The National Health Insurance (NHI) is just a vote-earning fantasy, a charade that continues despite its absurdity that will not lead to any improvements to Healthcare in South Africa. The risk is the opposite, says Busi Mavuso, CEO of Business Leadership South Africa (BLSA).

Mavuso wrote before that if government is serious about delivering an improvement in healthcare, there are far better ways to do it, such as partnerships with the Private sector that have been demonstrated to work.

“Instead, we continue with this make-believe in which the apparent upsides of the NHI, access to quality healthcare for all, can be talked about without ever having to discuss the practicalities. That way the vote-earning fantasy can be sold to the public without any of the vote-destroying realities of it, particularly how it will be funded and the devastation to be dealt to the private healthcare industry.”

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She refers to a “fact sheet” about the NHI distributed last week, purportedly written by the department of health, that had many things to say about the upsides of an NHI but little about the practical implementation, pointing out that the 27-page document has only 198 words about how it will be funded.

The document refers to a payroll tax on employers and employees and makes the astounding statement that this “must not create an increased burden on households compared to the current system”.

How much will NHI cost?

It contains no analysis at all about how much the proposed system will actually cost and only refers to the fact that South Africa currently spends 8.5% of gross domestic product (GDP) on healthcare. It has pages and pages on what kind of health services South Africans can expect, but no calculation of what these will cost, Mavuso says.

“It makes no reference to the fact that the pilot projects for the scheme failed dismally, nor to the fact that the existing healthcare system has been deemed woefully inadequate.”

The previous health ombudsman, professor Malegapuru Makgoba, described the Gauteng Health Department as having “no leadership, no capacity, no vision” and the Eastern Cape Health Department as “really dysfunctional” and “embarrassing”.

Yet, Mavuso says, from these ashes an NHI must somehow emerge by closing down private health insurance and forcing its members into a national scheme.

“The biggest farce in this charade is the funding story. While the fact sheet declares the current mixed system to be ‘inefficient’, it seems to believe that removing the private element of it is the key to creating wider efficiency.

“That is impossible unless huge funding is allocated to it, the kind of funding that the private system currently enjoys. This is the other fabulous element to the story: that payroll taxes will somehow do this. The current system sees half of health expenditure from the private sector, which also employs 79% of doctors, but only 16% of the population is covered by medical schemes allowing access to the private sector.”

Mavuso says if South Africa expanded health insurance as it exists to the rest of the population, it would need to increase the amount spent by about six-fold.

“That would imply that the current 4.3% of GDP spent on the private sector would need to become about 26% of GDP. That is obviously impossible, but perhaps a slimmed down form of insurance cover is more feasible.”

Discovery has calculated that a modest NHI would cost R200 billion, which would require personal taxes to go up by a third or VAT to increase to 21.5%, or a mix of the two.

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The NHI fact sheet claims that the national scheme would be more efficient than what we currently have, but Mavuso wants to know what supports this.

“I can only see the reality of a very inefficient state sector and a private sector that has many checks and balances, including patient choice over providers and a balance between healthcare funders and providers.

“The idea that somehow NHI can emerge without a serious imposition of additional taxes is simply untenable. Payroll taxes are not as straightforward as government may hope. With every increase, fewer people pay them, either through avoidance or emigration.”

Paying for NHI with taxes?

Only 50 000 people out of about 5.5 million taxpayers in the country earn more than R2 million per year and therefore pay tax at the top 45% income tax bracket (which starts at R1.7 million), yet the scheme envisages that all 60 million South Africans will be covered.

Mavuso says these same taxpayers also have the most to lose from a degradation of the existing private healthcare system and therefore, there will be many incentives to leave.

“The number of taxpayers assessed in 2021 was already about 13% fewer than in 2012. Some suggested that corporate income tax can also be used to fund it, but there is a direct relationship between corporate profits and investments.

“When they are taxed, companies have less capital to use for expansion and the consequence is straightforwardly less economic growth and employment. As it is, profits of South African business have never recovered from the post-2008 recession and were devastated again by the Covid lockdowns.”

More careful analysts have pointed out that the only tax that can be increased reliably without significant exit from the system is VAT that currently provides a quarter of tax collected or roughly 6% of GDP. This means that the existing 15% level would need to increase considerably.

Health Minister Joe Phaahla has accused people who criticise NHI of being heartless about those who do not have access to quality healthcare. Mavuso says this argument is hollow.

“In fact, business would be strongly in favour of universal healthcare that is practical and affordable. I would argue that it is the charade of an NHI with no prospect of successful implementation that is truly heartless. A cynical attempt to win votes without the hard work of creating a real workable plan.”