Steamrolling unaffordable policies – the new norm in South Africa

27 November 2017
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The current trend of pushing through populist government policies without consideration of expert reports on the affordability of funding initiatives, causes grave concern

The Davis Tax Commission (DTC) report on NHI funding was made public last week. The lack of certainty within the draft NHI White Paper caused considerable difficulty for the DTC to make recommendations on funding the NHI. Instead, the DTC focused on aspects it could provide expert comment on, such as tax income and the tax base.

The first major finding was that “Given the considerable size of projected funding shortfalls, substantial increases in VAT or Personal Income Tax and/or the introduction of a new social security tax would be required to fund the NHI.” A second finding was that “Given the current costing parameters outlined in the White Paper, the proposed NHI, in its current format, is unlikely to be sustainable unless there is sustained economic growth.”

It is important to note that this report by the DTC was made available to government at the beginning of 2017, several months before the publication of the revised NHI White Paper in June 2017. The recommendations in the DTC report were largely disregarded in the new White Paper and the Department of Health opted to make the decision of discarding VAT as funding mechanism in the White Paper, despite DTC recommendations to the contrary. This is indicative of the worrying trend that has become the norm in how South Africa is being governed.

This same scenario is being played out in other arenas such as the funding of higher education. Here, the findings of the Heher report on the unaffordability of the initiative are also being ignored. Attempts to implement a nuclear build programme continue, as well, despite numerous economic indications that South Africa cannot afford that either.

The Minister of Health replies “Can we afford not to implement NHI?” whenever he is asked about the costs of the system. The simple answer is that we probably cannot continue on the current trajectory of healthcare, in both the private and the public sectors. Costs in the private sector are a concern as well as the quality in the public sector. Promoting NHI as the only way to remedy the situation, however, is not realistic. NHI is not required to improve quality in the public sector.

As things stand, quality in the public sector is so poor that more than 66% of facilities will not even be able to contract with the NHI fund in order to render services to NHI patients. This problem of quality will have to be addressed prior to any further implementation of NHI being considered in South Africa. Implementation of NHI is not going to solve this, as changing the funding design does not help facilities that cannot contract with the funder. Instead, it will radically reduce available healthcare facilities in South Africa. This is of especial concern when taking into consideration that the Office of Health Standards Compliance needs to increase its inspectorate capacity from 35 inspectors to over 1,000 in order to certify the private sector for contracting with the NHI Fund, effectively excluding private providers from NHI participation.

One can at least see the positives in the interim NHI committee implementation plan that was gazetted on 7 July, which speaks of making medical scheme membership mandatory for employed people. This will help reduce costs in the private sector, while reduction in plan options will also increase the size of risk pools. A single plan option per scheme, however, is not a realistic goal. The introduction of risk equalisation measures between options and amongst schemes will create a “virtual NHI fund” in the private funding industry, which will make great strides in reducing private sector costs and promoting sustainability. These measures proposed in 2007 were shelved due to NHI implementation, but are now back, posing as part of the NHI implementation plan. This 10-year delay in private sector reforms has burdened every medical scheme member with unnecessary high costs of healthcare for over a decade.

It is interesting that the 7 July document has radically different concepts from the White Paper, which was published just a week prior. The stark difference between the two documents gazetted just a week apart is probably an indication that the rumours abounding in the industry, of the gazetted White Paper being changed by Department of Health officials from the one that was approved by Cabinet, should be investigated in more detail.

Johann Serfontein is a Member of the Free Market Foundation Health Policy Unit


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