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NHI plans infeasible, research indicates  Comments

Necessary skills and funds not within government reach

February 15, 2010

By SLINDILE KHANYILE


Taxpayers will have to fork out an extra R244 billion a year towards healthcare if the government's planned National Health Insurance (NHI) is to work, according to economics consultancy Econex.

This is nearly three times more than the current R84bn the government currently spends on healthcare a year. This is according to a independent research by Econex into the NHI. The authors of the study concluded that South Africa would not have the extra cash available.

The estimate, which would require a 33 percent to 37 percent increase on total tax revenue, is based on the latest Econex NHI note.

The research estimates that the government will have to provide between R216bn and R244bn more for health over and above the R84bn it currently allocates towards healthcare, when making certain assumptions about fiscal substitution and increased expenditure on HIV/Aids.

The research says this will put a strain on the fiscus as it is already more than the R207bn budgeted for personal income tax and the R179bn budgeted for companies tax.

The note used a demand-based approach that looked at the about 40 million people who are currently not insured. It assumed comprehensive cover and that there would be a greater shift towards the use of private healthcare as everyone would be free to choose a provider and not be obliged to pay at point of service

With savings and rationing, Econex says NHI could cost an additional R165bn. But Nicola Theron, a director at Econex, said the R244bn figure was the more likely cost because the NHI proposal document has not explicitly pronounced on savings and rationing.

"This is an expensive programme. The danger is that someone can easily say, we can find the R200bn somewhere, but we can't. Politically, it would be difficult to increase taxes by 33 percent to 37 percent, and this will place a very heavy burden on the fiscus," said Theron.

"We agree that the inequalities in our healthcare should be addressed but the current proposal is not fiscally feasible," said Theron.

The NHI will be phased in over five years. It will use a single-payer system meaning there will be one agency to collect revenue and procure services. That agency is expected to be the SA Revenue Services.

Employers and employees will contribute 50 percent each to the fund and the government will increase funding through the health budget as well. Those who are not employed will be subsidised by those who are working as it will be tax based.

Econex economist Marine Erasmus said the five-year period was too short and suggested that the government should rather concentrate in the short term on spending more money on upgrading the public service and giving priority to HIV/Aids.


Erasmus said social health insurance, which would mean not everyone was automatically covered, might be the best option for South Africa as an interim step towards a full NHI.

The government has said that the NHI would not succeed if it is not done together with upgrading public healthcare infrastructure, improving general working conditions and employing more people.

According to Econex, to implement the NHI in its proposed form, there will have to be 10 000 more general practitioners and between 7 000 and 17 000 additional specialists but nobody knows where these additional skills will come from.

At present, the NHI advisory team is busy with the policy document that must be presented to the Cabinet, after which it will be published for public comment.

The estimates from the research show implementing the NHI is not likely to happen as quickly as anticipated, especially in light of President Jacob Zuma's State of the Nation address last week.

Zuma said there were 2 million more people who would receive social grants. Already, there are 13.5 million people who together get just more than R80bn in social grants each year. There are also other critical social programmes such as education and fighting crime.

The research is not the first to warn on the affordability of NHI. Health economist Alex van den Heever has said the proposals as they were would destroy the healthcare system and would cost too much.

Last year, Treasury deputy director-general for public finance Andrew Donaldson said there was more that the Treasury had to cater for. He also said the country's medical aid industry was well-established and there should be efforts to expand on that capacity.

The research says there should be significant amendments to the NHI proposals, such as not making the envisaged benefits so comprehensive. Free provider choice would have to be curtailed to prevent doctors and specialists from becoming the first point of call on all health visits.

NHI advisory team chairwoman Olive Shisana and the ANC policy team could not be reached for comment.

