Small, step-by-step innovations at the clinic and hospital level are where the real action lies in fixing South Africa’s healthcare system. Sourcing money in new ways at the top of the system is only part of the story. Variations of the single-payer system have worked well in several other middle-income countries – but in each case, the health system rises or falls according to how skilfully the details are worked out at the bottom of the system rather than the “big” ideas at the top.

The proposed National Health Insurance system is a big idea. And it evokes strong emotions because it touches on “hot-button” issues in South Africa such as socialism and higher taxes. These are potential slayers of dinner-table conversation – even among friends – and that’s before you stir in our anxieties about health.

Another factor in the emotional quotient of the conversation is the sheer complexity of healthcare. For starters, the government bond market is in the red zone: to escape the formidable clutches of IMF head Christine Lagarde, South Africa needs to pay down its debts urgently. Also at play are the increases in non-communicable diseases such as cancers and heart disease, large-scale HIV programmes, and ever-changing medications, systems and medical technology. It is too much to hold in mind – and so we go with our “gut” feelings.

When thinking about the costs of medicine it is important to recognise that they are surprisingly different depending where you look. Consider the following table:

The US has the most expensive healthcare in the world while its outcomes are inferior to other high-income countries like Japan, Germany and France. When we talk about healthcare costs we can’t think about those costs as absolute and unchanging, like Newton’s laws of motion. We need to think about what drives costs up (and down) and what would stir healthcare innovation.

In South Africa, the NHI itself can be thought of as a grand-scale innovation – one that has enjoyed a degree of success in other middle-income countries around the world including Brazil, Colombia and Thailand. But innovation is a double-edged sword. Take the life of Nikola Tesla. He invented the alternating-current motor, a technology worth millions of dollars. Yet through poor decision-making and poor business management of his innovations, Tesla died in poverty. Managing the business side of innovation is no mean feat.

The financial innovation heralded by the NHI revolves around the single-payer system – corralling rands spent on dozens of private medical aids into one giant insurance system (run by government). In theory, this changes the market dynamics in three significant ways: (1) through buying power, (2) through cross-subsidisation and (3) through per capita payments to providers.

First, if you represent the whole of South Africa’s demand for, say, chemotherapy, you can negotiate down the price. Think of the difference in buying power between a corner grocer and Pick n Pay in their dealings with suppliers. Pick n Pay can call the shots on price whereas the corner store can’t. In theory, the NHI can get a much better deal by being the “big kahuna” in the negotiations with suppliers.

Second, the NHI legislates cross-subsidisation between the wealthy and the poor, the young and the old, the healthy and the sick. If you have a medical plan with only 30-year-old, healthy, high-income marathon runners then you have only a sliver of cross-subsidisation. The majority are healthy and a few will fall sick. But you have no cross-subsidisation between the young and the old, and between the wealthy and the poor. The NHI improves the efficiencies of “risk pooling”, albeit at a higher price for taxpayers.

Third, per capita payments means paying doctors (and other providers) a fixed amount per month to look after a pool of patients in their area. For example, each GP would be paid a fixed amount of money per month to care for a list of, say, 1,000 patients living nearby. International experience with this system has revealed advantages and disadvantages. The upside is that the doctor’s incentive shifts towards prevention and cost-effective treatment. High-value treatments are prioritised. Most doctors are conscientious, hard-working types – and for once they would get rewarded for working to keep people healthy, and intervening only when necessary, rather than making money out of more “billable hours”.

The downside of capitation payment is that the doctor’s incentive may also become not bothering to keep up the quality of care. Without excellent monitoring and evaluation, patients may experience a downgrade of the quality and availability of care.

Single-payer financing is not an end in itself but a means to an end. The real goal is universal healthcare (UHC). The defining feature of UHC is giving good-quality healthcare to everyone regardless of their ability to pay. It is a move away from the idea of paying at the time you get sick, to a pre-payment system through tax. Single-payer is just one way to get there – Britain’s way. Other ways work too.

In Germany, everyone has to sign up for health insurance (for which employers pay) and the government will step in and cover it for those who cannot afford it. German health insurance is available through private (mostly non-profit) insurers that are tightly regulated. There is not a lot to choose between Britain and Germany in terms of the quality of healthcare they provide, or the cost. The over-arching model is less important than the clinic-level systems that transform money into healthcare.

