Huge tax increases needed to fund NHI

Connie Mulder, head of the Solidarity Research Institute, said the planned National Health Insurance (NHI) would require large tax increases.

South Africa’s National Assembly recently passed the National Health Insurance Bill aimed at introducing universal health insurance.

The Department of Health promotes it as a way to provide good healthcare for all by sharing the money available for healthcare among all people.

However, many businesspeople, health professionals, and medical aid schemes warned that it is unworkable and is chasing medical professionals out of the country.

Business Leadership South Africa CEO Busi Mavuso says the National Health Insurance Bill is unworkable with no implementation or funding plan.

“It is as if the government is intent on striding forward, somehow ignoring that, eventually, the whole charade will collapse,” she said.

The biggest problem is money. The NHI’s money bill – the financing part of the plan, which must come from the National Treasury – has not been published.

The government has a misguided belief that the money which is currently flowing into private healthcare will make its way into NHI.

Discovery Health CEO Ryan Noach said the government has no way of getting its hands on medical aid money to fund NHI.

Noach said it is naive for the Department of Health to assume that medical aid contributions will be redirected into a national health insurance scheme.

National Health Insurance deputy director general, Nicholas Crisp, explained the government’s plan to fund the new health financing system.

“When we come to the contributions made in the private sector, the only way to move that money into the NHI fund is through taxes,” he said.

“Whether that is through VAT or other taxes is a matter for National Treasury and the money bill, which will come later.”

Crisp added that the National Health Insurance Bill creates alternative mechanisms that do not currently exist, like a payroll tax.

It echoes the view of Health Minister Joe Phaahla, who said taxpayers would be footing the bill for national health insurance.

Mulder said trying to fund NHI through additional taxes is unfeasible because of the tremendous amount of money needed.

He provided a rough estimate of the tax increases needed to fund the planned NHI.

• 20 percentage point increase in personal income tax.
• Increase Value Added Tax (VAT) to 20%.
• Increase company tax from 27% to 42%.

He added that the proposed payroll tax, where money is taken from employees before they are paid, will amount to 5.5%.

“We are talking about massive increases in taxation to fund this, which will crush South Africa’s economic outlook,” Mulder said. “It is completely unaffordable and unnecessary.”

Mulder said they are getting ready for a major court case against the government’s plans for national health insurance.

“The government has already failed with the public healthcare system, and it now wants to fail on an even bigger scale,” Solidarity said.

“We cannot trust the government, and we cannot deliver our medical professionals to them and trust our health to their hand.”