NHI can cost taxpayers R460 billion a year

Managing director at Intellidex Peter Attard Montalto estimated that the government’s National Health Insurance (NHI) scheme would cost the country between R300 billion and R460 billion a year.

South Africa’s National Assembly recently passed the NHI Bill, which is aimed at introducing universal healthcare.

The Department of Health explained that National Health Insurance provides good healthcare for all by sharing the money available for healthcare among all our people.

However, the Bill has drawn a lot of criticism, with many saying that its provisions are unclear, it will root out competition and choice in the healthcare sector and cause doctors and nurses to leave the country.

Montalto told Newzroom Afrika that the lack of clarity around how the Bill will be funded is one of its biggest problems.

The government has said it wants to use additional taxes to fund NHI. However, a Money Bill – the financing part of the plan, which must come from the National Treasury – has yet to be published.

Montalto said the lack of a clear, detailed implementation and funding plan means South Africans must make estimations based on “some very broad brushstroke numbers”.

Therefore, he estimated the range to be between R300 billion and R460 billion. This is a significant increase from the estimated R170 billion the government currently spends on healthcare in the country.

Many experts have warned that South Africa risks losing high net-worth individuals through its high taxes. Economist Dawie Roodt recently warned that there is no room to increase taxes as rich people and companies will leave the country if it happens.

“Combined with the high crime rate and economic instability, higher income taxes will drive rich people out of the country,” Roodt said.

Raising taxes is a particularly unfeasible plan in South Africa, where the country already has a small tax base – only 7.4 million people in the country pay personal income tax.

“You would need very sizable changes in revenue policy to be able to fund [NHI], which is not politically, practically or economically feasible,” said Montalto.

“You can’t just tax a very thin slither of people on the top and expect to raise that amount of money.”

Rather, the government would have to generate more revenue from various sources, like value-added tax or payroll tax. 

While it is possible to raise enough funding for NHI, it is not likely, Montalto said. In fact, he said NHI in South Africa at this time is “simply impossible”.

Montalto said South Africa needs better healthcare – “some form of NHI” – for the majority of the population. However, this current Bill is not the solution.

While Montalto doubts that the Bill will ever be implemented, he believes it creates an opportunity for South Africa to come up with alternatives to its current healthcare system and rethink how it works.

Private-public alternative

Business Leadership South Africa CEO Busi Mavuso said the NHI Bill illustrates that the government did not learn from other successful public-private partnerships.

She used the Covid-19 pandemic as an example where a partnership between the government and private sector proved successful. Together, the two entities could source equipment and medicines, roll out vaccines and fund other interventions.

“It was a clear demonstration that national health outcomes are achieved faster and more efficiently when government and business work together, drawing on their respective strengths,” she said.

“With the right incentives, the private sector can complement government efforts, speed up the investment needed and reduce costs to the state and users.” 

Mavuso pointed to the Affordable Care Act (Obamacare) in the US as a viable alternative to NHI with a single-buyer model.

Under Obamacare, health insurers must provide minimum benefits, and the state subsidises those earning below a threshold.

However, insurers also compete in a marketplace to offer coverage, and consumers can choose their providers. 

“This approach focuses scarce public resources where it matters: supporting those who do not work or earn below a threshold while ensuring market incentives reduce costs and improve service quality,” said Mavuso.

“Together, we can build a mechanism that delivers the best possible universal healthcare to South Africans at the lowest cost while ensuring we do not destroy the parts of our health system that do work effectively.”