consider as it moves forward with its changes to health financing. The commentary draws on experience from other countries as well as South Africa and focuses on some of early challenges that may need to be considered.

Strategic purchasing

The aim should be to ‘purchase’ services, results and, where possible outcomes, from public, private and not-for-profit providers in a way that drives more efficient and equitable delivery of health. The services (or ‘benefits’) to be available should be a well-defined comprehensive service, including measures of quality, and build on the defined national service guidelines, essential drug lists and protocols that already exist for national Primary Health Care (PHC), HIV/TB and communicable diseases, reproductive, maternal, child and adolescent health, and non-communicable diseases (NCDs). This should include covering catastrophic illness, such as for cancer and major injuries. The new systems for financing should be expanded using an incremental approach, for example starting with high quality PHC services, focusing on non-salary costs, and then expanding to specialist services and inclusion of funds for staff salaries. All steps should be accompanied by careful analysis of cost drivers, access and quality of services. National agreements on the inclusion of new services, technology or drugs should be based, as now, on objective assessment of health technology that include cost-effectiveness studies, and should focus on the benefits from integrated approaches to service delivery. Some public health services will likely continue to require separate funding approaches, such as for disease surveillance and outbreak response, and tackling cross-sectoral determinants of health such as early childhood development (ECD), nutrition, tobacco control and promotion of exercise.

Setting up the NHI Fund

Strategic purchasing will be carried out by the proposed NHI Fund, with clarity on its objectives and on the decision making roles and accountability of institutions at national, provincial, and districts levels and of the providers of services, both public and private. This may require amendments to regulations to enable these roles at different levels. As noted above, the functioning of the NHI fund should be sequenced and be linked to what is feasible in terms of capacity at the different levels. Much of the funding will come from existing district budgets in the public sector, with additional funds, as they become available, for defined expansion and improvement of services. There is now considerable global experience on the options for governance and structure of a strategic purchasing fund that South Africa can draw upon, aiming for agility and minimized transaction costs.

How to pay

There is also now a large global knowledge base on provider payment mechanisms and how to optimize service delivery using purchasing and contracting arrangements. Central to success is a unified national information system, including for user enrolment or registration, and for provider payment. The government may need to consider changes to rules on public financial management to allow for performance based funding of providers. Districts and service providers will need to better understand what they must do to prepare for payment mechanisms, such as contracts and possible capitation based funding arrangements. In hospitals, financing in many countries is linked to grouping of conditions, such as through diagnostic related groups (DRGs), but simple funding more linked to performance should continue to be explored, as discussed below. Incentives will need continued exploration for contracting private specialist services in under-served rural areas. The introduction of an enrolment or registration system should empowers users, and be part of a move to greater accountability with greater local engagement and oversight of services.

Working with the private sector

The competition commission enquiry currently underway should help improve the efficiency of private financing and private provision of services. In the early stages of the NHI, there should be close partnership between the development of NHI Fund and private providers with a view to developing a unified information system for registration of users and payment for services. There may also be value in exploring their role in delivering a standardized benefits package. The government may need to review its tax subsidies on medical schemes to be consistent with its longer term goals for a comprehensive PHC service and strategic purchasing.

UHC, quality and cost containment – looking for the win-wins

South Africa, as with all middle and high income countries, will continually struggle to afford the universal coverage of quality health services that its citizens expect to be delivered. There is a growing global pool of documentation and ‘implementation’ science behind achieving and sustaining UHC. South Africa is already contributing to this, and can continue to learn from lessons elsewhere. A few areas are highlighted here:

• Prioritizing prevention: Despite the pressures to increase funding to hospital based services and specialists care, particularly as the burden of NCDs grow, it will remain important to keep the NHI focused on cost-effective investments in preventative services and an effective and efficient primary health care service. Some priorities, such as ECD services, may only bring benefits to health and shared prosperity in the long term. This may require a separate institutional arrangement for promoting prevention of disease and promotion of health, where evidence is strong.
• Primary care led services: Direct public access to specialist care is frequently linked to lower quality care, and higher costs (8). An empowered district and primary care workforce that can help people navigate the health system when secondary and tertiary care is required, will bring more efficiency and can improve overall quality in heath service provision. However, it needs long term planning. This includes giving priority by government and teaching institutions to the development of a larger cadre of Family and Nurse Primary Care Practitioners.
• Efficiencies in the private provider market: As already noted, the ongoing enquiry into the private provider market should bring efficiencies that will benefits to the private health care market. However, it will also bring benefits to the NHI Fund, as it uses private providers to fill service delivery gaps in the public sector. Social franchising has already been suggested as a strategy to explore in both public and private sectors (9).
• Health sector tariffs: Developing a standard set of prices for the delivery of a specified service or set of services is far from easy. Problems of case-mix and the many imperfections in the health information system make this a challenging process. However, progress has been made in some areas, such as HIV services (10). Countries where tariffs are well established and linked to regulation of the sector, such as in Japan, have found this a useful tool for maintaining UHC and containing costs.
• Task shifting: South Africa has already pioneered task shifting from medical to nursing care is expanding its middle level workforce for this trend to continue. This has shown to be effective in many areas, including HIV services (11), some emergency maternal care (12) and in other services where quality of provision can be assured through monitoring adherence to protocols, and development of skills in high volume, specialized areas. South Africa should continue to explore and expand task shifting under the NHI where there is evidence of improved health outcomes. This should include more community and home based self-care, where this is shown to be effective for individuals and their families.
• Quality information: South Africa already benefits from quite sophisticated health information systems in the private and public sector. However, there needs to be more alignment between the two, and more use of information and data to routinely drive improvements in quality and coverage of services. This helps avoid wastage of resources as well as improves quality. The high coverage of mobile services provides an enabling environment for use of data that can strengthen both demand and supply of services.
• Results based funding: South Africa, like many other countries, is exploring how to be better link provider payment mechanisms to outputs or results, and these efforts should continue. Some lessons are emerging (13); this includes the need to be able to verify results and look for unintended consequences of financial incentives. South Africa should continue to experiment and evaluate these approaches as it changes its approach to health financing, keeping a close eye on lessons in other countries.

The learning process

The introduction of the NHI will bring changes, some good some difficult, some predictable and some unexpected. Careful monitoring, rigorous evaluation and programs of operational, or ‘implementation’ research, will be the key to success. Learning from other countries can help but only to a limited extent. South Africa has a unique history, and has a health sector that will no doubt take an equally unique route on the muddy and sometimes uncertain routine route to universal coverage of high quality health services.