Teething problems for NHI in South Africa

An article in Businesstech quotes the Free Market Foundation as saying that South Africa will need to make serious tax changes to be able to afford its proposed National Health Insurance (NHI).

Funding challenges

While a large portion of the funding will come from South Africans who currently contribute to private medical aids, an additional R165 billion in revenue would still be needed at the start of the programme, the foundation said, citing calculations from the Davis Tax Committee.

Assuming R165 billion is enough, the foundation said that this amount would require:

  • A 2.75% payroll tax
  • A 2.75% surcharge on income tax
  • A 3.5 percentage point increase in the VAT rate – from 15% to 18.5%.

But even if R165 billion can be raised from a population already struggling under one of the highest tax burdens, the money will not necessarily be used directly for the NHI.

“In the absence of legislation ring-fencing NHI taxes for NHI purposes – which the Treasury opposes – the extra R165 billion will be paid into the National Revenue Fund, as the Constitution requires.” The foundation warned that this is a recipe for corruption and that there would be limited control over how the money is actually spent.

“Once included in this common pot, NHI revenue will be used to help fund all government spending: from public service wages and state-owned entrerprise bailouts, to the interest bill on expanding public debt.”

And more

In a presentation to parliament at the end of June, the Free Market Foundation said that the amount that government will need to raise through dedicated NHI taxes would be closer to R148 billion, an effective 2.9% of GDP just on taxes for the new NHI system.

The foundation’s Michael Settas said that this figure was effectively ‘impossible’ to raise and would require increasing personal income tax by 32%. This was further exacerbated by the country’s very narrow tax base, with just over half a million individuals paying 73% of taxes in 2019.

At the start of May, the Council for Medical Schemes (CMS) said that the government’s NHI programme is in full development, with plans to move to phase 3 next year.

In its 2021/2022 annual performance plan, the CMS said that phase 3 will include mandatory pre-payment of the new scheme, contracting for accredited private hospital and specialist services, and finalisation and implementation of the NHI Act.

“The CMS sees its role as playing both a supportive and a direct role in the delivery of all the activities according to the Act that should occur in the private sector.”

Business Unity views on NHI Bill

On 29 June 2021, Business Unity South Africa (BUSA), presented its views to the National Assembly Portfolio Committee on Health on the NHI Bill.

Business supports Government’s objective of universal health care under the Constitution and the much needed reform, which can only be achieved with a strong partnership between the public and private health systems. The main points made by Business are as follows:

  1. Governance needs to be strengthened for the NHI Fund, given its ultimate size. When fully implemented this entity’s annual budget will equal the size of Eskom’s balance sheet and standard governance applicable to a 3(a) public entity would not be appropriate.
  2. Insurance, whether statutory or private should not undermine the rights of individuals to physiological and psychological integrity and autonomy under Section 12(2) of the Constitution concerning their health.
  3. Medical schemes need to be allowed to operate alongside the NHI Fund. Excluding the right to insure privately for any benefits provided for by the NHI is not practiced in any jurisdiction around the world.
  4. Implementation needs to be phased in through the achievement of identifiable milestones, rather than dates specified in the Bill.
  5. A central single payer/purchaser model for all NHI benefits (simultaneously excluded from medical aids) does not ensure optimal developmental outcomes for the health sector.

But wait – that’s not all

In another Businesstech article titled 9 massive problems with government’s NHI plans – which still need to be addressed before the end of the year, Werksman’s Attorneys raises a number of issues which confirms that the NHI is on a slippery slope, and making its deadlines will need far more than what is currently being done.

As soon as government allowed the private sector to become involved in the vaccination roll out, there was a marked increase in efficiency and delivery. Rather than holding on to the reins, fearing being shown up, taking the hand of friendship offered by the private sector to government will lead to a substantially better outcome than what is evident or possible now.

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