  • To view the Econex report on the National Health Insurance (NHI) - click here to download full document

  • To view the correction of the Econex report on the National Health Insurance (NHI) - click here
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    Showing page 1 of 2 comment pages, 16 total comments
    29 Weeks ago Anonymous wrote :
    That's about R50,000 per year per tax paying citizen! Can't happen! The 5,000,000 taxpayers would leave or cheat on their taxes.
    29 Weeks ago khe sanh1968 wrote :
    The ruling party's acumen & skills in finances will bankrupt the country and SA will be crucified on a cross of gold. The unions' "wants" are: interest rates @3%, nationalise the mines & SARB, scrap inflation targeting, wages increase between 10&15%, peg the Rand @10 to 1 USD, NHI and a pension for all. SA has 44 million inhabitants and 3,5 million tax payers. These unfortunate people are taxed at a rate of 37% and for this the SA Government doesn't even provide a livable social security to its tax payers as most of the money is wasted on corruption and luxury cars. The budget deficit is 8.4%, SARS is short of 82.9 bn of the estimated target of 740bn. Therefore tax payers will have fork out the shortage (more tax hikes on the way) and now the Government is requesting more taxes for the NHI. Good timing indeed. What next? Hello Zuma & Co, in which fools paradise have you been living? We are ruled by leaders with galactic stupidity and ignorance. Unfortunately the majority in SA is not educated and this is SA's curse. Had the majority previously been educated, surely they would not have voted for unskilled people to represent them. I can see the young educated people will leave SA and the rest will be in the hands of a bunch of arrogant corrupt leaders. After all SA voters elected them to rule the country. Just like Zim they have themselves to blame.
    29 Weeks ago Silver Surfer wrote :
    @ mapholoba. Simply demanding money from the White man without adding any benefit whatsoever (except maybe adding more kids to the problem) is hardly an innovation !
    29 Weeks ago Anonymous wrote :
    @anonymous: That is the whole ideal of the NHI, you don't need a medical aid anymore, instead you will have basic NHI cover and your private medical aid will be your top up cover for more advanced procedures or optionals. Of course, you medical aid payments will decrease accordingly as they will not have to cover the basic procedures anymore.
    29 Weeks ago mapholoba wrote :
    NHI plans infeasible, research indicates. Vuvuzela causes deafness, research indicates. Who is really doing all these research? I wont be surprised if DA is involved. Can you stop please crushing black peoples innovations.
    29 Weeks ago Edward wrote :
    I have seen and used the National Health Service in Britain and it works very well (despite how the British complain about it but they haven't sat in an out patients ward in SA!) The problem is exactly what the ecomomists are saying: We can't afford it at the moment. PPP must increase to at least $25,000 and unemployment has to be lower. In Europe the average PPP is about $33,000 and unemployment is usually around 7%.....then you can afford an NHI. SA PPP is around $10,000 and unemployment at about 22%....the numbers are just not there yet. Hopefully in the future but first education, education, education....and more education.
    29 Weeks ago Edward wrote :
    I have seen and used the National Health Service in Britain and it works very well (despite how the British complain about it but they haven't sat in an out patients ward in SA!) The problem is exactly what the ecomomists are saying: We can't afford it at the moment. PPP must increase to at least $25,000 and unemployment has to be lower. In Europe the average PPP is about $33,000 and unemployment is usually around 7%.....then you can afford an NHI. SA PPP is around $10,000 and unemployment at about 22%....the numbers are just not there yet. Hopefully in the future but first education, education, education....and more education.
    29 Weeks ago Anonymous wrote :
    If this plan becomes a reality, why should we have private medical aid 'accounts'? I currently pay in excess of R 3500 monthly to cover my family. If, for a 4% tax hike, I can visit private medical services at the governments expense, I may as well cancel my medical aid, and save a lot of money. Of course, that will mean the collapse of medical aid schemes, as I'm sure I'm not the only person that thinks like this. That will, in turn, mean the collapse of private medical service providers, and a pathetic inept medical system, much like the current public sector one...
    29 Weeks ago Mo wrote :
    Don't worry - they will go ahead anyway.
    29 Weeks ago Luthuli House is falling down wrote :
    I wouldn't have a problem with the NHI initiative if I knew that it wouldn't be rife with the same nepotism, inefficiency and idiocy that plagues every other aspect of government. I wish that the ANC would just pause for a moment and get their house in order rather than desperately building on extensions and hoping that it'll distract people from noticing that the other parts are falling down. The motive here isn't economic or social, it's purely political and that's the worst possible motivation.
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