Why the NHI is impossible

Intellidex director Peter Attard Montalto has described the passing of the National Health Insurance (NHI) Bill by parliament – and the subsequent reaction – as “bizarre”, saying that the scheme is simply impossible to implement in any reasonable timeframe.

The bill was passed by the National Assembly this week, laying the path for the government’s dream of “free universal healthcare for all” in South Africa. The bill will pass to the National Council of Provinces for concurrence and then to President Cyril Ramaphosa to be signed into law.

The NHI places the government as the single purchaser of medical care in the country, using the money in NHI Fund to cover healthcare for all citizens at private and public facilities. Where the NHI Fund will get this money is still up in the air, but the government has made it clear that taxpayers will ultimately foot the bill.

The scheme is expected to roll out in phases, starting in 2026.

According to Attard Montalto, however, the government is feeding a pipedream.

“The whole debate around the passing of the bill in the National Assembly has been quite bizarre – the (NHI) is not going to happen in any reasonable timeframe,” he told Newzroom Afrika.

“It is simply impossible: logistically, in terms of pathway management, systems that are in place, and in terms of funding as well.”

Funding, in particular, makes the scheme’s execution a nightmare for the government. Because no implementation plan of any substance has been published, the numbers and estimation around the cost of the NHI are speculative, Attard Montalto said.

On the lowest end, the scheme would cost the country an additional R170 billion, on top of the approximately R230 billion already spent in the public healthcare sector. On the upper-end, the figures are even higher – upwards of R450 billion.

“It’s a huge range,” the analyst said. “You would need a very sizeable change in revenue policy to fund that – none of which are politically, practically or economically feasible.”

Attard Montalto said that a wealth tax – which has been raised as a possible avenue to fund several of the government’s lofty social spending goals – is also unlikely to do the trick. Taking the money already spent on private healthcare also looks like a stretch.

He said that the tax base in South Africa is so narrow that funding of this scale cannot be focused on a small group of people.

“You need a very broad stroke of different measures – including much easier-to-implement tax-side changes like VAT. You would need a three percentage point increase (in VAT) just to start to contribute something towards that lower-bound R170 billion,” he said.

If the government goes broad enough, it could raise funds – but this would have to include payroll taxes, VAT hikes and a host of other measures that would carry deeply negative consequences for the country.

At the same time, the NHI is only one of many things the government has promised that require funding. The basic income grant, which is another hot topic for debate, is seeking about the same amount as the NHI will need.

And there are only so many taxpayers.

While better public healthcare is definitely something the country needs, Attard Montalto said, the NHI that is being rubber-stamped through parliament is not the solution.

“I don’t think this is the answer – and I don’t think it will be implemented in any reasonable timeframe.”

He said that in lieu of any implementation plan, the government will likely see what the response from the private sector will be. In many ways, it will depend on the private sector to parther with it to address the many shortfalls.

“Government is going to look to the private sector to pick up the pieces – and that is a very difficult and complicated discussion that will start,” he said.

Despite the baseline view that this is not going to happen any time soon, the analyst said that the country will still suffer the negative consequences of pushing the bill through.

Aside from the negative sentiment it draws, people will have a behavioural response, he said. Doctors and nurses will look to move out of the country, and will likely become another push factor for taxpayers who are already finding many reasons to go.

He said this view isn’t “doom-mongering” – it’s simply a fact, as it is already happening.

Read: Why there’s no need to panic over the NHI bill: Discovery Health CEO