National Health Insurance
Need for Risk Adjustment in the Public Sector in South Africa
Download Full NHI Policy Brief 8 PDF Document
The public sector in South Africa is financed from tax revenue. Tax funds are centrally collected by the South African Revenue Service (SARS) and amounts are allocated from central government to provinces (for all sectors) using a needs-based formula. Each of the nine provinces has relative autonomy to decide on how it will allocate these funds to individual sectors (e.g. health, transport and education) meaning that South Africa has a ‘fiscal federal’ system. McIntyre & Thiede found “In more recent years, there has been progress towards greater equity in interprovincial health care expenditure. ... by 2005/06, total public sector health care expenditure per person dependent on public sector services was approximately twice as high in the Western Cape as in North West (compared to the fivefold difference between the best and worst resourced provinces in 1992/93).” The disparity improves marginally if spending on highly specialised services (central and tertiary hospitals) is excluded.
There are significant differences between the age profiles of the provinces, as illustrated in section 3 of Policy Brief 123. The table in that brief illustrates the difference in payments needed by province on the basis of age and gender differences alone. “The Western Cape has a much older profile, with fewer children and more middle to older age adults than the other provinces. This translates ... to a price difference of 9.4% more needed in the Western Cape than the price for the country as a whole. By comparison, Limpopo province has a very young profile with many children and few working age and older adults, thus needing 9.2% less for healthcare than the price for the country as a whole.”
The ANC proposals for National Health Insurance suggest that purchasing may be devolved to 52 health districts. These districts are of very unequal size, as illustrated in Figure 5 below. The Community Survey used does not differentiate between those receiving healthcare in the public and private sectors so the graph is drawn using the total population of each district.
Figure 5 : District Risk Pool Size in 2007, including Medical Scheme Beneficiaries
The districts range in size from 56,000 lives in the Central Karoo to 3,888,000 lives in the City of Johannesburg. All are substantially larger than the minimum risk pool size of 20,000 lives discussed in section 2. However if District Health Authorities were to make fixed or capitation-like payments to clinics or facilities under their jurisdiction, then the issue of risk pool size will again become critical. A typical GP practice may have some 3,000 lives which is well below the minimum pool size of 20,000 lives advocated by Millimans.
An interesting issue in future pooling in the public sector is whether to develop an allocation formula at provincial level, effectively creating nine risk pools, or whether to consider the particular characteristics of each district, thus creating 52 risk pools. As with many such exercises, the decision may come down to the availability of reliable data. Good data on age and gender profiles at district level is only available at Census time, which is to be every ten years in future after the planned Census 2011.
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