Each South African taxpayer will have to pay R43,000 extra per year for NHI

New estimates from Momentum Health show that the state will need an additional R628 billion annually to provide quality healthcare using National Health Insurance (NHI).

This translates into every South African taxpayer paying an additional R43,000 per year to fund the shortfall.

The National Health Insurance (NHI) is South Africa’s strategy to achieve universal health coverage for all citizens.

The NHI is a centralised national insurance fund from which the government purchases healthcare services from providers in both the public and private sectors.

All eligible South African residents, as defined in the NHI Act, will be able to visit these providers whenever they need healthcare without any payment.

Although this sounds good on paper, the government has caused tremendous damage to the public healthcare system, and this is likely to be repeated with NHI.

Many stakeholders urged the government to fix the broken public healthcare system instead of limiting people’s access to private healthcare.

Considering the poor state of public healthcare, Ramaphosa’s signing of the NHI Bill into law in May 2024 was not well received.

Instead of seeing national health insurance as a wider support of a social wage theme, it attacked people’s access to private medical professionals.

People from all sectors of society, including poor households in rural areas, respect private healthcare.

However, despite the resistance from all quarters of society, the government is doubling down on its NHI plans.

President Cyril Ramaphosa and Health Minister Aaron Motsoaledi recently confirmed their plans to implement the scheme.

Medical aid schemes, civil society, and unions are now fighting hard to block NHI in its current form.

Trade union Solidarity told Daily Investor that its fight against NHI has only begun. “We will challenge the legislation in its totality,” it said.

This week, Discovery Health Medical Scheme said it was “participating in the preparation of potential litigation” against the NHI.

“We remain concerned that the NHI Act is unworkable in its present form without private sector collaboration,” Charlotte Mbewu, Discovery’s principal officer, said.

She added that the NHI in its current form will not lead to the desired improvements in healthcare for all South Africans.

NHI funding concerns

One of the biggest concerns regarding South Africa’s National Health Insurance plans is the lack of a funding model.

Previous estimates suggested the country would need an additional R200 billion annually to fund the scheme. However, this is a big underestimation.

Momentum Health chief marketing officer Damian McHugh showed that the scheme would cost at least R900 billion per year.

He explained that the private sector spends an average of R1,750 a month, or R21,000 per year, on 9 million medical scheme beneficiaries.

The NHI plans to offer the same care to 63 million South Africans. This translates into R1.3 trillion annually.

McHugh said there would be savings, like doing away with medical aid tax credits and other economies of scale.

Taking cost savings and other revenue measures into account could bring this to a more conservative estimate of R900 billion.

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

The government spends around R272 billion annually on health. This leaves a shortfall of R628 billion, which the taxman must collect.

South Africa has 14,667,133 registered taxpayers. The additional NHI costs mean each taxpayer will have to pay R42,817 per year.

If one limits the payment to personal income taxpayers, it increases the additional tax burden on these individuals to R88,176 per year.

The NHI Act states that the scheme will be funded in four ways—three of which are individual tax-related.

• Shifting of funds from government departments and agencies and provincial budgets and conditional grants as part of general tax revenue.
• The removal and reallocation of funding for medical aid tax credits.
• Payroll taxes on employers and employees.
• Surcharges on income tax through a Money Bill by the National Treasury.

However, even if the tax burden is spread across multiple sources, the shortfall is so significant that it is unfeasible.

South Africa’s tax base is already under severe strain, and additional taxes will cause tremendous economic damage.

Projected cost of NHI

Group	Members	Claims per member	Total cost
Private Medical Scheme	9 million	R21,000	R192 billion
South Africa	63 million	R21,000	R1.3 trillion
Estimated NHI cost	63 million	R14,000	R900 billion

Measure	Amount
Estimated NHI cost	R900 billion
Health budget	R272 billion
Shortfall	R628 billion