Friday, February 19, 2010

Let's lay the Maxwele situation to rest

Today SAPS published a confession and apology by Chumani Maxwele for his zapping the President's convoy and swearing at the police who confronted him about it.

I emphasise the word "by" in the above, because I don't want the reader to mistakenly read the word "to" in its place. I am in strong agreement with Calli and Emma at For Voet's Sake! who argue that the Minister of Police in fact owes Maxwele an unreserved apology and perhaps even compensation. The reader would be forgiven for mistakenly reading that the Minister had apologised to Maxwele.

Minister Nathi Mthethwa said in the statement, "Let us lay this matter to rest, as the person concerned has now apologised." This statement smacks of defiance in the face of very damning actions by the police.

Tuesday, February 16, 2010

NEHAWU responds to Econex report

I have included my comments below on today's Business Report article on NEHAWU's irate response to yesterday's Econex report. Maybe it's just me, but I feel that NEHAWU is not angry with Econex over any substantive issue - NEHAWU seems angry that the NHI was once again predicted to cost a fortune and that Econex dared to question the viability of a project so essential to the welfare of South Africans.

NEHAWU outraged by NHI study
February 16, 2010

The National Education, Health and Allied Workers' Union (Nehawu) on Tuesday slammed the research by consultancy Econex into the proposed National Health Insurance (NHI) scheme.

The research was "yet another guesstimate exercise" purporting to be a credible study on the costs of the NHI, the union said in a statement.

Nehawu said the research had been commissioned by private hospitals -- "hardly a reassuring indication of objectivity".

"Wild and unfounded claims on the supposed costs of the NHI are made in the report, including the usual claims about the possible tax implications, a ploy intended to scare off the taxpayers for ulterior motives of those who currently take the largest share of our country's health budget to service their selfish interests as opposed to improving health care to a large majority of our people."

Quite the opposite, in fact. I think that producing initial estimates of the likely cost of the NHI is in everyone's best interests, including those of the "large majority of our people". This research is the best cost analysis available to date with the information that the Government has released on the NHI.

According to the study, government will have to provide an extra R244 billion a year, in addition to the money it already spends on health.

"The proposed NHI in its current form, promising universal coverage, no co-payments, comprehensive cover and provider of choice, will be massively expensive," Econex said in its research note.

However, the union said Econex economist Marine Erasmus had allegedly confirmed in a radio interview that the estimate of an extra R244 billion a year was based on only two leaked documents and one public document from ANC Today.

"She has in the same interview confessed that she has absolutely no idea of what the detail is."

If Econex has used limited information to draft this report, then whose fault is that? It is the Government's fault, for failing to release more useful or accurate information to the public. No member of the public knows what the details of the NHI proposals are because no documents other than those above have been released.

"However, the report acknowledges that the researchers based their costing of the comprehensive cover on the current private healthcare costs believing that there would be a greater shift towards the use of private healthcare."

Nehawu said it rejected this assumption as private healthcare was not available to people living in remote areas "and in any case the NHI is not going to be based on the current private health costs which are distorted by profiteering and inefficiencies".

Once again, "freedom of choice of provider" is the promise that Government has been delivering to South Africans. It is therefore natural to assume that the majority of demand for hospital services would be channeled to the excellent private sector.

Having said that, it is true that a mix of public and private healthcare will be consumed under the NHI, and this should have been allowed for in the report.

On "distortions from profiteering and inefficiencies", there is little empirical evidence to suggest that public healthcare can be provided more cheaply than private healthcare, although a common rule of thumb is a 30% discount in the public sector. In any case, the Econex report does allow for such a reduction in costs.

The union said Econex had indicated the additional revenue needed for the NHI would amount to a 33 percent to 37 percent increase on total tax revenues.

"However in [the] interview, Erasmus stated that it would be difficult to say how much additional income tax would be required given the little detail we have at the moment", the union said.

It rejected Econex's suggestion that social health insurance, where only employed people would be covered, might be the best option as an interim step towards a full NHI.

