Comments on the White Paper for the Transformation of the Health System
Notice 667 of 1997

Mission, Goals and Objectives
The PMA totally endorses the targets outlined in Chapter 1. Namely the PMA wishes to be part of the common mission of continuous improvement of health. It wishes to make available the industry's resources to help meet the needs of the nation. The PMA agrees with the desire to correct historic imbalances in health care provision.

The PMA approves of the federal concept whereby a district health system addresses policy and delivery of services within national guidelines and in accordance with international norms. The PMA approves of decentralised management, enquiry and advocacy so encouraging participation by all members of the community.

The PMA, represents an important part of the overall health care industry in SA. Its members supply both the public and the private health care delivery sectors. As such the PMA endorses the overall aims of the White Paper and wishes to share responsibility with government and, where appropriate, to aid Government in the accomplishment of these aims.

Notwithstanding the general enthusiastic support the PMA wishes to provide, there are areas of concern which the PMA believes will hamper rather than aid in the achievement of the overall objectives. These reservations are discussed seriatim below.

2. Reorganising the Service
Priority for Primary Care
Chapter 2 discusses the functions to be assigned to the national, provincial and district authorities.

There is very little which is specific here in terms of policy direction. Draft 9 of the National Health Bill (November 1996) however suggests there could be cause for internal policy conflict in the otherwise desirable three level structure.

In the Bill a National Health Authority is proposed. The White Paper simply permits this.
Establishment of a National Health Authority
The proposed NHA will comprise the Minister, an Executive Council member from each province and 3 persons representing local government.

The NHA will both determine policy and pre-digest any other legislation pertaining to health. It will determine whether or not and by what yardsticks "certificates of need" be granted. It will co-ordinate provincial health policies and lay down guidelines for district health management. It will be responsible for promoting equitable financial mechanisms and for laying down the targets and norms and priorities as to what is in fact equitable. It will be responsible for the efficient co-ordination of health services, and the responsibility will extend to both private and public sectors, with a view to enabling establishment integration where appropriate.

In short, the NHA will be a central body whose powers may well undercut the desirable decentralisation of decision making to provinces and districts, and by use of "certificates of need" could further hinder the expansion of the private sector as it develops to meet the needs of South Africans. (The current moratorium on hospital building - now more than 36 months in extent - has already imposed economically unnecessary delays on the expansion of facilities to meet health care requirements)

By its powers as defined the NHA could also retard the development of a single health care financing act. Medical Schemes should neither be advantaged nor disadvantaged by having to operate under different legislation and having to report to different controllers from other health insurers. The Council for Medical Schemes will be best placed to ensure that schemes are not so disadvantaged if it can report to the Financial Services Board in common with all other large scale financial institutions and health care insurers.

Roles of provincial health authorities
The responsibility and scope of the provinces are listed in Chapter 2.2.1.
The functions will include providing health services in secondary hospitals and academic health centres. The provinces will screen applications for licensing for private health facilities. They will co-ordinate district health funding. Also, they will ensure provision of primary health care facilities and community hospitals services. They will ensure quality control of all health care facilities.

District Health System
The functions of the district health authorities are detailed in pages 28-31. Of particular interest is the possible emergence of a quasi-internal market at this level (p 29, para 2.3.2.). In the Bill (p.34) District may enter into agreement with any provider (public or private) for products or services. They may enter into agreements with "adjacent" Districts and they may "obtain funds from any source". These freedoms are to be commended. They are unfortunately only partially specified again in the White Paper. For example, in p 38-39 of the White Paper devolution to Districts is again emphasised but only to allow DHAs to purchase from the private sector, not explicitly (as in the Bill) from other Districts.

The White Paper argues for three tiers of administration, National, Provincial and District, with the first two acting as facilitators for the latter. Districts are closer to the communities they serve, and will be more keenly aware of the health-care requirements than remoter and higher-tier authorities. The White Paper goes on to argue (p.28) that the desirable principles of local accountability, efficiency and decentralisation will be well served by this structure where Districts act (p.29) 'both as a provider and purchaser select [ing] the appropriate strategy on assessment ... of local conditions".

These are the principles underlying reforms by those (e.g. the U.K. NHS) who have adopted the concept of "internal markets". Apart from local accountability, such organisational structures also promote flexibility of response. For example, the Department recognises the requirement of diversity (p.30) in order to "include appropriate incentives to encourage people to work in underserved areas". But this goal is denied in the very same sentence where the White Paper recommends that "there will be parity in salaries ... for all public sector health personnel through the country. Not only is this internally inconsistent in detail and in principle, but it denies the essence of the purchaser: provider, internal market concept - that providers compete to satisfy the purchaser's requirements. They can do so by innovative methods of management (including variations in pay scales), of provision, and of external fund-raising. They are motivated by an ability to retain budget undershoots for equipment, facilities and staff. These consequences arise from the rationale of the White Paper. It is not clear whether they are accepted.

At present the White Paper seems unclear and ambiguous as to whether the purchaser: provider role it speaks of (and which is a well-understood concept in health care administration) is to be pursued, or whether it is simply lip-service to a sound principle which will in practice be jettisoned for a monolithic and uniform approach. The White Paper description of the purchaser-provider split is at odds with much of what is generally understood by the terms. Yet on page 38 it does ultimately concede that Districts may "purchase services from accredited private providers [so that] there will thus be an opportunity for the ultimate emergence of some form of provider competition" (emphasis added). The ultimate problem with a purchaser-provider split, however, even if enthusiastically carried out, is that the final consumer, the patient, is regarded as "external" to the system and is affected only indirectly by the "internal market". Patient demand remains at arm's length.

