NHI will ‘definitely’ be funded once the Bill becomes law – Godongwana

The government has committed to raising existing taxes and/or implementing new taxes to fund the National Health Insurance (NHI) scheme, the Minister of Finance’s responses to questions in Parliament indicate.

On Wednesday (20 March), opposition Members of Parliament attempted to pin down Enoch Godongwana on the cost of NHI and which taxes will be increased or introduced to fund it.

But Godongwana would not be drawn on disclosing the government’s proposals at this stage. Any announcement about tax changes to fund NHI will be made through the normal Budget process.

“I mention taxes once a year, on Budget Day […] I don’t go around everywhere mentioning taxes. If I’m going to tax anything, you’ll hear from me next year on the nineteenth of February. So, any clarity on taxation you’re not going to get now,” he told the National Assembly.

Godongwana emphasised that the NHI Bill will become law: “The president has made it absolutely clear he is going to sign the Act.”

DA MP Dr Dion George said the conservative cost estimates for NHI are from R850 billion to R1 trillion. He asked the minister “when the government will stop lying to the public about the hopelessly unviable non-starter NHI that it knows will break the backs of hard-working South African taxpayers”.

Godongwana said that once President Cyril Ramaphosa signs the NHI Bill into law, National Treasury will work with the Department of Health on the progressive realisation of the objectives set out in the NHI Act.

Addressing George’s statement that NHI is unaffordable, he said the government subsidises the middle class and the rich to the tune of R34bn a year. “Shouldn’t we be talking about that R34bn becoming the starting point? And the current health budget.”

The subsidy to which Godongwana referred are the medical tax credits available to members of medical schemes. Proponents of NHI want the tax credits to be reallocated towards funding NHI.

The minister said: “At the appropriate time, we’ll look at the various instruments of raising revenue to fund the NHI. But it’s definitely going to be funded once the president signs it [the Bill].”

In his answers to questions on financing NHI, Godongwana twice referred to the Department of Health’s 2017 White Paper on NHI. Chapter seven of the White Paper proposes five different scenarios for funding NHI.

“Once the Act has been assented to by the head of state, the president, we will then work with the Department of Health on those scenarios and […] roll the NHI out,” he said.

The five scenarios are:

• a surcharge on taxable income, a VAT increase, and a payroll tax;
• a payroll tax and a surcharge on taxable income;
• a surcharge on taxable income and a VAT increase;
• a payroll tax and a VAT increase; or
• a surcharge on taxable income.

Comment

Much of the opposition to the NHI Bill has focused on section 33, which will restrict medical schemes to offering complementary cover to services not reimbursed by the NHI Fund once the Minister of Health determines that NHI has been “fully implemented”.

The full implementation of NHI may take at least a decade – if, in fact, it is ever fully implemented.

What is often overlooked is section 49, which provides for the funding of NHI via general tax revenue, a payroll tax, and a surcharge on personal income tax.

If taxes are increased or introduced to fund NHI, permitting medical schemes to continue providing the benefits they currently do will not remove the threat to private health cover because medical scheme members may not be able to afford paying scheme contributions in addition to more income tax or VAT and/or a payroll tax.