National Treasury. Financing NHI. Pharmaceutical Society SA 24 June 2018

Transcription

1 Financing NHI Pharmaceutical Society SA 24 June

2 Principles of National Health Insurance Public purchaser Provision by accredited public and private providers Affordable and sustainable Primary care as point of entry Needs to provide wide coverage and equitable access to affordable medicines Chronic medicines delivery program currently funded through indirect NHI grant is already dispensing medicines through private pharmacies and has potential for expansion and broadening 2

3 Financing reform for NHI Financing reform for NHI requires reforms in the areas of: Revenue raising Pooling: e.g. Provision for NHI Fund in Bill recently approved for publication by Cabinet; some amendments to medical schemes and roles and functions of province vs national government Purchasing Contracts with accredited providers Reimbursement reform e.g. capitation, DRGs Provision: e.g. mixed public and private delivery platform 3

4 Public and private health spending trends as % of GDP Health spending as % of GDP 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% Public health Private Total 4

5 Public and private health spending trends as % of GDP Total health expenditure in South Africa ranges from 8-9% of GDP Public health expenditure is currently around 4.1% of GDP, R210 billion in 2018/19 Public expenditure on health under NHI envisaged to increase from 4% to 6% of GDP over year period 5

6 Health spending public and private Health expenditure in SA public and private sectors Rand million 14/15 15/16 16/17 17/18 18/19 19/20 20/21 Public sector 14/15-17/18 ave 17/18-20/21 ave National Department of health core 3,955 4,610 4,526 5,105 5,450 5,770 6, % 5.9% Provincial Departments of Health 140, , , , , , , % 6.2% Defence 4,053 4,243 4,474 4,587 4,906 5,371 5, % 7.1% Correctional services , % 6.3% Local government (own revenue) 3,389 3,730 3,927 4,163 4,409 4,660 4, % 5.5% Workmens Compensation 1,466 2,033 2,155 2,284 2,421 2,567 2, % 5.7% Road Accident Fund 1,155 1,216 1,280 1,357 1,437 1,519 1, % 5.5% Total public sector health 155, , , , , , , % 6.2% Private sector Medical schemes 140, , , , , , , % 7.4% Out of pocket 23,896 25,617 27,256 28,892 30,596 32,340 32, % 3.8% Medical insurance 4,007 4,356 4,635 4,913 5,203 5,499 5, % 3.8% Employer private 1,915 2,081 2,215 2,348 2,486 2,628 2, % 3.8% Total private sector health 170, , , , , , , % 6.8% Donors or NGOs 8,369 8,787 9,349 9,910 10,495 11,093 11, % 3.8% Total 334, , , , , , , % 6.5% 6

7 Health spending public and private Health spending overall in South Africa around R447 billion in 18/19, projected to increase to R507 billion by 2020/21 Public sector R210 billion, R190 billion in provinces Private sector R227 billion, R188 billion by medical schemes 7

8 NHI Indirect grant Budget 2018 To create an alternative track to improve spending, performance as well as monitoring and evaluation on infrastructure in preparation for NHI; to enhance capacity and capability to deliver infrastructure for NHI; to accelerate the fulfilment of the requirements of Occupational Health and Safety; to expand the alternative models for the dispensing and distribution of chronic medication; to fund the development of and roll-out of new HIS in Preparation for NHI; to develop a risk-adjusted capitation model for the reimbursement of primary health care; to enable the health sector to address the deficiencies in the primary health care facilities systematically to yield fast results; to expand the healthcare service benefits through the strategic purchasing of services from healthcare providers. 8

9 NHI Indirect grant Budget 2018 Additional allocations into NHI indirect grant in Budget 2018 Total indirect NHI conditional grant R2.3 billion in 18/19, R3 billion and R3.7 billion respectively over MTEF Centralised chronic medicines dispensing programme (mainly pilot districts to date; includes private pharmacies) R360 million in 18/19, R420 million, R476 million (popular programme, spending escalating rapidly) Allocations for medicines stock management information systems (under-spending in 17/18) Most general practitioner pilots up to 17/18 have been in public facilities From 18/19 new component to contract GPs in own facilities using predominantly capitation as reimbursement mechanism. Working with DOH to find a way that patients registered with these doctors under NHI can access medicines 9

10 Sources of revenue for health by country As countries develop a greater share of funds tend to be pooled in public financing streams Out of pocket expenditure not a good way to finance health care, causes catastrophic expenditure at time of illness; Pre-funding far preferable 10

