NHI will be a disaster on many fronts

All South Africans who value quality healthcare and freedom of choice should be very concerned about government’s latest announcement that cabinet has approved the contentious National Health Insurance (NHI). When one considers the high levels of poverty and unemployment, the small tax base, and the poor performance of the public health sector, it is difficult to envision how a centrally controlled and administered government-funded system that promises “free healthcare for all” is appropriate for South Africa. Adopting the proposed NHI scheme has the potential to wreck South Africa’s already weak economy.

The NHI Bill has been surrounded by controversy ever since the National Treasury revealed last year that the President’s advisor, Dr Olive Shisana, attempted to introduce draconian changes to the proposed Bill after the public comment period had closed that would have all but destroyed the private healthcare sector in South Africa. In the development of the Bill, Dr Shisana also completely side-lined the director-general of health, Precious Matsoso – the department’s accounting officer who is responsible for defending the proposed legislation when it is eventually introduced in parliament

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.

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. 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 State-Owned Entity, 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.

Since the main funding option for the NHI Fund will necessarily come from a surcharge on taxable income and a payroll tax, the NHI is 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. While supposed to help people access medical care, the NHI scheme will undermine any chance of economic success by either cutting wages or eliminating jobs altogether. 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 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. 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.

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.

The government’s role should be to finance healthcare for the poor and to create the conditions to allow a competitive private sector to supply services for those who are able to fund their own healthcare. Government could then concentrate scarce taxpayer resources on the truly destitute, while the private sector grows, innovates and expands. This will not only be good for South Africa’s financial health but will also lead to better health outcomes for the poor. And it will not destroy the private healthcare market in South Africa. 

Author: Jasson Urbach

This article was first published in The Star on 17 July 2019

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