Why the NHI is headed for disaster

 ·26 Jul 2019

Government is pushing through a revised National Health Insurance (NHI) Bill, which is leaving analysts and medical professionals with more questions than answers – with others expecting the worst.

Health minister Dr Zweli Mkhize says universal health coverage is essential and that the NHI will happen whether people like it or not.

The bill has been passed by cabinet and will be tabled before parliament, with Mkhize saying that the days of debating whether it will be implemented or not are now over.

As government hastily moves to implement its universal healthcare plan, much remains unknown. Most glaringly, the minister could provide no clarity on how the NHI would be funded, with the health department previously admitting that much of the forecast costs were down to guesswork.

Adding further uncertainty is the state of the NHI pilot projects which ran between 2013 and 2017. An evaluation report was compiled, but has not yet been released to the public.

According to the Free Market Foundation (FMF), these gaps in information about the NHI, along with a slew of other problems, indicate that the government’s universal healthcare plans are heading for disaster.

“The consequences of this politically motivated scheme are entirely predictable: the quality of South African health-care provision will fall, more health-care professionals will leave the country, the bureaucracy will be incapable of handling the huge volume of claims, and an unnecessary and intolerable burden will be imposed on taxpayers,” the group said.

Here are five of the biggest issues with the NHI.

The NHI fund – another massive SOE risk

One of the main aims of the bill is to establish the NHI Fund, a centrally-controlled and administered state-owned entity, which will be responsible for all NHI-related payments.

Given the government’s extremely poor track record in managing state companies (which now require billions of rands in bailouts every year just to keep operating), adding another SOE to manage on top of the pile opens the country to even greater risks.

“To date, the government has not clearly explained why a single-payer, centrally controlled, payment system is necessary to achieve its stated objectives of Universal Health Coverage (UHC).

“It will be yet another moribund SOE, one that will be twice the size of Eskom, which, ironically, government has admitted is too large to administer and needs to be broken into three, manageable parts,” the FMF said.

Taxing the overtaxed

Government has been evasive about how the NHI will be funded – with talk of realigning budgets and possibly doing away with medical aid tax credits being only some of the processes hinted at.

The FMF believes that the main funding option for the NHI Fund will likely have to come from a surcharge on taxable income and a payroll tax – which would make the NHI nothing but a tax on labour.

“A payroll tax will always, ultimately, be borne by workers, either through reduced earnings or compensation or job losses – precisely the opposite of what the poor in South Africa require,” the group said.

While the expectation is that the NHI will help people access medical care, the scheme itself will likely have the opposite effect, undermining any chance of economic success by either cutting wages or eliminating jobs altogether, the foundation said.

“South Africa has a very narrow tax base and it would be extremely unwise for government to even consider imposing another tax on already overburdened taxpayers to fund the NHI rather than trying to get more people actively involved in the workforce.”

The downfall of private healthcare

Government officials have already said that the room for private healthcare coverage in South Africa will be limited under the NHI – with the idea being to make sure that private medical aids don’t cover the same things covered by the NHI to avoid double-paying.

“The government’s centrally controlled NHI scheme will concentrate power in the hands of the state, which then acts as both a player and referee, leaving no room for the private sector to operate,” the FMF said.

“Under the NHI, whether directly or indirectly, the government will control the availability, financing and delivery of healthcare from the cradle to the grave and South Africans will no longer have any choice.”

People who use it, aren’t paying for it

According to the FMF, approximately 5 million adults in South Africa are members of medical schemes. These citizens virtually all pay personal income tax and are employed by businesses that also contribute to the fiscus through company taxes.

“All private medical services in South Africa are subject to VAT, which is funded indirectly through medical scheme contributions or out-of-pocket payments made by these same tax payers.

“These 5 million citizens, who voluntarily choose to spend their own private money on medical scheme cover for themselves and their families, are the same individuals who fund a massive portion of the public healthcare budget,” it said.

FMF data scientist Mpiyakhe Dhlamini previously pointed out that this is the biggest flaw in the NHI scheme – the people who will make use of it are not the ones paying for it, and thus have no incentive to balance the demand on the system.

“At zero prices, the services offered by the NHI with the greatest elasticity of demand are going to experience the greatest demand from the public,” Dhlamini said.

“In other words, the voters will have an incentive to impose more taxes on the small population paying taxes, to fund greater levels of service – especially with regard to the NHI services that have the greatest elasticity of demand.”

Dhlamini said that taxpayers will, in turn, have a rational reaction to this scenario, that being to look for a way to reduce this burden – like packing up and leaving the country altogether.

Medical professionals will leave

A survey conducted by union Solidarity among medical professionals in 2018 found that 83.2% of healthcare workers believed that private health professionals will leave the country if the NHI is implemented.

43% of the respondents said that they themselves would consider emigrating.

There was also a firm belief that the scheme would completely destabilise the country’s healthcare as a result. The major points of concern are:

  • Shortages of specialists, doctors, nursing staff and other healthcare workers;
  • Financial management of the NHI;
  • Purchasing and distribution of medicines and equipment; and
  • Maintenance of infrastructure and equipment.

Read:  You may have already been signed up to the new NHI registry

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