The private South African healthcare funding environment is quickly changing, as traditionally, it mainly depended on medical aid schemes and other statutory funding mechanisms such as the Road Accident Fund and the Compensation for Occupational Injuries and Diseases Fund.

With the Demarcation Act distinguishing health policies from medical schemes, a wave opened an opportunity for affordable health insurance to join in. This will change healthcare funding in a big way from what the public and providers are used to. 

Opportunities due to Change in South African Healthcare Funding 

The shift not only opens access to private healthcare to people who had never had access to anything more than available in private but also offers businesses a refreshed capacity and information and changes the dynamics of how private healthcare functions in the country. 

South Africa is a country of dual economies where first and third-world realities co-exist. Such a distinction impacts the financial aspects but also affects epidemiological realities, which incapacitates the effectiveness of risk management tools such as underwriting, product design and proper decision-making for healthcare purposes.

Health care products and services are utilized differently by the population existing in the two worlds (first and third world), which also implies that there are vastly separate realities in profiling the two cohorts.

Blending one cohort to the other introduces opportunities and new realities and threats that would require mitigated, transferred, or avoided. My skills and knowledge allow me a privilege in the advisory role to companies interested in contracting as a third-party insurer, creating strategic partnerships, and penetrating the South African Healthcare Market.

This article was contributed by our expert Xolani Mnyandu 

Frequently Asked Questions Answered by Xolani Mnyandu

Q1. How much does South Africa invest in healthcare ?

The health budget for the financial year 2022/2023 is R64.5 billion. This is the allocation by the government from the total national budget of R67 trillion.

Q2. How does the government fund the provision of health care in South Africa ?

Government funds the provision of healthcare by using the health budget. However, various funds have augmented services, such as the US PEPFAR Community Grants Program Fund, which sponsors the supply and distribution of anti-retroviral drugs to the public at the primary healthcare level. Various public-private partnerships support certain aspects of government healthcare obligations.

Q3. Does South Africa have free healthcare ?

Only the Primary Healthcare Services offered in local public health clinics are free in the South African Healthcare System. The public healthcare secondary and tertiary healthcare services are, in theory, offered using the means test of affordability, where the most indigent qualify for free healthcare and a subsidized sliding scale is applied to the different income bands. 

However, this is not the case as the financial governance in public healthcare services lacks the capacity to do income verification methods. This has for many years meant that the government carries the burden of this inefficiency.

Q4. How is the South African healthcare system structured ?

The public and private sectors comprise the South African healthcare system. The public sector is responsible for most of the training and services to the South African population. However, the private sector has better reach as it is geographically more accessible and is better resourced than the public sector, which is strained for servicing the majority at very constrained funding.

The public healthcare sector is under the leadership of the Ministry of Health, the legislative head of the entire South African Healthcare system, public and private alike. There are no private medical schools in South Africa. However, private institutions are licenced to train nurses, paramedics and healthcare workers.

Q5. How does private healthcare work in South Africa ?

Private healthcare in South Africa is highly regulated, with the National Health Act being the overarching regulation for the entire healthcare system. Other laws, such as the Medical Schemes Act (medical aid) and the Financial Advisory and Intermediary Services Act (health policies), play a role in governing the private healthcare space. Also, the South African Health Product Regulation Act has a fundamental role in the healthcare sector.

Private health care uses a mix of value-based purchasing of healthcare services and fees for service. This poses a significant risk considering the rising volumes of care driven by various forces such as epidemics, inflation, and business dynamics.

Because of this, there is a certain level of instability in the numbers of practitioners, businesses and healthcare facilities that remain operational and in business. Though it is a highly regulated environment, there is substantial room for business and ample opportunity to find a niche and make a huge difference.

Q6. How vulnerable is the health sector in South Africa ?

The vulnerabilities of the health sector in South Africa are there. However, not as pronounced as in the other African States. The most current threat is the imposition of National Health Insurance without readiness structurally and financially.

There is also very poor communication or consultation from the government on the plans of the healthcare reforms that will complement moving from a dual healthcare system into a centralized single healthcare system. The exposure to the COVID-19 epidemic also proved that though there were uncertainties, the South African healthcare sector has the capacity to collaborate and efficiently contain common threats.