The end of private healthcare and medical aids in South Africa – government responds to biggest NHI worries

 ·6 Jul 2023

The Department of Health has published a comprehensive response to frequently raised concerns around the National Health Insurance scheme – promising South Africans that the scheme is affordable and won’t destroy the private healthcare sector.

The National Assembly recently passed the National Health Insurance Bill, paving the way for the new healthcare regulations to become law.

Despite various legal holes in the proposed laws – including worries over the bill’s constitutionality – the ANC government has pushed ahead with the changes, sending the laws to the National Council of Provinces for concurrence.

Many legal experts and analysts have flagged major issues with the bill, including, but not limited to, significant questions around the funding of the scheme and the role of private healthcare in the system.

The NHI aims to make the state the sole purchaser of healthcare in South Africa, allowing all citizens to access healthcare at the provider of their choice at no cost.

In turn, all private healthcare providers – including doctors and hospitals – will be required to register with the scheme to deliver services and get compensation. The scheme will set prices, and providers will have to operate within its framework.

In terms of funding, the state has argued that more money is being spent servicing the needs of 14% of the population through private healthcare than what is spent on the vast majority of people through public services. Hence, it aims to pool the money spent on both.

Stakeholders and critics of the system have described this move as the destruction of private healthcare in South Africa, with medical aid schemes in particular, serving no real purpose under the system.

The government says this is not true.

South Africa’s public healthcare system is beset by inefficiencies, with poor outcomes

Private healthcare

The department has assured that private healthcare will be alive and well under the NHI – just severely truncated and limited to reduce costs.

“The NHI will not destroy the private sector. The private sector has different role players, and they are healthcare providers (like GPs, specialists, pharmacies and hospitals); suppliers of goods (health products like medicines, devices and diagnostic devices); funders (medical schemes) and administrators. They have different roles to play in the NHI,” it said.

The department said that private health care providers will continue to operate privately under the NHI dispensation.

“Contrary to some public narrative, the NHI is not going to abolish or do away with private health providers,” it said. However, “NHI will not allow health care providers to set their own fees for NHI funded benefits.”

The NHI Fund will set the fees that it will pay to private doctors, hospitals and others on patients’ behalf.

“Private General Practitioners will be a part of multi-disciplinary networks in their communities and will be paid by the NHI Fund using a capitation model. The private health sector providers will benefit from the opportunity to contract with NHI to provide health services to the broader public, rather than the small proportion for which they currently provide services.

“They will be able to provide services to patients throughout the year not worried about depletion of funds of patients at any stage. Private hospitals will see patients referred by primary health care providers in both public and private sectors and the NHI Fund will settle the bill at the prescribed rates,” it said.

Private healthcare providers won’t be forced to register with the NHI, but the department said it is in their best interestes to do so.

“Contracting with NHI Fund gives the healthcare provider opportunity to offer healthcare services to a designated population – significantly more patients than currently,” it said.

“Patients who consult with providers who are not contracted with NHI will pay cash for the providers’ services. Patients will only be able to use their medical schemes to pay for benefits not covered by the Fund with non-NHI contracted providers.”

The NHI doesn’t see much space for medical aids, but promises they won’t be killed off

Medical aids

The department made it expressly clear that the NHI Fund will not be taking over the reserves of medical aids.

“The Fund will not take the accumulated reserves of medical schemes since those belong to the members and not the schemes,” it said.

“The business models of private funders and their administrators will change over time. Once the NHI Fund covers a benefit, the medical schemes may not cover the same benefits.

“This means that their membership fees must be reduced, and some will be too small to survive so they will consolidate with others to maintain a viable risk pool for the benefits that they may still cover.”

It said that because administrators of medical schemes will no longer manage over 250 options, the complexity of their services will be greatly reduced.

Once implemented, medical aid schemes won’t be able to offer any health services already offered by the NHI and will only be allowed to offer extra services not covered by the NHI.

Because the NHI will offer comprehensive health care service cover, Medical Aid schemes will remain voluntary arrangements for those who choose to contribute to them – but the services will be very limited.

“The Fund will be implemented over phases and over many years. Regulations will be published to address the phased implementation of the NHI Fund and phased implementation of service benefits as the money is moved to the Fund. Medical schemes will be given notice on the type of services that they will no longer be able to cover,” it said.

It will be up to National Treasury to determine how the NHI will be funded


In terms of funding, the department gave no ‘big number’ as to how much the NHI will cost per year.

However, it said that taxes will pay for it, one way or another.

“NHI will be funded through a mandatory pre-payment system and other forms of taxes collected by SARS and allocated to the Fund by Parliament,” it said.

Based on the NHI Bill, NHI will be predominantly funded through general revenue allocations, supplemented by: a payroll tax payable by employers and employees and a surcharge on individuals’ taxable income.

The department said, however, that the financial impact of the NHI taxation system “must not create an increased burden on households compared to the current system”.

It appears that the thinking is that, as households cut their spending on private healthcare and medical aid, those payments will make their way into the NHI Fund. The department explicitly stated that “there will be no option for opting out of NHI for eligible people”.

“The NHI will redistribute money from the current multi-payer system of nine provincial health systems, tax rebates, levies, conditional grants and consolidate into one Fund. The pooling into one risk pool will ensure appropriate cross-subsidization between the young and old, rich and poor, healthy and unhealthy,” it said.

Read: NHI: What comes next

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