South Africa’s shrinking tax base is too strained to fund the NHI: experts

Health experts have raised concerns around the planned funding of South Africa’s planned National Health Insurance, and who will be footing the bill.

In a presentation to parliament, representatives from Stellenbosch University’s medical faculty said that they were broadly supportive of the introduction of universal healthcare coverage in South Africa.

However, the department said it was not clear how the NHI could possibly be funded by an already strained tax base.

“The sustainability of sources of funding is a concern, especially if the main source relies on a small taxpayer pool. How will this pool be affected by challenging economic times, high rates of unemployment and rising costs of fuel and food?”

The medical experts said that there are already concerns around private medical aids in South Africa:

  • There is a decreasing pool of people able to maintain contribution to medical aid schemes;
  • Those who continue contributing are downsizing on benefit packages;
  • Private medical aid is considered a grudge purchase.

“There is an assumption that private individuals are happy to make contributions to private medical schemes,” the group said. “Yet this is known to be a grudge expenditure due to uncertainties in quality that have come to represent public healthcare.”

The health experts said that government will first need to eliminate wasteful expenditure and adopt lean management approaches throughout the system. Only then can it ask taxpayers to contribute – once the system has proven to be reliable.

“Whatever taxes are proposed thereafter, bring taxpayers into your confidence and make them understand the justification for asking them to do what they are asked to do,” it said.

The NHI currently makes no reference to the exact costs of the scheme once fully implemented.

However, the department of health has said that that payroll taxes and a surcharge on personal income tax could be considered as sources of funding. Such taxes would need to be determined by National Treasury.

At the start of May, the Council for Medical Schemes (CMS) said that the government’s planned National Health Insurance is in full development, with plans to move to phase 3 of the programme from next year.

In its 2021/2022 annual performance plan, the CMS said that phase 3 will include mandatory pre-payment of the new scheme, contracting for accredited private hospital and specialist services, and finalisation and implementation of the NHI Act.

“This (current) period coincides with the beginning of the second phase of the implementation of the NHI,” the CMS said.

“The CMS sees its role as playing both a supportive and a direct role in the delivery of all the activities according to the Act that should occur in the private sector.”

Read: Doctors threaten to leave South Africa because of the NHI

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South Africa’s shrinking tax base is too strained to fund the NHI: experts