‘Absurd’ NHI a vote-farming fantasy: CEO

 ·10 Jul 2023

The National Health Insurance “charade” continues in its absurdity with no detail on how the “fantasy” would be funded, says Busi Mavuso, the CEO of Business Leadership South African (BLSA).

The NHI bill – currently being steamrolled through parliamentary processes with little to no detail on how it would be funded – seeks to provide universal free healthcare for all South Africans, threatening existing medical aids and private healthcare schemes.

Mavuso characterised the NHI as a ‘vote-earning fantasy’ being sold to the public without any breakdown of how it would function, nor with any thought given to the devastation it would deal to the private healthcare industry.

“Last week, a ‘fact sheet‘ was distributed about NHI, purported to have been written by the Department of Health. It had many positive things to say about the upsides of an NHI but little about the practical implementation of it.”

“The 27-page document has precisely 198 words in the section for how it will be funded. It refers to a payroll tax on employers and employees and makes the astounding statement that this ‘must not create an increased burden on households compared to the current system’,” said Mavuso.

Payroll tax refers to monthly taxes paid by an employer such as medical aid or PAYE. Some of these taxes are paid directly by the employer; however, some involve the funds from the employee’s salary.

It contains no analysis at all on what the proposed system will actually cost, referring only to the fact that South Africa currently spends 8.5% of its GDP on healthcare, she added.

“It has pages and pages on what kind of health services South Africans can expect, but no calculation of what these will cost.”

With few calculations provided by the government, Mavuso cited a private study done by one of the country’s largest medical ad providers, Discovery Health.

The company calculated that the NHI would cost the country R200 billion, which would require personal taxes to go up by a third or for VAT to rise to 21.5% or a mix of the two approaches.

According to Mavuso, the document further makes no reference to the fact that the pilot project for the scheme failed dismally nor that the existing healthcare framework is inadequate.

The fact sheet claims the current mixed system is “inefficient,” but removing the private element won’t improve efficiency without substantial funding. Payroll taxes alone cannot provide this funding.

“The current system sees half of health expenditure from the private sector, which also employs 79% of doctors. But only 16% of the population is covered by medical schemes allowing access to the private sector,” said Mavuso.

“If we were to expand health insurance as it exists to the rest of the population, we would need to increase the amount spent by about six-fold. That would imply that the current 4.3% of GDP spent on the private sector would need to become about 26% of GDP.”

This is obviously impossible, she said.

The idea that somehow NHI can emerge without a serious imposition of additional taxes is simply untenable.

Mavuso added that payroll taxes are not as straightforward as the government may expect. As they increase, fewer people pay them either through avoidance or emigration.

There are just 50,000 people who earn more than R2 million and therefore pay tax at the top 45% income tax bracket (which starts at over R1.7 million). That is out of a total of about 5.5 million taxpayers – yet the scheme envisages that all 60 million South Africans will be covered, said Mavuso.

Talk of taxing businesses has also emerged, with some suggesting corporate income tax could fund the scheme.

This, however, would result in companies having less capital to expand and ultimately leading to less economic growth and employment, Mavuso said.

Increasing VAT has been made out to be another option by analysts. This route, Mavuso noted, would see the existing 15% VAT rate increase significantly – as it currently provides for a quarter of all the total tax collected.

The CEO said that if the government was serious about improving healthcare, there are better ways to do so, involving partnerships with the private sector.

Private sector woes

Although the new scheme spells bad news for private healthcare, the Department of Health is adamant that NHI would not ‘destroy’ the sector.

The department said that private healthcare providers would continue to operate privately under the NHI dispensation. – however, these healthcare providers will not be allowed to set their own fees.

The department said that private providers will not be forced to register with the NHI; however, it stressed that it is in their best interests to do so.

The next move

The National Health Insurance Bill was passed by the National Assembly on 13 June; however still has a lengthy process until it comes into reality, with many experts noting that it will be stalled throughout its legislative journey as a result of private court cases against it.

It is now up to the National Council of Provinces (NCOP0 to, among other things, brief delegates, open the bill up for public comment, conduct public hearings on the bill, and formulated consolidated positions on the bill, said the Parliamentary Monitoring Group (PMG).

As the NHI is a Section 76 bill, “it will be subjected to extensive scrutiny by the provincial legislatures because the content of the bill affects the interest, concerns, and capacities of the provinces,” the PMG added.

Read: How much you need to earn to be middle class in South Africa

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