NHI means more tax, less benefits for medical aid members – Discovery

The National Health Insurance (NHI) Bill last week got the nod from the National Council of Provinces and has now been plonked in the lap of President Cyril Ramaphosa.

Other than expropriation without compensation, few statutory artefacts have elicited such exasperation from those most affected – medical schemes and their members, for the most part. Should the bill pass as is, it will almost certainly be challenged in the courts on the grounds of irrationality and constitutionality, primarily because the country cannot afford it.


At a media presentation in response to the NHI Bill’s relatively smooth passage through the National Council of Provinces, Discovery CEO Adrian Gore pointed to one of the offending clauses in the proposed legislation – Section 33, which would disallow medical schemes from covering the benefits provided for under the NHI once it is fully implemented.

Read: Ease up on Section 33 of NHI Bill – Discovery boss

“Once it is fully implemented” is the crucial wording in the proposed NHI Bill, and that’s likely a decade or possibly more away, says Gore. Section 33 reads: “Once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund.”

In this respect, South Africa seems to be an outlier globally. No other country appears to have imposed a regulatory limit on the scope of private healthcare cover where, for example, private healthcare providers are prevented from covering hip replacements or kidney dialysis if these are covered by the NHI.

The financial impacts of the NHI are potentially horrifying. Discovery estimates the NHI will cost R859 billion for prescribed minimum benefits against the 2023 public healthcare budget of R233 billion.


Where will government get the R626 billion shortfall?

That’s where the NHI plan seems to run aground. Apart from roughly R100 billion in tax credits and government employer medical scheme subsidies, roughly R528 billion will have to come from raising personal income tax.

Expressed another way, that’s the equivalent of an 82% increase in personal income taxes. And this from a small and shrinking taxpayer base.

This means medical scheme members will be required to pay 31% more tax and receive 69% less benefits in return.

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Biggest farce in the NHI charade is the funding story: Mavuso

Gore emphasised that Discovery acknowledges the inequalities in access to healthcare in SA and that something must be done to rectify this, but the current version of the NHI Bill is not the way to go about it.

It’s hard to imagine that the government has not thought this through. Nicholas Crisp, deputy director general for the NHI, has argued that the 8.5% of GDP spent on health in South Africa could be allocated far more wisely if placed in a single pool. He also refers to the superior healthcare outcomes in peer nations, which spend roughly 5.6% of GDP, while the private sector in SA has the highest incidence of tonsillectomies in the world, and 72% of all C-sections in the country are done in the private sector, suggesting unnecessary medical diagnosis and spending.

The public-private sector gulf

There is no disputing the gulf between private and public sector healthcare. The crucial issue is whether the NHI will be able to effectively assume the functions of the private sector when it comes to prescribed minimum benefits without pushing the country (further) off a fiscal cliff. Many would argue that’s already been done years ago, and the NHI would merely tap-dance on the taxpayer’s corpse.

Crisp has repeatedly argued that the government is not interested in taking over from private sector doctors and hospitals but would purchase services from the public and private sector providers.

A resident in Diepsloot near Johannesburg should not have to drive past several private hospitals to get to a distant public hospital when medical attention is available closer to home.

NHI advocates point to the roughly 15% admin fees charged by the private sector, some of which could be saved, and private medical inflation, which typically runs at consumer price inflation plus 2% or 3%. An NHI pool could extract far better economies of scale, which would further reduce purchase and delivery costs.


That seems to make economic sense, but the reality is something quite different. Gore says pooled procurement in healthcare is not as simple as it looks. There are already cross-subsidies between the public and private sectors, and the idea that profit margins can be shaved will simply drive out investment.

Read: ‘Totally irresponsible’ to adopt NHI Bill in current form

Gore pointed out that there is a common misconception that the NHI will offer a comprehensive package of benefits similar to what the National Health Service (NHS) offers in the UK. The current NHI proposal amounts to a cost of R714 per person per month, which is a quarter of what the NHS costs, even after allowing for purchasing power parity.

Private care currently costs R2 332 a month. Even after removing any potential profit, the figure would drop to R2 028 a month, which is three times more than the NHI’s proposed R714 a month.

Even this highly ambitious target of R714 a month is unlikely to provide anything close to the NHI’s prescribed minimum benefits. That means there will always be gaps in medical cover.

The idea that everyone will have access to private healthcare facilities is unrealistic, adds Gore, since there are not enough doctors to serve the whole population. Bumping up the doctor numbers will require more investment, but the proposed structure of the NHI will lead to disinvestment, and doctors will be incentivised to move to better-paying markets abroad.


One of the solutions proposed by Discovery is an amended wording of Section 33 of the NHI Bill that will allow for a collaborative and flexible approach, with the minister of health consulting with a benefits advisory committee and a stakeholder advisory committee leading to a “progressive realisation of sustainable access to quality healthcare services”.

Without any change to the NHI Bill, universal healthcare may only be realised a decade from now, and “in our view, the funding realities will ultimately prevail”, says Gore.

Listen to this Moneyweb@Midday podcast with Jeremy Maggs:

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Interview starts at the 6:04 mark

Source: moneyweb.co.za