Big NHI reality check from Discovery CEO Adrian Gore

 ·11 Dec 2023

Discovery chief executive officer Adrian Gore says that regardless of what happens with the National Health Insurance Bill, the national government will have to face the reality that there is simply no money for its “irrational” foundation of universal healthcare – and cutting out private sector funding makes the whole thing unimplementable.

Addressing a media roundtable on Monday (11 December), Gore outlined Discovery’s position on the bill after it was passed by the National Council of Provinces and sent to president Cyril Ramaphosa to be signed into law.

Gore joined the chorus of business leaders, healthcare professionals and other stakeholders in calling on the president to apply his mind to the proposed laws before simply signing them.

The Discovery chief has echoed the sentiments expressed by many in the sector, calling the laws unworkable and unimplementable largely because the private sector has been sidelined by the portfolio committee in its deliberations on the laws, and many of the critical points raised – such as the nonsensical limitations on medical aids – have been ignored.

However, while groups like trade union Solidarity are lining up their legal challenges, Gore said Discovery is taking a different route, trying to appeal to rationality and offering to work with the government to turn the NHI Bill into something that could work.

Numbers don’t add up

Gore said that the core problem with the NHI Bill in its current form is that its goals of universal healthcare will hit an unavoidable funding wall.

There is too little funding for the NHI to work, too few doctors to make it viable, and insufficient investment to keep the scheme going. This is a big problem because the NHI desperately needs all three but is instead built to deter this.

To this point, the Discovery CEO laid out the math:

With public healthcare spending at around R233 billion, the government will be able to secure an additional R28 billion by redirecting medical aid tax credits to the NHI Fund. It could add a further R70 billion from government employees’ medical scheme subsidies.

But even with these sources, the Department of Health estimates that another R200 billion in funding will have to be found – with additional taxes being the only practical source.

If everything works out perfectly – and assuming that taxpayers are happy to foot the estimated 30% tax increase needed – the NHI would have access to R531 billion, Gore said. This works out to be around R715 per person, per month when split among South Africa’s 62 million people.

Current spending for those not covered by medical aids is at around R400 a month – so this would be a significant boost. However, for those on medical schemes – where spend is around R2,332 a month – this would be a 70% reduction in health coverage. A massive cut.

The bigger problem, Gore said, is that the NHI promises “comprehensive” medical cover for everyone in the country – but R715 is nowhere near enough to do this.

To cover the government-mandated prescribed minimum benefits alone would require over R1,000 a month – and R530 billion a year more in additional tax revenue (R860 billion in total).

Even if such a scenario were possible, taxes would have to be hiked by 80%, and taxpayers on medical aids would still have to be satisfied with a more than 50% reduction in their health coverage, Gore said.

“This is irrational. The NHI does not have enough money to give comprehensive coverage and threatens to destabilise taxpayers who are already funding public healthcare. The fundamental problem is a lack of funding,” he said.

Reality check

According to Gore, while the passing of the unworkable NHI Bill – and looming assent by President Ramaphosa – is a significantly negative mark for South Africa, he believes that the reality of the funding problem will win out in the end.

He said that there has been a serious “negative sentiment” effect caused by the NHI, which could deter investment and push doctors and healthcare skills out of the country – but the reality is that the NHI is still decades away from happening, and the government will have to face the truth eventually.

“I think (the negative sentiment) will settle – the reality is that this is a multi-decade process, and the realities will drive the outcome. It’s a missed opportunity (by the government) to do something more pragmatic and better,” he said.

Discovery’s approach is to keep its people focused on the positives, he said. For doctors, the message is more difficult – but “we have to work hard to let them know they will be funded and that this is a slow process”.

Core to this is the fact that the clause in the NHI that would ostensibly “kill” medical aids in the country – section 33 – would only kick in once the system is “fully implemented”.

There are zero indications of what the government considers to be “fully implemented”, with no criteria or KPIs noted. If “comprehensive” coverage is a criterion, it will never be achieved in reality. Medical aids will continue to operate as normal until this vague finish line is crossed.

If the line is crossed, Gore said that Discovery will continue to work “constructively” to find a workable solution for healthcare coverage. No legal action is on the cards, yet.

“We will evaluate the process and see how things lie. We will be constructive in our approach and try to make (the NHI) workable,” he said. For now, Discovery is pushing for changes to section 33 to allow for medical aids to work with the NHI through more flexible terms.

Discovery said that there are big, complex implementation components that have to be achieved, including legal (passing the bill and repealing many integrated, standing laws), operational (developing the complex systems needed to take over funding and control of the private healthcare system built over decades) and financial (the funding issues which remain unaddressed by the government).

“The 2026 horizon is completely unrealistic,” it said.

Read: 30% more taxes for 70% less healthcare – the NHI’s big problem

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