What does the demand for healthcare look like in SA?

NHI NOTE 3, OCTOBER 2009

The aim of this research note is to understand what drives the demand for healthcare in South Africa. It is important to understand the current drivers of healthcare demand and the demand for insurance, and what the effect could be on aggregate demand if health insurance is extended to the entire population under a planned national health insurance (NHI) scheme. This research note starts with a brief survey of the economic literature on the demand for healthcare and what the effects are of being insured. It is shown that utilisation increases when services are free (i.e. under an assumption of zero co-payments). This again drives costs under a model of universal coverage with a comprehensive benefit package. We also present an overview of existing data on the demand for healthcare in South Africa, in order to assess the existence of pent-up demand. We show that under a system of universal coverage, a comprehensive benefit package and zero co-payments there will be an order of magnitude increase in the demand for healthcare services.

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