Another NHI headache for Ramaphosa

Opposition party, the Democratic Alliance (DA), says it is ready to pull the trigger on court action challenging the government’s National Health Insurance (NHI) scheme as soon as it is signed into law.

The party said on Monday (4 March) that it has “sought legal counsel and stands ready to oppose the draconian legislation”, which it says threatens to bar access to quality healthcare for South Africans.

This follows trade union Solidarity’s statement this past week that it was gearing up for a big legal battle against the government over the scheme, which it believes is unconstitutional.

According to the DA, the NHI is projected to cost as much as R860 billion per year – an amount that is simply unaffordable to the country.

Brochures from the government “explaining” the scheme have confirmed that additional taxes will be sought to fund the system – although initially, no tax hikes are envisioned.

“Initially, there will be no tax for the NHI. The government will pool the funds that already exist in the public sector to start the NHI. When the NHI is up and running, then Treasury may introduce a small tax to augment the money allocated through the public budget,” the government’s communication service said.

In his latest budget, Finance Minister Enoch Godongwana assigned a total of R848 billion to health over the Medium Term Expenditure Framework (MTEF).

This allocation includes R11.6 billion to address the 2023 wage agreement, R27.3 billion for infrastructure, but only R1.4 billion for the NHI grant over the same period. The pooling of funds already in the public sector is thus not on the cards in the near term, at least, raising more questions about funding.

The government and the National Department of Health have been cagey on the details of funding the NHI but have previously stated that taxpayers will foot the bill.

Deputy Minister of Health Dr Sibongiseni Dhlomo also confirmed some numbers, saying that a payroll tax and surcharge on personal income tax will be implemented.

“Concerns about insufficient resources for NHI are unfounded. The Bill clearly outlines funding sources, including appropriations, general tax revenue, medical scheme tax credits, payroll tax (2%), and a surcharge (2%) on personal income tax,” he said.

Medical aid tax credits will also be removed, and the proceeds will be handed to the NHI.

Analysis of the funding options by independent researchers has identified several streams, all of which will be a painful knock on already tight budgets, including either a VAT hike to 23%, personal income tax rates hiked by 31%, or a R1,500 per month payroll tax on everyone who is formally employed.

The government has tried to give assurances that the funds will not be mismanaged.

However, the DA has rejected this, saying that the government has already proven that it cannot be trusted with public funds.

“Governmental impositions on income, consumption, and property ownership, aggravated by public resource mismanagement through waste, corruption, and embezzlement, have eroded public trust significantly,” the party said.

“Government’s model of centralising all healthcare funding into a new state-owned entity in which private sector resources and state resources will be merged into a single funding pool controlled by the Minister of Health is a recipe for disaster.”

The DA and opponents like Solidarity have labelled the scheme as doomed to fail, while analysts have highlighted the looming legal challenges on various grounds, saying the implementation of the scheme in its current form will likely never happen.

The NHI Bill is still sitting with President Cyril Ramaphosa, waiting to be signed into law. The office of the presidency, as well as Ramaphosa himself, has promised to sign the bill before the coming 2024 elections.

Read: R1,500 a month tax on everyone with a job in South Africa – funding the NHI