South Africa cannot afford the proposed NHI

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SOUTH AFRICA (The Citizen) – The Davis tax committee warned in 2017 that an NHI would not be sustainable without much faster growth, which is unlikely to happen.
The introduction of National Health Insurance (NHI) was likely to cost South Africa more than R600 billion at its start in 2026, with costs continuing to escalate thereafter, according to the South African Institute of Race Relations (SAIRR).

Reacting to the plans by Health Minister Aaron Motsoaledi to introduce the NHI, SAIRR head of policy research Anthea Jeffrey cautioned government on the “dire implications” of introducing a medical health scheme South Africa could not afford.

“No proper costing has ever been done on the NHI. The projected R256 billion in the 2025 figure provided in the 2017 white paper is a 2010 figure, which is badly outdated and entirely unrealistic.

“South Africa cannot afford it, especially now that growth is so low and public debt so high. In addition, the tax increases which were earlier mooted to fund it – a 1% point in the VAT rate, or a 4 percentage point increase in the top marginal rate of personal income tax – have already both been introduced, simply to plug the holes in the government’s revenues.

“The country has a very small and already overburdened tax base.

“In December 2017, the Davis tax committee, which had been charged with investigating the funding of the NHI, warned that it would not be sustainable without much faster growth. Such growth is most unlikely to be achieved,” warned Jeffrey.

Jeffrey said the country’s crisis-ridden public health institutions would make the NHI difficult to introduce.

“At present, 85% of public hospitals and clinics could not be accredited to take part in the NHI because they are unable to comply adequately with basic healthcare norms and standards, such as maintaining proper hygiene and having medicines available.

“These problems cannot be overcome without much better management, including financial management. In addition, there needs to be much stronger accountability for wrongdoing, as illustrated once again by the former Gauteng health MEC Brian Hlongwa’s story of being implicated in a R1.2 billion graft.”

She said the NHI would lead to existing medical schemes being “squeezed out of existence, leaving the middle-class dependent solely on the NHI.”

Added Jeffrey: “Many may find this unacceptable and those with the option to emigrate will have increased reason to do so.

“Such emigration would reduce an already very narrow tax base, in which about 600 000 people pay 64% of all personal income tax. Cut that number of taxpayers in quarter or in half, and the tax available to fund all other needs will be much reduced.”

Jeffrey said “porous South African border posts”, which made it easy for economic migrants to enter the country without difficulty, would also have adverse implications for the NHI.

“As long as our borders remain so porous, it will be difficult to control the number of people who come into the country and then rely on our health services. This means that the NHI may – in practice – have to cater for more than 56 million people, which will be a further challenge,” she said.

The NHI would make all South Africans dependent on a single state-run medical scheme: the NHI fund.

“This will set the fees to be charged by all health practitioners across the country. It will set the prices for all medicines and medical devices. It will decide on the healthcare protocols to be used and the new technologies to be allowed, most of which are likely to be excluded due to being too expensive.

“It will be responsible for paying every doctor, specialist, nurse, and other healthcare practitioner, and delays in payment are likely to be legion.

“The NHI fund will have to ensure that all medical equipment and facilities at hospitals/clinics are properly maintained.

“If payments are made late, suppliers will cut off their services, as already often happens in the public sector, and the public will suffer,” said Jeffrey.

She said the NHI fund would “require a huge bureaucracy, the costs of which will also be enormous.”

“It will be far less efficient than current private medical schemes. Many of the contracts for supplies it enters into may also be tainted with corruption, as the Brian Hlongwa story shows.

“Since it will have a monopoly over healthcare, people will have no choice but to rely on it, irrespective of how poorly it functions. Long waiting times for all medical treatment are sure to arise, with people having to wait months or sometimes years for their healthcare needs to be met.”

The IRR recommended that “a significant portion of the poorly-spent healthcare budget should be allocated directly to low-income households in the form of tax-funded healthcare vouchers”.

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