Taxpayers will pay for NHI, says government

Health minister Joe Phaahla says that under the National Health Insurance (NHI), all South Africans will have access to free public and private healthcare – and taxpayers will pay for it.

The National Assembly has passed the National Healthcare Insurance Bill, bringing the laws that will lay the foundation for the government’s ambitious promise of universal healthcare one step closer to reality.

The bill still has to make its way through the National Council of Provinces before being sent to the president to be signed into law.

Speaking on the NHI Bill debate in parliament, Phaahla welcomed the passing of the bill, saying that it will “usher major reforms in the health sector with an objective to build an equitable, accessible, affordable, and strengthened healthcare system in the country”.

“The people of South Africa have access to the same clinic or hospital – either public or private – closer to where they live or work without paying – government will pay,” he said.

Of course, when the minister says that the government will pay, he means that taxpayers will pay – and one of the biggest questions hanging over the controversial scheme is how exactly this will be done.

For years, the government has posited that the NHI scheme will be funded by pooling the money already spent on the private and public healthcare sectors. This amounts to a pool of around R460 billion that would ostensibly be at the state’s disposal to execute this dream.

Approximately 52% of healthcare funding in South Africa is spent on the private sector by a small percentage of the population (16%). This is a major sticking point for the government, which finds this imbalanced and inequitable.

In effect, the government wants this R240 billion kitty, held by the private sector through medical aids and other spending by private households, to be under its control so that healthcare can be more evenly distributed among the population.

However, there’s a major problem with this.

Naive dreams

According to Discovery Health CEO, Ryan Noach, the government is being naive if it thinks that the spending on private healthcare will suddenly be diverted to the public coffers just because the state removes the option.

For many South Africans, private healthcare and things like medical aids are already seen as a double tax, as public funds sourced from taxes are already spent on public healthcare.

Given the poor state of public hospitals and clinics, taxpayers opt to pay extra from their after-tax income to make use of private facilities.

“These funds are well-protected by the medical schemes, which are effectively trust funds. They are functioning as mutual funds that hold the money on behalf of members,” Noach said.

“By law, there is no way anybody could take or nationalise access to those funds. That would be completely beyond the realm of realistic thought.”

Noach equated it to the government taking people’s pension fund money or nationalising it.

“We see no mechanism whatsoever to do that, and we think medical aid funds are well-protected by law,” he said.

This would leave the government with limited options to raise the funds it needs to make the NHI work.

Speculation is already rife that the government will have to turn to implementing additional taxes on an ever-strained tax base, with focus on a narrowing pool of high-net worth-individuals to get it done.

It is worth noting of the 60 million people in South Africa who would need to make use of the NHI, only 7.4 million pay personal income tax – and an even smaller portion, around 164,000 people, pay 30% of the total personal income tax in the country.

The NHI’s money bill – the financing part of the plan, which must come from the National Treasury – has not been published, leaving the question of funding hanging in the air even as the government rubber-stamps the bill through necessary processes.

In his address, Phaahla made it clear that, one way or another, taxpayers will be footing the bill.

“The NHI is a fund from which the government will buy healthcare services for South Africans from healthcare providers both in the public and private sector.

“It is a fund to pay for healthcare, and all of us will contribute to this fund through taxes and special contributions in line with what we can afford.

“It will ensure that everyone is entitled to free healthcare when they need it, and there will be no fees charged at the facility because the fund will cover the costs of care,” he said.

Read: NHI heading to court – with many more legal challenges to come