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National Health Act, 2003 (Act No. 61 of 2003)


National Health Insurance Policy towards Universal Health Coverage

Chapter 7 : Financing of NHI

7.10 Containing costs and improving management


258. Irrespective of the structure and financing arrangements for the health system, there will continue to be upward pressures on costs, and a need to control health cost escalation through both demand and supply side measures.


259. Sustainability and value for money are key concepts in health financing globally at present. For the past 50 years, the rise of healthcare spending has consistently outpaced economic growth. Health spending in developed countries has increased at double the pace of income, with the public sector carrying two-thirds of this growth. In the context of a rapidly ageing population, concerns about growing healthcare demand and its rising costs weigh heavily on the long-term fiscal sustainability of these economies.


260. Policy efforts have sought to tackle ‘excess cost growth’l by changing incentives to providers or consumers, or a combination of both, and have also aimed to reduce administration costs. As South Africa transforms its health financing system, important lessons can be learnt from other countries’ experience to tackle growing health spending and promote efficiency in the health sector. Three principal areas of cost control, supply-side, demand-side and governance measures are briefly discussed below.



l In the health sector, spending grows faster than income (‘excess cost growth’). This is associated with the organisation, financing and delivery of services, e.g. changes in medical practice and uptake of new technologies, and accounts for up to two thirds of spending growth in the OECD.


7.10.1 Supply-side measures

7.10.2 Demand-side measures

7.10.3 Public management and financing reforms