POLITICS Bloomberg Businessweek January 27, 202036
ILLUSTRATION BY JACK TAYLORTHE BOTTOM LINE A proposed South African law aims to fix
a system in which a small portion of the population has private
insurance and consumes almost half the health-care spending.private hospitals will continue to operate, their fund-
ing will come from public sources. Private insurers
will still subsidize some services, but the majority
of coverage will come from the new public system.
ANC lawmakers will have to sell the change to
doctors and nurses, particularly those in the pri-
vate system who may have to live with smaller pay-
checks. Some private insurers and administrators
are worried that when the NHI rolls out in 2026,
the role of companies may be reduced to provid-
ing coverage for treatment not offered by the state.
South Africa’s main opposition party also has said
it’s concerned that funds given to the new system
will be vulnerable to corruption.
For now, none of those factors appear to be hold-
ing back the legislation. Nationalized health care
“is going to happen,” says Ronnie van der Merwe,
chief executive officer of Mediclinic International,
a South African for-profit hospital chain. Some doc-
tors have threatened to leave the system, says Gray
of the University of KwaZulu-Natal, but “where are
they going to go? Most developed countries already
have the same system—except the U.S.”
Backers are battling widely held misconcep-
tions about the plan, including the notion that all
private health insurance will be phased out. There
will still be a role for private insurers to provide
complementary services, and South Africa’s big-
gest one supports the NHI. It’s a far cry from the
U.S., where health-care reform has frequently run
aground on industry opposition. “If you told me
that 15 years from now a bunch of your custom-
ers feel they don’t need private insurance because
the public health system is superb,” says Discovery
CEO Jonathan Broomberg, “I’d say that’s great.”
—John Lauerman and Janice Kewuniversal health-care proposal, known as the
National Health Insurance (NHI) initiative. Not only
is the public system starved of funding, private pre-
miums are also precipitously high.
Of the nation’s 60 million people, about 16%
have private insurance, many of them white and
comparatively wealthy. They’re served by 70% of
the nation’s doctors and consume almost half the
spending on medical care, according to the health
department. That leaves the remaining 84% of the
population to crowd into government hospitals
and clinics beset by underfunding, broken equip-
ment, and personnel shortages. The most recent
government-mandated inspection report showed
that just 5 of 696 public hospitals and clinics met at
least 80% of the national standards for such mea-
sures as drug availability and infection control.
South Africa started talking about nationalizing
care after World War II, when the U.K. established
its vaunted National Health Service. The leaders of
the Commonwealth nation, however, moved in the
opposite direction, applying their apartheid regime
to health-care facilities as well.
Since the ANC gained power in 1994, the care gap
has become increasingly obvious. Years ago, many
doctors held jobs in the private and public sectors,
evening out resources somewhat, says Solomon
Benatar, a health-policy researcher at the University
of Cape Town; now that’s less common.
Doctors in South Africa’s private system operate
under a fee-for-service model and have wide dis-
cretion in how they treat patients, which encour-
ages interventions. For example, three-quarters
of pregnant women covered by Discovery Health
Inc., the nation’s biggest private insurer, undergo
cesarean deliveries, far exceeding the World Health
Organization’s recommended rate of 10% to 15%.
Only about one-quarter of women in public hos-
pitals get the surgery. Costs in the private system
are also driven up by drugs that in some cases cost
7,000% more than they do for public payers.
Experts say savings from wasteful care can be
redeployed to widen coverage. If the number of peo-
ple using the ICU were cut in half and half the sav-
ings were used to improve quality in general wards,
that would still leave $180 million in annual savings
that could be used to bring down the cost of care,
says Sharon Fonn, a researcher who helped conduct
the Health Market Inquiry, a study of South Africa’s
private health sector. Most hospitals dispute the alle-
gation that they overuse their ICUs.
The NHI would take funds going to private insur-
ers and pool them with those in the cash-starved
public sector. Based on the draft plan, costs are esti-
mated to top out at about $30 billion annually. While