Nehawu said this would once again "remove the focus of health delivery from workers and the poor" and this was not in line with the constitutional injunction which expected government to ensure access to healthcare to all.

Quite the opposite. Regardless of what NEHAWU would like, the introduction of NHI would have to take place in phases, or the introduction of NHI will almost certainly fail. Introducing the system in phases brings the poor closer, not further, from coverage.

"Distortions and misrepresentations about a people's health are not only unethical and irresponsible but they are also a health hazard as their poisonous effects can penetrate the minds of the policy makers and implementers," Nehawu said.

So true.

It challenged Econex to clarify the basis of its calculations and to inform the public as to who sponsored the research.

I would also like to see Econex release some more of its assumptions.

"Until the final policy document has been confirmed by Cabinet and released for public comment by the minister of health, the assertions from Econex and similar institutes remain guesswork," the union said.

Very important and useful guesswork that is conducted with the best of the available information at the public's disposal.

While Finance Minister Pravin Gordhan may mention the NHI in his first budget speech on Wednesday, he was not expected to announce the launch of the scheme.

The plan is still regarded by most economists as being in its infancy. - Sapa

Monday, February 15, 2010

Thomas Jefferson on Life, Liberty and the Pursuit of Happiness

Thomas Jefferson in The United States Declaration of Independence, 1776:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

Latest Econex report on National Health Insurance (NHI)

About a week ago, Econex released a report on the likely cost of the National Health Insurance proposals as they currently stand. Here is a summary of the findings.

Principles of the NHI
  1. Universal coverage with no copayments
  2. Comprehensive benefits similar to those currently offered on cheaper medical scheme options
  3. Freedom of choice of healthcare service provider

Cost estimates for the NHI
Various studies and methodologies have estimated the costs of the proposed NHI between R130bn and R250bn as follows:

Where should the money come from? Financing the NHI
The costs as estimated above are large when compared to government's tax revenue and to government's current expenditure on healthcare. Such a comparison is provided below:

Econex concludes that the NHI as it is currently proposed is too expensive and substantial policy changes would be necessary to introduce a system that meets citizens' needs and affordability constraints.

Current NHI proposals are widely regarded as being too costly for effective implementation. The really interesting debate is in the form that the NHI should take given budgetary constraints.

Furthermore, the political will behind implementation of the NHI is too strong to be deterred by these cost estimates. Policy reform is therefore critically urgent, or the design of the NHI system will be determined by an uninformed political process.

Sunday, February 14, 2010

DA on parastatals

In a recent feature article by Politicsweb, Dion George of the Democratic Alliance writes about the principles underlying the DA's 2010 budget:
  1. Competition
  2. Choice
  3. Personal responsibility
While a substantial part of the article contains needless waffle and mistruths about the ruling party, I am encouraged to see that competition and accountability feature so prominently in ths list. Competition is seldom recognised by the ANC as an important social good when constructing policy.

On parastatals
The DA argues for the privatisation of parastatals over time. Names like Eskom, SAA and the SABC have become synonymous with inefficiency, wastage of public finances, mismanagement and corruption, even though the SAA has recently turned its financial position around.

The failure of parastatals worldwide is understandable from a microeconomic perspective if one accepts that the incentives facing such institutions predispose them to failure. A public entity, unlike a private entity in a competitive environment, has little incentive to structure its operations efficiently or to employ its financial resources to add the greatest value to its customers. On the contrary, with government underwriting its activities, public corporations are incentivised to take a disproportionate amount of risk, and on failure to request additional capital - a 'bailout'.

In South Africa, where state accountability and management expertise is limited, the government as majority shareholder has little incentive or ability to ensure the proper functioning of state-owned corporations. As South African citizens we should inform ourselves of the issues surrounding privatisation and we should make our voices heard.

Next up - nationalisation of mines or nationalisation of the Reserve Bank?

The reader can find a relatively balanced article on privatisation of parastatals on Wikipedia.