NHI will chase doctors and taxpayers out of South Africa

The government’s National Health Insurance (NHI) Act risks accelerating the emigration of healthcare professionals and taxpayers out of South Africa. 

As the NHI is implemented, increasing pressure will be placed on existing healthcare workers, and the government will need to raise taxes on South Africans to fund the scheme. 

This will prompt many, particularly high-income taxpayers, to leave the country, as they have the means to emigrate. 

The Health Funders Association (HFA) revealed this as part of the launch of its legal challenge against the NHI Act on constitutional grounds. 

It said that the NHI will centralise control of healthcare financing in a single fund run by the state, which will remove the ability of private medical schemes to offer cover for services. 

“This effectively outlaws the constitutional right of citizens to choose how to access or fund healthcare beyond what the state provides,” the HFA said. 

While the Act’s unconstitutionality is being challenged, the HFA also explained in length the potential disastrous impact on the country’s finances and economy. 

The steep taxes needed to fund the NHI, with personal income tax potentially doubling, will reduce disposable income and crush consumer spending. 

This will translate into slower economic growth, resulting in even less tax revenue to fund the scheme, forcing the government to either scrap it or squeeze taxpayers harder. 

The HFA warned that this may trigger an exodus of high-income taxpayers and destabilise the private healthcare sector that contributes over 4% to South Africa’s GDP. 

This echoes a warning from Dr Paula Armstrong from FIT Consulting, which released a study outlining the tax increases needed to fund the NHI. 

To raise the R200 billion required each year for the NHI, assuming that the number of taxpayers and their spending remains constant, will require a –

• VAT increase from 15% to 21.5%.
• Personal income tax rates increase by 31% across the board.
• A payroll tax on those employed in the formal, non-agricultural sector of an estimated R1,565 per month.

Armstrong said implementing such extreme tax hikes, no matter the combination, would have disastrous effects on South Africa. 

“I think you would see the tax base shrink even further. We will see more emigration than we see at the moment,” she said. 

Furthermore, if there are steep hikes to personal income tax rates, people will want to work less and retire early as there will be less benefit to working more. 

“People will work less and retire early as the return to their income from more work would be so low after tax that it would not be worth their while to work longer or harder.”

Doctors leaving South Africa

The HFA also warned that achieving the government’s vision for NHI would require far greater healthcare capacity than the country can afford. 

Commissioned analysis from Genesis Analytics showed that achieving the NHI in its entirety would require more than 286,000 additional healthcare professionals. 

This means it would require more than double the number of general practitioners (GPs), nurses, and pharmacists that currently work in South Africa. 

Furthermore, it would require triple the number of specialists, which will take significant time and investment to address. 

The HFA said that the NHI will, therefore, place significant pressure on healthcare workers in South Africa. 

“We simply do not have the skilled people needed to deliver the NHI,” the organisation’s CEO, Thoneshan Naidoo, said. 

“By driving down service tariffs, the NHI risks accelerating the emigration or exit of healthcare professionals from the sector altogether.” 

This warning has been issued by numerous lobby groups and individuals over the past few years, with the South African healthcare sector already facing capacity constraints. 

Investec chief economist Annabel Bishop said the NHI plan will lead to the emigration of skilled professionals and taxpayers. 

Bishop pointed out that the NHI Act seeks to eradicate private-sector healthcare in South Africa, with the majority of healthcare to be provided by the state.

South Africa’s state healthcare has ranked among the world’s worst healthcare providers for many years in the World Bank’s global competitiveness survey. 

In addition, she said most private-sector doctors and specialists will likely emigrate under the NHI.

However, business leaders, skilled workers, and entrepreneurs will also emigrate, and international tourism will collapse under state healthcare as the only option. 

“This would all negatively affect state revenue, resulting in a massive worsening in borrowing, while state expenditure would rocket, and the prospect of fiscal consolidation would disappear,” Bishop warned.