The chief executive of Discovery Health, Dr Ryan Noach (pictured), has rejected the view that his company has not come out strongly in opposition to National Health Insurance (NHI) because it hopes to administer the scheme.
In an interview, Alec Hogg of BizNews asked Noach to respond to the suggestion by Connie Mulder, the head of the Solidarity Research Unit, that the lack of public push-back by the major health insurance companies might be because they hope to administer NHI on behalf of the government.
“Let me say factually and on the record, that’s not the case […] There’ve been no conversations or considerations of that. We have no idea what their administration plan is,” Noach said.
“That’s not our strategy. We’ve never even tendered to administer the Government Employees Medical Scheme (GEMS),” he said. GEMS is the second-largest scheme in South Africa after Discovery Health Medical Scheme.
He said this was not because Discovery was “allergic” to government business but because GEMS’s contracting model did not align with Discovery’s integrated approach to administration and managed-care services. GEMS has about 19 contracts for delivering administration and managed care.
Noach said he did not think Discovery has been “silent” on NHI.
“I’ve done close on 30 conversations like this one in the last two weeks, and I’ve got a very clear position. One, the current situation’s inequitable and needs to change. Two, NHI has strengths, and actually most of that bill is quite good and can be worked with. Three, it is not feasible to wipe out the private sector and nationalise it in a very communist-like approach towards delivering health care […] There’ll be a revolt of the people whose current healthcare spend would drop by, in our calculation, more than 70% per capita, and you can’t raise the taxes for it. It’s economically not feasible.
“Plus, it’s just not smart because there is just such brilliant support from the private sector in this country […] The smartest way to do it would be to work with the private sector and use that for the good of a larger number of people.”
Constructive approach
Instead of “just tearing down” the NHI Bill, Noach said Discovery has presented constructive proposals to the effect that the bill provides a viable framework but suggesting necessary changes.
Asked whether Discovery would challenge the legislation in the Constitutional Court, Noach said the administrator was “not naturally litigious”, and “we’re far more engaging”.
Over the four years during which the National Assembly’s Portfolio Committee on Health considered the bill, Discovery did “an extensive amount of work and submitted almost a thesis to demonstrate what we think is a viable solution for NHI. There are lots of strengths in the proposal, but there are a couple of things that are non-starters that in our view make it impossible to implement and not feasible,” he said.
Discovery’s estimates of the required tax increases
Hogg asked Noach to comment on Mulder’s estimates of the tax increases that will be required to fund NHI. VAT would have to increase from 15% to 20%, personal income tax (PIT) rates by 20 percentage points, corporate income tax (CIT) from 27% to 42%, and a payroll tax of 5.5% would be added.
Noach would not comment on Mulder’s numbers but said Discovery’s health economics unit has done its own calculations.
National Treasury has not costed NHI, and the only number in the public domain was R200 billion, which was provided by the Department of Health some years ago, he said.
Hypothetically, assuming R200bn is sufficient, VAT would have to increase from 15% to 21.5% if NHI were funded entirely from VAT. If NHI were funded entirely from PIT, the tax rate would have to increase by 32%. If NHI were funded purely from a payroll tax, employers would have to pay 10 times their current Unemployment Insurance Fund (UIF) contributions, Noach said.
“You don’t need to understand the fiscus to know that there will be a tax revolt, or you’ll never raise it.”
Discovery also did calculations based on increasing a combination of taxes.
He said the “most viable combination” Discovery could come up with was increasing VAT by two percentage points to 17%, PIT by 10%, and CIT by 10%, and adding a payroll tax of double the current UIF contribution. This combination would provide R200bn, although Discovery believes NHI will cost R400bn.
He said South Africa has a tax base of about 5.5 million people, which largely mirrored the medical scheme base of five million principal lives and a total of nine million beneficiaries. These individuals also fund the public sector healthcare system, contributing about 80% of its funding from their disposable after-tax income.
The government is proposing to increase their taxes significantly, while their per capita entitlement to health care will decrease by about 72%. This “doesn’t work. It’s not feasible,” Noach said.
‘Decades away from feasible implementation’
The Portfolio Committee on Health received 112 submissions comprising tens of thousands of pages from health economists, civil society organisations, non-governmental organisations, and the private sector. In the four years following those 112 submissions, not one substantive change has been made to the NHI Bill, Noach said.
He was at a loss to explain why the government was non-responsive to the proposed changes.
The “only rational conclusion” was that the government “had a model they believed in and were determined to push it through”.
Despite this, Noach said he was optimistic.
Even if the NHI Bill was passed into law without any material changes, the country was “decades away from any feasible implementation”.
It was possible that the bill could encounter opposition in the National Council of Provinces because section 32 requires that about 50% of the provincial health budgets are appropriated into the NHI Fund.
If the Act is passed by both houses of Parliament, President Cyril Ramaphosa might raise concerns about the legislation’s constitutionality before he signs the legislation into law. Parliament’s legal service has said there are “serious constitutional shortcomings” in the bill, Noach said.
If the president “fast-tracked” the Act to get it on the statute books before the general election in November 2024, the Act will “undoubtedly” be challenged in the Constitutional Court, Noach said.
If the Act got through the Constitutional Court, “there’s many, many years before implementation. We don’t think it’s feasible as it stands, so there’s no reason to panic today. But there is reason for action, public conversation, and engagement,” Noach said.
Click here to watch the full interview on YouTube (about 22 minutes).
nothing is true until officially denied (scope circa 1980), this little pearl of wisdom has proved true more often than not. who get what out of NHI it remains to be seen however ,logically the dept of health has had more than its fair share of scandal. one thing is for sure quality will evaporate , machinery will break or disappear and waiting list will stretch into years
NO thank you don’t want public health when I need a doctor , who will probably move overseas
in the next few years ,UK looking for 100,000. nurses