Anthea Jeffery | Aug 15, 2019
The National Health Insurance (NHI) scheme is likely to destroy the healthcare system and make it inordinately difficult for most people to obtain the care they need.
Unveiling the National Health Insurance (NHI) Bill last week, health minister Dr Zweli Mkhize claimed the proposed system will reduce costs while providing 58 million South Africans with quality health services that are free at the point of delivery. In fact, however, the NHI is likely to destroy the healthcare system and make it inordinately difficult for most people to obtain the care they need.
The main purpose of the NHI Bill is to establish the ‘NHI Fund’ and its nine sub-units, provide for various ministerial advisory committees, introduce new health agencies in all district municipalities and sub-districts, establish mechanisms to plan, monitor, evaluate, and at times revise the system, and set up a state-controlled Appeal Tribunal to rule on people’s complaints. However, neither the Bill nor its explanatory memorandum answers any of the key questions around the NHI.
How much will the NHI cost? The Bill speaks of some R30bn a year for various interim interventions, including the costs of establishing the NHI Fund. However, it dodges the vital point that the NHI will cost at least R450bn a year at its start – this being the projected cost of both public and private healthcare in 2019. Given high medical inflation (some 9% a year in both the public and private sectors), annual costs could easily exceed R700bn by 2026, when the system is supposed to become fully operative.
How will the NHI be financed? This question cannot be answered properly when no one knows what the costs will be. However, the Bill speaks of ending the R30bn medical tax credit, reallocating R150bn in provincial health spending to the Fund, and in time introducing a surcharge on income tax as well as a payroll tax. The new and increased taxes needed could be, roughly, a 3% payroll tax, a 3% surcharge on income tax, and a VAT increase of four percentage points (bringing the VAT rate to 20%), says Intellidex analyst Peter Attard Montalto. This discounts the country’s mounting economic malaise, along with a 2017 warning by the Davis Tax Committee that the NHI will not be sustainable without much faster growth.
What benefits will the NHI provide? The Bill is silent on this key issue too. Benefits will in time be decided by the ‘benefits advisory committee’ appointed by the minister, along with the ‘benefits design’ unit within the Fund. The list laid down in time is likely to be long, but many of the promised benefits may not in fact be supplied. This would mirror the experience of 24 developing countries, which in practice have failed to provide the full range of health benefits they earlier pledged.
How will comprehensive state controls work out in practice? Under the NHI, the state will control every aspect of healthcare – from the healthcare services to be provided to the fees to be paid to doctors and other professionals; the treatment protocols to be followed; the medicines, equipment, and health products to be used; the new health technologies to be permitted; and the permitted or recommended prices of all items, from medicines to syringes, stretchers, and x-ray machines.
In practice, doctors, specialists, and other health professionals may object to the fees set by the state and so decline to participate in the NHI. Those who join it will find themselves obliged to follow the treatment protocols laid down by NHI officials, even though these are unlikely to work well for all patients in all circumstances.
If recommended prices for healthcare goods and services are set too low, suppliers will shift to markets in other countries, cutting patients off from a host of essential items. The same will happen if the NHI Fund fails to pay its bills on time, prompting suppliers to terminate delivery and adding to shortages.
Will South Africa have enough health professionals to meet demand? The country already has a major shortage of nurses, doctors, and other health professionals, of whom some 20% (on the figures available) could emigrate to avoid NHI controls. Waiting times for treatment will increase sharply and people will seldom get speedy help when they need it most: when babies have to be delivered, children fall ill, breadwinners are injured, or the sick need medication.
Will present medical schemes still be allowed? Medical schemes will be limited to providing ‘complementary’ and ‘top up’ cover ‘not reimbursed’ by the NHI. Such limited cover is likely to be expensive. Most schemes will cease to exist, as most people will see little benefit in membership and will not be able to afford this once the medical tax credit has been abolished and substantial NHI taxes have been introduced.
How efficient will this ‘giant’ medical aid be? The NHI is intended to create ‘a giant state-run medical aid’, as former health minister Dr Aaron Motsoaledi has stated. Once the system becomes fully operative, all health revenues will be paid into the NHI Fund. This will then purchase and pay for all the ‘free’ healthcare goods and services needed each year by all South Africans – while most existing medical schemes will collapse.
The implications are mind-boggling. Not even the most efficient private medical scheme could successfully manage the diverse health needs of some 58 million people, while simultaneously implementing a plethora of NHI controls. The NHI Fund will also be far less efficient than private schemes, for it will be staffed by deployed cadres and will face no competition. Effectively, it will give the state a monopoly over health care. This is likely to be just as costly, dysfunctional, and corrupt as Eskom’s monopoly over electricity.
Why ignore the better options available? The Bill assumes that only the NHI can usher in universal health coverage. But such coverage is already available, mostly for no charge, at public clinics and hospitals. These generally function poorly at present, but can be turned around through merit-based appointments, strict accountability for poor performance, and effective action against corruption and wasteful spending. Public-private partnerships would further improve their operation.
Access to private healthcare should also be increased by encouraging the roll out of low-cost medical schemes. Poor households should be provided with tax-funded health vouchers so they can join these low-cost schemes as well. To help spread risks, medical scheme membership should be mandatory for all employees, with premiums for lower-paid staff buttressed by employer contributions for which tax credits can be claimed. Medical schemes would then have to compete for the custom of all South Africans, which would encourage efficiency, promote innovation, and help hold down costs.
What are the economic implications of the NHI? The Bill ignores these issues too. The NHI with its enormous costs will push the country further into junk status. By infringing property and other rights, it will deter investment and limit any remaining growth. It will also drive the middle class away and destroy much of the country’s narrow tax base. Some 70% of all personal income tax – and a hefty chunk of VAT besides – comes from about 2% of individual taxpayers, many of whom have portable skills and will not accept the destruction of sound private healthcare. If even a third of them were to emigrate, the impact on the economy, revenue, and the state’s capacity to sustain its spending would be devastating.
Dr Anthea Jeffery, Head of Policy Research at the IRR, is the author of People’s War: New Light on the Struggle for South Africa, now available in all good bookshops and as an e-book in abridged and updated form.
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