Every South African taxpayer could pay R29,000 extra for NHI 

The government will need almost twice the current health budget to fund National Health Insurance (NHI) in South Africa, which could see every income taxpayer in the country pay an additional R29,000.

At his recent Opening of Parliament Address, President Cyril Ramaphosa reiterated the government’s plan to establish NHI in South Africa. 

“An important task of the next five years is to ensure that we also reduce the high cost of living through ensuring that everyone in South Africa has equal access to equitable, accessible and affordable quality health care,” the President said.

“As we implement the National Health Insurance, we will focus on strengthening health care infrastructure, improving training of health care personnel and using technology to improve health care management.”

He acknowledged that there is much contestation around the NHI. Still, he said there is also broad agreement that South Africa must draw on the resources and capabilities of the public and private sectors to meet the healthcare needs of all South Africans equally.

“In implementing the NHI, we are confident that we will be able to bring stakeholders together and that we will be able to resolve differences and clarify misunderstandings,” he said.

Since its inception, many industry stakeholders have criticised the government’s NHI scheme, which was signed into law earlier this year.

The legislation aims to establish universal health coverage for South Africans through a state-run fund.

While the government has promised that signing the NHI into law will result in universal healthcare free at the point of delivery, this ambition is far from reality. 

Apart from challenges relating to whether it will pass Constitutional muster, business leaders and experts are concerned that the scheme has no clear funding mechanism. 

The Department of Health has confirmed that tax increases and other tax changes are planned to fund the NHI. However, it has not been clear which taxes will be raised or if a new tax will be introduced. 

NHI Deputy Director General Nicholas Crisp said the only way to move medical aid money into the NHI fund is through taxes.

“Whether that is through VAT or other taxes is a matter for the National Treasury and the Money Bill, which will come later,” he said.

The Bureau for Economic Research (BER) has stated that the affordability of NHI is complex and hinges on the structure of the basic benefit package, which the National Department of Health has not yet publicly disclosed. 

Initial expectations are that the package will prioritise child health, preventative primary healthcare, and maternal and reproductive services, with plans to expand over time.

The Department of Health’s cost estimates, based on the 2011 NHI Green Paper and consistent with the 2015 and 2017 White Papers, projected the NHI cost at R256 billion by 2024/25 (2010 prices). 

Adjusted for inflation, this equates to approximately R470 billion by 2024/25 (2022 prices). This is about twice the allocated government health budget of R254 billion for 2024/25.

The BER noted that funding strategies in the Green and White Papers involve reallocating private health spending to the NHI Fund and other fundraising methods. 

However, the organisation highlighted that doubling health expenditure under current fiscal conditions is unlikely.

“Even this simple calculation illustrates that South Africa is unlikely to afford this cost, given current fiscal and economic conditions and competing areas of social expenditure such as grants and education,” it said. 

“The idea that South Africa can double its health expenditure relies on the assumption that private health expenditure is fully reallocated to the NHI Fund, which is highly unlikely.” 

Using the BER’s estimation, the NHI will cost the country an additional R216 billion annually.

Assuming this will be funded solely through taxes, every income taxpayer in South Africa must pay an additional R29,152 in taxes every year.

For reference, in its February 2024 Budget, the National Treasury reported that the country had 7.41 million personal income taxpayers.