National Health Insurance
Possible Risk Pooling between Public and Private Sectors

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There is currently no risk pooling between the tax funded public sector and private medical schemes. While the future design of NHI is still not clear, it seems highly likely that a multi-tier system will remain for a considerable period of time, as discussed in sections 5, 6 and 8 of Policy Brief 720.  In section 4 of the same brief it was advocated that the existing tax subsidy for medical schemes be replaced by a per capita subsidy that is fixed at the same amount across the public and private sectors.  This amount could be allocated per head or on some risk-adjusted basis. The design of the proposed mandatory system for medical schemes in 2005 would have allowed for a central equalisation fund to fulfil an additional role in providing risk-adjusted payments to the public sector as well as medical schemes, as illustrated below.

Figure 6: Possible Risk-Adjustment between Public and Private Purchasers

The age and gender profile of people in medical schemes was shown to be older than that in the public sector in sections 5 and 6 of Policy Brief 226. Thus a formula for risk-adjustment of the per capita subsidy based only on age and gender would result in a transfer from the public to the private sectors. This is unlikely to be politically palatable. However there are substantial differences in the incidence and prevalence of HIV between the provinces, as illustrated in section 3 of Policy Brief 427. This is also an example of a disease where risk adjustment between the public and private sectors would benefit the public sector. Prevalence of this disease in medical schemes is of the order of 1/3 of that in the general population.

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Val Beaumont

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Houghton, 2041

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