The Primary Health Care Package
The PHC is a key to the White Paper. Its definition is difficult and it is probably easier to assert and agree upon what should be excluded rather than what should be included. Table 3.2, pages 37-8 defines it. The authors of the White Paper are to be commended on carrying out a difficult task.

However, the proposals that this package will be largely free at the point of consumption and that it will increase in scope over a decade suggests that it may be overambitious. It is likely to fall victim to the problems of socialised medicine everywhere. Namely demand in excess of supply, shortages, budget squeezes and controls on prices of inputs (not least doctors' and nurses' salaries).

State-dominated Health Systems throughout the world are not proving to be the panacea once envisaged. There are insufficient funds, staff and inefficiencies with rundown facilities, and the patient is made to suffer long waits for treatment, lack of professional attention etc.

In South Africa the resources that the Government can allocate to health care are limited by other equally pressing priorities such as; housing, water provision, education and training, sewerage, all of which will need to be supported from a limited tax base.

The utilisation of available resources should be used more efficiently to provide essential health care to those persons that can least afford it and allow the market principle to determine the use of facilities in the private sector. At the same time private facilities should be made available to the indigent population by co-operation and agreement with the private providers. To introduce national health for all at this stage will be tantamount to destroying the infrastructures already in place. Rather let us work towards raising the standards of care available to the lower income groups while assessing the needs and availability of facilities that can be provided in the long term for all South Africans.

The empowerment of people and communities to recognise and respond effectively to their own health problems must form a fundamental part of the new health dispensation. This could well result in any defined PHC today being smaller tomorrow or in ten years time as more and more people become better off and opt for private sector cases.

A General Comment on Financing Issues
User charges and not additional taxes should be used to finance any additional health expenditures implied by the White Paper. To the extent that the indigent cannot pay and that central government has to be approached for funding it is noted that in the Budget some consideration has been given to the recommendations of the Melamet Report that medical scheme contributions paid by employers on behalf of employees should be regarded as employee income for tax purposes. This would both reduce current inequities of treatment in the tax system between rich and poor, and provide additional income for the fiscus to distribute to the Health Department.

This suggestion is not innovative to commentators on health care (see The Economist, 7th March 1998).

Chapter 3
The suggestion (p 44) that state hospitals be encouraged to generate and retain revenues is to be applauded. It will discourage overuse on the one hand and provide resources on the other.
However if hospital managers cannot use fees so generated to assist with one of their largest cost components (wages and salaries of medical staff) the incentive to collect efficiently will be that much lower.

Physical Resource Attraction (pp 48-50)
The White Paper gives broad hints as to future policy. The Health Bill, Draft 9, suggests what underlies the White Paper's proposals. For example, in the Bill, the Minister is to be awarded large powers to (pp 36) "define the level of service at each public or private establishment" and to "regulate the referral of patients and other relationships between public or private establishments". These powers are excessive, and the excess is further developed on pp 36 -7 where the National authority "must determine" whether certain establishments require authorisation before establishment, enlargement or modification. These powers extend to the ability to order total or partial closure at any time. Paras 5 & 7 (pp 37 - 8) determine the certificate of need process. Two requirements for the certificate are unexceptional (the establishments must be legal and meet minimum standards of service.) The remaining eight requirements are either open to abuse and corruption or presume the authorities are better able to judge demand for health care than those who are prepared to put up the money to satisfy that demand. They include compliance with Government plans, demographic and geographic considerations, health conditions, available personnel, availability of alternative establishments in the vicinity, interrelationships between existing and proposed establishments, and the conditions for funding the establishment.

All these criteria involve entrepreneurial judgement of the future they do not require accounting computations about the past or arithmetic extrapolations from the present. Only the decision maker knows what is foregone, only he/she knows the cost. Objective criteria cannot be used for investment (expansion or contraction) decisions. That is the job of the risk taking business person. If attempts are made to be objective some perhaps critical information will be ignored.

Additionally, certificate of need requirements open up the road to vested interest attempting to capture regulatory favours. Pressure groups may obtain certificates where more effective potential providers may fail to do so. Innovative techniques of provision may be retarded and the "bundle" of provisions nationally may then be less than optimal. Total operating costs of the system would then rise. (The Swart commission came out against certificates of need on precisely such grounds).

Concern must also be expressed over the final criteria: the conditions for funding the establishment. Not only might novel types of health care provision be discouraged, but so might innovative financing methods. Surprise is a key benefit of market provisions in any advancing and developing society. Licensing regulations rule out surprise.

Equipment (para 3.10.2)
The intention of licensing equipment seems quaint. Licensing is a device usually intended to reduce supply. If individuals are prepared as individuals or collectively to purchase medical equipment and hire it out for use, then this is an example of free trade in private property rights protected by the Constitution.

If the concern is the historical one of non-fully utilised equipment in the private sector, then the critics should examine the reasons for that. (The old scale of benefits with a guaranteed by law fee for service reimbursement system of medical scheme regulation was the root cause of much over-provision and hence necessarily high cost recovering prices. That fault lay in the presence of regulation. With the removal of compulsory first rand cover that issue is now a dead letter).

Medical Scheme Regulation (pp 51-3)
A new bill is under discussion.

Developing Human Resources (p 54)
Compulsory community service is illiberal.

Management Development (p 66)
Good managers require incentives. A properly operating internal market can provide this.

The White Paper says little on this topic (p 220). The PMA agrees with all the assertions and objectives stated there.