National Health Act, 2003 (Act No. 61 of 2003)

Notices

National Health Insurance Policy towards Universal Health Coverage

Chapter 3 : Problem Statement

3.3 Structual problems in the health system

3.3.5 Health care financing challenges

3.3.5.5 Weak Purchasing and Financing systems that punish the poor

Purchase

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Analysis of the available South African National Health Accounts data shows that there are three methods of financing health care namely through general tax, medical schemes (private health insurance) contributions and OOPs. South Africa has a relatively low share of mandatory prepayment funding in the context of the goal of UHC. The system has small, fragmented funding and risk pools, which limit the potential for income and risk cross-subsidisation. Health care services are not distributed in line with the need for health care services and the benefit incidence of health care in South Africa is very ‘pro-rich’, with the richest 20% of the population receiving 36% of total benefits (despite having a 'health need share' of less than 10%) while the poorest 20% receive only 12.5% of the benefits (despite having a ‘health need share’ of more than 25%)48.

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South Africa also has weak purchasing mechanisms. At present, there is a relatively passive relationship between purchasers (i.e. those who hold a pool of funds and transfer these funds to providers) and service providers. Existing ways of paying providers in both the public and the private health sectors are inefficient. The current system of line-item budgeting in the public sector does not provide incentives for efficiency or for providing good quality care. Fee-for-service payments, as used within the private sector environment, creates an incentive to provide as many services as possible, even where these may not be medically necessary or appropriate, again generating inefficiencies.