Big ‘NHI tax’ expected for South Africa: Discovery

South Africa’s biggest open medical scheme Discovery has flagged concerns around the proposed National Health Insurance (NHI) scheme and how it will be funded.

The NHI Bill is currently undergoing a public consultation process, with a number of healthcare, civil society and political groups presenting on why the new system should or should not be introduced.

In a presentation to parliament this week, Discovery said it was broadly supportive of the bill, but was concerned about the funding shortfall it will create and how this will be passed on to government budgets and, ultimately, taxpayers.

The group estimates that private health spend, including the medical aid financing of around nine million South Africans, currently equates to R212 billion (44%) of total healthcare funding in South Africa.

If medical schemes are eliminated, as is proposed by the NHI Bill, the R212 billion funding gap will need to be absorbed by the state, Discovery said.

“If taxation is used to increase state healthcare budget to this amount, additional 4.1% of GDP needs to be collected in taxes – unlikely to be feasible.

“A more feasible pathway to increase public sector per capita funding is to maintain medical scheme funding, expand access to the employed population while state funds focus on the most vulnerable.”

If the government’s goal is to offer universal healthcare coverage it should instead adopt a blended finance model – similar to those used in the Netherlands, Thailand and Indonesia – which would allow consumers to continue choosing private healthcare providers, while allowing for greater public and private sector integration, Discovery said.

It added that no other country has implemented a regulated limitation on the scope of private health insurance cover.

While discussions around the new NHI are expected to continue throughout much of the year, the National Treasury has said that it does not expect the scheme to be a significant cost pressure in the medium term, with the scheme’s planned implementation progressing at a glacial pace despite being mooted more than a decade ago.

In its Medium Term Budget Policy Statement (MTBPS) published in November 2021, Treasury said that a limited costing of the national health insurance policy proposal has previously shown that it would require about R40 billion per year in additional funding in the first five years, and perhaps considerably more over time.

“At present, however, there is insufficient capacity in the health sector to work substantively on national health insurance. The national health insurance indirect grant has been underspent, the National Health Insurance Fund has not yet been established, and the National Health Insurance Bill still needs to be passed by Parliament.

“It is therefore unlikely that national health insurance will be a significant cost pressure in the medium term,” it said.


Read: Mediclinic sends NHI warning to South Africa

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Big ‘NHI tax’ expected for South Africa: Discovery