NHI will break the back of South Africa’s middle-class

 ·8 Apr 2022

The opposition Democratic Alliance wil submit a formal request to the Socio-Economic Impact Assessment Unit (SEIAU) in the presidency, asking it to conduct a new risk assessment on the proposed National Health Insurance (NHI) Bill.

The most recent Socio-Economic Impact Assessment (SEIA) was done in 2019 – before the Covid-19 pandemic decimated state coffers and put tremendous strain on the public health care system, the party’s Michele Clarke said on Friday (8 April).

“According to the outdated 2019 SEIA, the projected cost of the NHI would be R256 billion. The financial impact this Bill could have on the post-pandemic tax base, which grows smaller every day, is enormous. A third of the population is dependent on social grants.

“Only 9% of South Africans are contributing to 40% of South Africa’s total tax revenue. With no recent data to determine the impact that Covid-19 has had on the tax base, it is not difficult to see why funding the NHI from the fiscus will be difficult to achieve.”

South Africa’s national debt and unsustainably high budget deficit make it extremely impossible to consider adding a new multi-billion rand expenditure item in the form of the NHI, Clarke said. He added that South Africa must have this comprehensive assessment before continuing with the NHI Bill.

“It will affect the poorest of poor, break the back of the tax-paying middle-class and potentially bankrupt our economy.”

Proposed funding 

In a presentation to parliament on 29 March, the department’s Dr Nicholas Crisp presented the government’s proposals to fund the NHI, including new taxes.

Crisp said the country ultimately spends as much on health care as it decides to. “The implications for every person that lives in South Africa is that in exchange for free health benefits (services and care) at the point of care when you need the care, (they) will contribute via the tax collection mechanism,” he said.

This will include the normal tax collection methods like VAT, personal tax, excise, company tax and so on, which are collected by SARS.

The department added that the bulk of the required finances for the NHI is ‘already in the system’, with the bill providing for:

  • General tax revenue, including the shifting funds from the provincial equitable share and conditional grants into the fund. This currently accounts for R256 billion per annum.
  • Reallocation of funding for medical scheme tax credits paid to various medical schemes towards the funding of National Health Insurance. This is estimated to be around R27 billion in 2019/20.
  • Payroll tax – The department said the state already contributes around R50 billion to public service employee contributions in just one medical scheme.
  • A surcharge on personal income tax. This would have to be introduced through a money bill by the minister of finance and earmarked for use by the fund.

Private sector concerns

Private medical scheme provider Profmed also criticised the government’s proposals to fund the new NHI this week.

Craig Comrie, chief executive of the scheme stressed that the NHI is still a surface-level discussion and that despite being years down the line from its introduction in 2006, there is no clarity on what benefits it will cover and how it will be budgeted for or financed.

He noted that the financing options proposed by the department have been on the table for more than a decade and that the NHI would probably cost more than R500 billion per year.

“It may be important to look at what is affordable within the South African context then use that money to fund a more pragmatic set of services within NHI.”

“In the interim of the promised money bill, stakeholders, including political players, are making broad statements about the need to improve healthcare and tote the NHI as the remedy,” said Comrie.

Comrie warned that medical schemes have also been relegated to playing a small role in the ambitious plans of the NHI. However, he noted that these schemes have effectively removed the obligation on the government to provide the funds to cover people’s healthcare costs.

“Even with an NHI, people will rely on medical schemes to provide what is not covered by the NHI due to it struggling as low economic growth is projected, and taxpayers remain overburdened,” said Comrie.

“It is clear that medical schemes will be around for many decades because there is no space for any added taxes in the form of payroll surcharges without significantly harming the economy.”

Comrie said that in the first phase of the NHI, after policy development, it must improve the public sector facilities and for members of schemes to choose to go to these improved facilities.

“The key to unlocking the power of the NHI is not to threaten the existence of the private sector or even the medical schemes industry, but to work alongside them.”

Read: Bad news for pay hikes in South Africa

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