11 Sources of revenue for health by country Table 3: Sources of revenue as percentage of total health expenditure, 2009 Public Funds General government expenditure on health Social security funds Private health insurance Out of pocket expenditure Private Funds Non-profit institutions serving households (eg, NGOs) Other Total Countries Australia 70.1% 0.0% 8.3% 19.0% 2.6% 100.0% Brazil 45.7% 0.0% 22.4% 3 0.9% 0.0% 100.0% Canada 67.3% 1.4% 13.5% 15.5% 2.3% 100.0% Chile 40.6% 6.8% 18.6% 34.0% 0.0% 0.0% 100.0% China 16.9% 33.3% 3.1% 41.1% 5.6% 100.0% Colombia 27.4% 56.1% 7.8% 7.8% 0.9% 0.0% 100.0% Malaysia 44.4% 0.4% 8.0% 40.4% 0.3% 6.6% 100.0% Mexico 21.9% 26.4% 4.0% 47.8% 0.0% 100.0% Republic of Korea % 4.3% 34.8% 0.7% 6.1% 100.0% South Africa 39.0% 1.2% 39.6% 17.7% 1.9% 0.6% 100.0% Thailand 70.0% 6.9% 5.9% 16.5% 0.4% 0.4% 100.0% United Kingdom 83.6% 0.0% 1.1% 10.4% 3.8% 1.1% 100.0% 11

12 Components of the indirect NHI grant and other allocations to DOH Personal health services Health professional contracting (current model) GP contracting capitation Psychiatric mental health (post Life Esidemeni) School health services (e.g. referrals for optometry, Occupational therapy) Priority benefits (cancer) Non-personal health services Chronic medicine dispensing Ideal clinic Information systems: medicine stock management system, electronic patient registration system Development of capitation model Hospital revitalisation National DOH Chronic disease prevention Interim NHI Fund and structures Health Technology Assessment 12

13 Financing options for NHI Original work (next slide) looks at several specific financing options: surcharge on PIT, new payroll tax and an increase in VAT However since then fiscal space has become more limited, since increases in personal income tax and VAT have become necessary just to balance the national fiscus This makes it more difficult to further increase taxes in the near term and continuing to use using general taxes as a source of health financing is another important option 13

14 Revenue raising mechanisms: Tax options under consideration for NHI Tax Surcharge on taxable income: Personal Income Tax (PIT) system is progressive, marginal tax rates increase - 18% to 40%. Allows for relatively high tax threshold Payroll Taxes: Imposed on employer and/or employee Current payroll taxes: UIF, Skills development levy (1%) Social security reforms in the pipeline Value added tax: Indirect tax Levied on transactions Pros & cons A flat surcharge on taxable income in addition to the PIT liability (similar to the Medicare levy in Australia) could be considered Administratively feasible Possible concern is the potential negative impact on savings Increases cost of employment and incentivizes movement to the informal economy Consider high unemployment rate in South Africa Recent global trends show a movement away from this due to the impact on cost of employment, esp. for low & unskilled workers Usually earmarked? Less distortionary, has a relatively broad base All those benefitting from NHI would contribute in some way Does not impact on savings or employment negatively Impact on the poor how regressive and how to compensate? Most VAT revenues from middle and upper income households SA s VAT rate 14% - compared to global average of 16.4% Used to fund NHIS in Ghana (majority of funding 2.5% levy), considering the tax base and future growth in Ghana 14

15 Scenarios of possible tax increases to finance NHI (schematic based on initial R80b shortfall calculation) Table 11: Alternative tax scenarios to fund a R76.4 billion (2010 prices) NHI funding shortfall by 2025/26 Scenario A: Payroll tax and VAT increase Scenario B: Surcharge on taxable income Scenario C: Surcharge on taxable income and VAT increase Scenario D: Surcharge on taxable income, VAT increase and Payroll tax 2015/ / / / / / / / / / / / / / / / / / / / / / / /25 Payroll tax 2.0% 2.0% Surcharge on taxable income 2.0% 2.5% 3.0% 3.5% 4.0% 2.0% 2.0% Increase in value-added tax 0.0% Table is illustrative, showing several scenarios of how R80 billion gap could be filled over a multiyear period 15

16 Access to medicines Access to medicines very important for NHI RSA has already made good progress with respect to medicine pricing: tenders in public sector, single exit prices regulated by Health Minister for private sector See both originator and brand medicines as important in SA RSA has not used Trade-Related Aspects of Intellectual Property Rights (TRIPS) flexibilities to date, Because it has sought to work collaboratively with pharmaceutical manufacturers and there have been many examples of successful negotiation to bring down prices and improve access e.g. ARV medications, new generation child vaccines As NHI unfolds we need to find ways to widen affordable medicines access to those covered by the NHI. This means we will have to find new ways of tendering where the NHI purchases medicines for all those covered by the NHI, regardless of provider 16

17 Fiscal Limits 17

18 Fiscal limits 18

19 Evolution of NHI likely to be slow but steady NHI Bill approved by Cabinet Establishment of NHI Fund Shift of funds from provinces to NHI Fund not easy Pooling reforms with respect to medical schemes likely to be gradual (may be difficult to make major changes until citizens trust new system) Fiscal constraints and other expenditure pressures (fees must fall, public sector wages) Given fiscal constraints reforms to medical scheme tax subsidy were used to finance new allocations for NHI in Budget 2018, including expanding chronic medicines dispensing programme 19

20 Conclusion Evolution of NHI financing likely to be relatively slow but steady Passage of NHI Bill and establishment of NHI Fund Use of general taxation (likely to be possible once fiscus is more stable) Medicine access and affordability remains a high priority Over time we need to find ways to move away from current tender system to purchasing for NHI with accredited providers in public and private sectors 20