The “early adopters” of universal health care (UHC) among middle-income countries occurred 50 years ago in countries such as Cuba, Sri Lanka and Malaysia. In the early 2000s, a wave of middle-income countries set their sights on UHC. These included the “big fish” of China, India and Indonesia (which combined hold 40% of the world’s population). But there are real differences in the particular form UHC took in each middle-income country. The variety of approaches was akin to a dozen people in a room painting still life; each individual is looking at the same image, but interpreting it in their own style.

Middle-income countries face the question:

“Given our limited budget should we target only the poor for free healthcare or should we make it free to all?”

The informal economy is typically large: ranging from around 36% informal employment in South Africa, to around 90% informality in countries like India, Ethiopia and Kenya. This is the “missing middle” in the sense that people in this economy are not “poor”, given that they have work that provides useful income (though often it is precarious). Yet because they are not registered employees they do not pay tax.

Most middle-income countries kicked off UHC by focusing only on the poor, and then gradually rolled the programme out to the informally employed. Initially, informal workers were asked to pay for services at government clinics and hospitals. But these payments were politically unpopular. Making people pay for things – especially when they are sick – is not a winning electoral strategy. More importantly, such payments catapulted some families into financial hardship. Over time most countries dropped this system. Following the German model, several middle-income countries such as Ghana, Costa Rica and Turkey have found ways of mandating health insurance (subsidised by the government) for the informally employed and the poor. Obamacare is alive and well – just not in the US!

The second major question that every middle-income country needs to answer is: “Given our limited budget what, exactly, should we include in our free health service?”. There are agonising choices to be made at every turn: how to divide resources between prevention and treatment, between primary care (nurses and GPs) and specialist services and between communicable diseases (HIV, TB) and non-communicable diseases (heart disease, cancer). These choices are, as they say, a “wicked” problem. Each country needs to come up with its own answer.

Who gets to set the priority for spending? What criteria are to be used? It is an intricate task and because there are large pots of money involved, it is vulnerable to political and corporate “capture”. Crucially, the “spending panel” needs to be protected from interference. There would be value in creating an independent institute, staffed with healthcare experts, to make these spending decisions – and make them methodically and ethically. It has been found that very few countries stick to the evidence, and stick to a carefully thought-out system in deciding what to cover. Thailand is an example of a country that does this step well – and Thailand has one of the most effective UHC systems among middle-income countries.

Monitoring and evaluation is a key area in SA healthcare that needs reform. There are blobs of data all over the place which have not been systematically brought together in a useful way. Take data on health workers in each part of South Africa. This is critical because there is a severe shortage of healthcare workers in many districts, especially rural areas. Yet researchers are crying out for an integrated, complete database. This would enable planning for the future – and innovation.

Perhaps the clearest example of a problem with health outcomes data is the NHI pilot programme itself. One would be forgiven for thinking that monitoring and evaluation would have been emphasised in order to promote the NHI as the best thing since penicillin. Not quite. Baseline measures were not recorded, and there was no control group. In short, there was no way of telling if the NHI pilot clinics did any better than the existing, cheaper clinics. At primary schools, children were screened for illnesses and referred to clinics. This is progress. But no records were kept of how many children actually made it to the clinics for care.

Private GPs were contracted to work in the clinics. That’s positive given the shortage. But many of these “private doctors” turned out to be government doctors. They saw that the NHI clinic contracts paid more, so they resigned from their regular government jobs, and “turned up” as contractors for the NHI clinics. Their old hospitals were left understaffed. In addition, billable hours paid to doctors were not monitored and doctors’ fees blew the budget. (Fixed per capita payments were not used after all!).

At the same time, it is important to recognise that some of the programmes really did work. The Health Patient Registration System improved patient registration and record-keeping. The Stock Visibility System (SVS) worked impressively. Stock-outs of medication are a frustrating daily reality at hospitals and clinics in South Africa. But when stocks ran low at the NHI clinics the SVS software would send an early warning alert to managers at each point in the supply chain, from the clinic through to national level. Stock-outs dropped dramatically. Improvements like these are life-saving.

The money spent on health research last year was 0.0037% of the overall department of health budget. The international recommendation is at least 2%. Spending more to fix our health data and monitoring is probably the best investment we can make right now. Debates around the NHI should focus on the important stuff – and the important stuff in a healthcare system is as much about the detailed systems in rural clinics as it is about the variant of single-payer financing. The single-payer system in Britain has been built with countless incremental modifications over the past 70 years.

We should focus on manageable steps towards the UHC goal and rapidly improving our monitoring and evaluation so that we can tell what’s working and what needs further innovation. DM