Discovery CEO’s message to South Africa
Discovery chief executive Adrian Gore has warned that implementing the National Health Insurance (NHI) Act in its current form will wreck South Africa’s economy and destroy billions of rands in business.
Speaking at the healthcare group’s Discovery Day, Gore said that the new laws—which were signed but not enacted two weeks before the 2024 elections—are a “problematic piece of legislation” that is draconian and unworkable.
He said that there is no plausible way to make the scheme work without the cooperation of the private sector, yet the laws freeze out the biggest funders: medical aid.
Under the laws, medical aids cannot fund any healthcare services the NHI covers; they can only provide complementary coverage. However, the Act is extremely vague and unclear about what these services will be.
“We have been unequivocal as business, as Discovery, and as a sector, that the NHI is unworkable without private sector collaboration,” he said.
“There is just not enough funding available if the NHI is imposed in a draconian form that excludes private medical aids.”
The government, particularly the Department of Health, has been vociferous and aggressive in its denials that the NHI will sink the economy—refuting claims from private medical funders that the costs to provide comprehensive universal healthcare coverage would amount to R1 trillion.
However, the scheme has not been costed, and the department has not put forward an alternative figure. The last clear indication of costs was a figure of R250 billion a year in the early NHI documents, which are now significantly outdated.
According to Gore, Discovery’s calculations show that if private medical aids are excluded from funding healthcare procedures in South Africa, the government would have to impose massive tax hikes to fund the NHI.
The Department of Health has confirmed that tax increases and other tax changes are planned to fund the NHI. However, it is not entirely clear which taxes will be raised or if a new tax will be introduced.
In 2023, former deputy health minister Sibongiseni Dhlomo told BusinessTech that the NHI would be funded through appropriations, general tax revenue, medical scheme tax credits, payroll tax (2%), and a surcharge (2%) on personal income tax.
Projecting these tax rates onto a South African earning an average salary of R26,000 a month, taxpayers would have to pay an additional R1,040 a month to fund the NHI.
The removal of the R364 per month medical aid tax credit easily pushes this up to an effective R1,440 tax per month. This would increase in line with salary and dependents—higher earners, and those with more dependents on their plan would end up paying more.
Because of the uncertain timelines around the implementation of the NHI—and doubts that it will proceed timeously, given the pending court challenges—it is likely that taxpayers will end up in a situation where they are being triple-taxed for healthcare.
Healthcare in South Africa is already considered a “double tax” service. South Africans pay income tax and VAT to the government, which then portions and budgets a large part of that to public healthcare (tax one).
However, given the poor state of public healthcare, households have to pay an additional “grudge tax” on medical aid to access proper healthcare in the private sector (tax two). Medical aids can still operate as is until the NHI is “fully implemented”—whatever that means.
Meanwhile, the plan is to remove the medical aid tax credit and add further payroll taxes to cover the NHI as it rolls out (tax three).
Gore said that tax hikes in this vein are unsustainable for a country with an extremely small tax base, where taxpayers are already being squeezed to raise revenue for the government.
“That would wreck the economy and does not do enough for anyone. You need more funding,” Gore said.
“It’s not a healthcare issue—it creates a real economic problem. I don’t think people would bear paying 30% more taxes and having 70% less healthcare.”
In stark contrast to the health department’s aggressive pushback against NHI critics, President Cyril Ramaphosa opened up engagements and discussions with the private sector this week in the hopes of finding common ground on the NHI.
The president said that businesses and representative groups should make formal and considered presentations on the path forward for the NHI and not just criticise the scheme.
Business groups have responded positively to the invitation to engage, committing to doing just that.
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