Financialisation is the last thing South Africa’s National Health Insurance needs

South Africa’s National Health Insurance (NHI) is one of the boldest attempts in decades to close the yawning and widening gap between a well-resourced private sector and an underfunded public health system. The NHI Act, signed into law on 15 May 2024, marks a crucial legal step by the state to implement legal and policy reforms to progressively realise every South African’s right to health, as part of the country’s phased approach to achieve universal health coverage (UHC).

However, despite the boldness of the reform it arrives into a health economy that is already being reshaped by the logic and retrogressive dominance of private capital. That logic, commonly referred to as financialisation, treats health services not as a public good but as an asset class that must be packaged, priced and sold to the highest bidder or those most capable of affording it. Left unchecked, it will hollow out the very solidarity and public financing the NHI, and a properly functioning universal health system, needs to succeed.

Read more: Everything you ever wanted to know about the NHI but were afraid to ask

Let us break down what financialisation implies. Financialisation is the growing dominance of financial motives, instruments and actors including private equity, asset managers, investment firms, complex public-private contracts and investor-return demands, all involved in the organisation and financing of health services, in one form or another and at different levels or sublevels of health systems. In healthcare, financialisation takes the form of hospital chains owned by investment funds or Stock Exchange-listed companies, public-private partnerships (PPPs) structured to secure optimal investor returns, and provider payment models that reward profitable procedures over essential primary care or even desirable patient outcomes. In many low- and middle-income countries and even in developed nations, financialisation has made significant contributions to deepened inequality and commercialised access to care, both of which are directly at odds with the goals of UHC.

It is not surprising that the proponents of financialisation are often quick to argue that private investment brings efficiency and innovation, contributes to domestic resource mobilisation and brings about much-needed fiscal relief. But efficiency for investors is not efficiency for society. When hospitals are run for the purposes of maximising shareholder returns, health costs will inevitably rise, equity and public health objectives fall by the wayside, and in some instances transparency and accountability diminish.

Furthermore, innovation driven by profit tends to favour expensive technologies over preventive, practical and more widely accessible solutions, and fiscal “relief” today often translates into significant fiscal dependency tomorrow through long-term debt repayment obligations. True efficiency in health systems is achieved through prevention, equitable and affordable access and coordinated care – goals that markets, left alone, do not and will not deliver.

You may still be asking why this is adverse for UHC and the NHI?

Throughout the past two decades, we as a country have gone through an almost cathartic process, deliberating how UHC depends on pooled public financing, equitable and affordable access to needed healthcare and services planned around our population health needs. Unfortunately, financialisation undermines each of these pillars.

Principally, it weakens social solidarity. This is because when private finance drives and dominates provision, returns flow to investors, not into the risk pool that redistributes resources across society based on need. This preserves a two-tier system, where the very inequity the NHI reforms seek to end are entrenched instead. Financialisation also raises long-term costs. Investor returns, transaction fees and complex financing structures make privately financed care more administratively and transactionally expensive, diverting scarce public resources away from prevention and actual health services provision.

Additionally, due to the nature and structure of financialisation and some complex structuring arrangements, it ends up distorting incentives for administrators and providers. Specifically, financialised providers favour high-margin procedures over integrated, multidisciplinary healthcare, fragmenting services and widening inequities and disparate health outcomes.

Finally, the entrenchment of financialisation comes with a high risk of regulatory capture because powerful financial interests lobby for favourable contracts and price-setting, threatening the integrity of public oversight, transparency and public policy priorities.

Therefore, although the NHI is a public reform, the health economy remains dominated by private voluntary health insurance schemes and corporatised hospital groups. Fiscal pressures on the state, and limited NHI allocations in the Medium-Term Expenditure Framework coupled with the recent withdrawals of key donor funding for programmes such as HIV, Aids and TB, increase the temptation to turn to private capital and PPPs for infrastructure and health services delivery. However, these “quick fixes” risk locking the NHI into high-cost and unsustainable models and eroding public control over essential health assets.

As a country, we need to proactively erect multifaceted guardrails for a people-centred NHI. This includes emphatically prioritising public and progressive financing through equitable taxation and budget reallocation, not investor-dependent funding. We must use private capacity, but do so selectively, with a circumspect approach that ensures transparent, short-term, performance-based contracts that prioritise public health and equity outcomes.

It is time as a country we agreed that we need to reform tax incentives that favour private medical schemes and undermine the desired NHI funding pool. Given the manner in which these tax incentives are fundamental to the continued existence of the medical schemes industry, we must remain resolute that these funds must be redirected into the NHI funding arrangements, rather than retained by a private sector that only benefits a few.

The government must double its efforts towards investing in public primary healthcare and health workforce development, where returns are measured in lives improved, not dividends earned or profits declared. There must also be an integrated regulatory regime that continuously safeguards the NHI Fund’s independence and transparency, keeping its governance firmly public and participatory. This must include strengthening regulatory and procurement capacity through institutional and organisational reforms that ensure robust, independent oversight of procurement, pricing and quality of healthcare. All contracts entered into by the NHI Fund should be published and accessible to the public, and independent audits of and reports on public-private deals must be routine.

The choice of the type and form of health system we desire now and in the future is before us. The NHI offers South Africa a historic opportunity to reshape our health system around equity and solidarity. But if financial markets and products are allowed to set the terms, we will end up with a system that looks universal in name only because the values that make UHC possible will have been sold off in pieces to the highest bidder.

We must always remember that health is not an investment product. It is a social right and a public good. South Africa’s NHI must be built on this foundation, or it will not stand at all, to the detriment of our people and the spirit of ubuntu. DM

Moremi Nkosi is chief director of healthcare benefits in the NHI branch of the Department of Health. Professor Nicholas Crisp is the deputy director-general responsible for the branch. Dr Aquina Thulare is a technical specialist in health economics in the department.