Is it not time to open up health financing in South Africa?


Is it not time to open up health financing in South Africa?

Is it not time to open up health financing in South Africa?

Following the 1994 elections, the government committed itself to a number of specific goals in the area of social policy, including, among others, the provision of affordable, decent and effective healthcare for all. Various documents on how this could be achieved have since been published.

The guiding principles considered in the ANC Health Plan demonstrated a social solidarity-based approach to healthcare reform. The plan endorsed principles that aimed to provide better protection of individual interests when considered within a communal context, by recognising the necessity for redistribution and the sharing of health care resources in a more equitable way. The Health Plan also recognised that the health system at the time of the transition to democracy as wholly unsustainable, because vulnerable people had difficulty accessing health care services.

In an attempt to reduce the inequities of the divide between the private and public health sectors the government, among other steps, enacted the Medical Schemes Act, 1998 (the Act), which was supposed to modify the behaviour of medical schemes toward their members and to enforce risk management requirements that would make schemes more efficient, affordable and equitable (Wayburne, 2014).


The “business of a medical scheme” is defined as the business of undertaking that undertakes, in return for a premium or contribution, to provide for obtaining health services; or granting assistance in defraying health-related expenses; or rendering health services.

The Act also prohibits anyone from being able to “carry on the business of a medical scheme unless that person is registered as a medical scheme.” (S 20)

The Act therefore also actively prevents currently excluded communities from creating their own prepaid mechanisms for the transfer of the financial risk of illness and accidents. In this regard, it must be noted that more than 80 percent of the South African population continues to be excluded from membership of medical schemes in spite of the good intentions with which the Act was promulgated fifteen years ago.


The Act provides for the establishment of a new statutory regulatory authority and governing body, The Council for Medical Schemes (CMS), which is appointed by the Minister of Health and is tasked with protecting the interests of members of medical schemes.

The LIMS3 national household survey estimated that 21.9 million individuals residing in non-rural households in South Africa had incomes below R6 000 per month. A high percentage of these individuals are willing to pay for medical pre-funding provided that contributions are affordable (i.e. <10 percent of income) (Broomberg, 2007). In spite of this the proportion of the population covered by medical schemes to date has continued to be relatively stagnant.

Medical schemes have also attracted criticism for unaffordability of cover (Fish and Ramjee, 2007), a lack of innovation, passive purchasing of healthcare (McLeod and Ramjee, 2007) and a failure to address the escalating cost of healthcare (McIntyre, 2010).

If the CMS only represent the interests of medical schemes, their members and service providers, it begs the question, “Who represents the interest of the more than 80 percent of South Africa’s population who are currently unable to obtain an affordable medical scheme option?”. Although the CMS have recently been holding various “indaba’s” with stakeholders interested in a low-cost alternative, the agenda and the proposed solutions continue to be informed by an exclusive approach that focuses on maintaining a more affordable version of the status quo.


Section 27 of the Constitution obliges the state to develop legislation to progressively realise the right of access to healthcare. In the absence of free and effective public healthcare, this can be interpreted, at the minimum, to mean access to affordable mechanisms for the transfer of the financial risk of illness and accidents – i.e. insurance in its widest meaning.

The World Health Report 2000 presented convincing evidence that prepayment is the best form of revenue collection for healthcare and that out-of-pocket payment tends to be regressive and often impedes access to care.


There is growing recognition that vulnerability to risk is one of the defining characteristics of poverty (World Bank 2000).

While having sufficient funding is important, it will be impossible to get close to universal coverage if people suffer financial hardship or are deterred from using services because they have to pay on the spot. When this happens, the sick bear all of the financial risks associated with paying for care. They must decide if they can afford to receive care, and often this means choosing between paying for health services and paying for other essentials, such as food or children’s education.

Health shocks appear to have especially important effects (Gertler and Gruber, 2002) and studies of household welfare in villages in Kenya, Uganda, Peru and India over a four-year period and covering 25 000 households found overwhelming evidence that health shocks are the most frequent cause of long-term poverty (Krishna, 2007).

Despite significant improvements made since 1994, inequitable access to health care services, reflected in the public private sector divide, remains entrenched in South Africa.


According to the latest available annual report of the CMS (Annual Report 2013/14) there were 87 registered medical schemes at the end of December 2013, of which 24 were open and 63 restricted. These schemes had a total of 8 776 279 beneficiaries, comprising 3 878 267 principal members and 4 898 012 dependants.

South Africa had a population of 52 982 000 in 2013 (Stats SA, 2013). This means that in 2013 more than 83 percent of South Africa’s population still did not participate in medical schemes – fifteen years after the publication of The Act and its Regulations.

As a result, annual out-of-pocket payments for healthcare services by South Africans exceed R13 billion (World Bank Indicators) which has a significant poverty effect on low-income communities. This is clearly a failure to deliver on the provisions of Section 27 of the Constitution. It is also a failure to adhere to the international standards provided for in Article 12 of the International Covenant on Economic, Social and Cultural Rights, which details the right of everyone to enjoy the highest attainable standard of health.

In addition, it is a well-documented aspect of health economics that health insurance generates increased demand for health services and therefore contributes to the development of healthcare delivery infrastructure (Doherty and McLeod, 2003; Spaan et al, 2012) – something that is urgently needed in South Africa.