Government gearing up for NHI in South Africa

The government will soon start to digitise health records management in South Africa in preparation for the rollout of National Health Insurance (NHI).

This was announced in the Medium-Term Budget Policy Statement, which Finance Minister Enoch Godongwana delivered on Wednesday, 30 October.

In his statement, the minister laid out the government’s plan for building a “capable, ethical and developmental government”.

He said part of this plan will be harnessing digital infrastructure to roll out critical systems in the provision of service delivery in the several focus areas.

Some of these areas include digitising and simplifying the application and disbursement process for social grants, broadening access to employment pathways, rolling out digital identification documents and building a centralised and accessible website for all government services.

Crucially, the minister also mentioned that digitising health records management for the rollout of NHI in South Africa. 

This shows the government is steadfast in its implementation of NHI in South Africa, despite severe criticism of the current legislation.

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

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.

The Act, in its current form, would also forbid private medical aid providers from covering healthcare procedures that the NHI provides for. 

This legislation has been met with severe opposition since its inception, with concerns randing from viability, necessity, legality and affordability.

The affordability issue is one of the most common critiques of the NHI, as industry stakeholders have questioned how South Africa can afford it.

In particular, stakeholders are concerned by the government’s lack of a funding model.

A Bureau for Economic Research report found that the country’s current healthcare budget would need to almost double to fund the scheme.

This is a tough ask for a country that has run overall fiscal deficits for over a decade and an already overburdened taxpayer.

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 previously said the only way to move medical aid money into the NHI fund is through taxes.

This would place a significant burden on South Africa’s already overburdened tax base, with estimates suggesting that 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.

Aside from funding concerns, one of the biggest challenges standing in the NHI’s way is legal challenges.

Several stakeholders have threatened or already taken legal action against the legislation, which could be tied up in court for decades.