NHI feels like an ill-considered choice - Star

14 August 2019 - Providing all South Africans with free, quality healthcare is a noble goal. However, it cannot work in South Africa at our current stage of development; we simply do not have the money or the tax base to pay for such a huge undertaking, by far the biggest project ever attempted by any South African government.

Marius Roodt

South Africa currently feels like an out-of-control ship bearing down on an iceberg. Instead of changing course, those at the helm are to determined to keep barrelling along at full steam ahead.

Despite the perils in our path, the current policy direction of the African National Congress (ANC) government shows there are very few ideas about plotting a new course for SS South Africa.

Policies which will doom South Africa continue to be punted, despite all evidence that they are not what this country needs to succeed. The government seems set on Expropriation without Compensation (EWC) despite the damage it will do to the economy, or the morality of allowing a government to take someone’s property without paying for it. Then there is the recent Eskom bail out, which will put even more pressure on a strained fiscus and taxpayer base. Despite the solution being crystal clear, the government is so constrained by ideology that it will not contemplate any form of privatisation. And in the face of an official unemployment rate of nearly 30% (closer to 50% if you include those who have given up looking for work), the government indicates it intends to double down on empowerment policies which have done far too little to improve the lot of poorer South Africans.

The implementation of National Health Insurance (NHI) is another symptom of a ship in the hands of an incompetent crew. NHI will ostensibly provide all South Africans with free, quality healthcare. It will be funded through the current health department budget and increased taxes (both VAT and personal income taxes). Instead of paying medical aid premiums, people who did pay these will, instead, pay this money over to the government.

Providing all South Africans with free, quality healthcare is a noble goal. However, it cannot work in South Africa at our current stage of development; we simply do not have the money or the tax base to pay for such a huge undertaking, by far the biggest project ever attempted by any South African government.

And there have been warnings from almost every quarter that NHI will be a failure, with dire consequences for the country and its future. Editorials in the country’s newspapers have been almost unanimous in their criticisms, as have the majority of professional medical associations, which have also warned that an exodus of medical professionals is imminent. Even some of the ANC’s union allies have come out to criticise the bill, which is telling.

Equally telling is that NHI pilot projects implemented in eleven districts across the country failed to increase the level of healthcare in those districts, and exposed a variety of other problems, including a shortage of staff and deficient infrastructure (including IT).

At the same time, it is still not clear how the NHI will be paid for. Although the government has initially estimated NHI will cost the country around R256 billion, it is unlikely that this is accurate, with former health minister Aaron Motsoaledi admitting it was a ‘guesstimate’. It is inevitable that taxes will have to go up. Peter Attard Montalto, an analyst at Intellidex, estimates that to fund NHI in the current economic environment, there will have to be an additional payroll tax of nearly 3%, another almost 3% surcharge on taxable income, and a VAT increase of nearly four percentage points (to give us a VAT rate of nearly 20%). And these tax increases will go only towards funding NHI, not other revenue holes.

If it is clear NHI is unworkable, however, ensuring all South Africans have high levels of healthcare is important. We believe it can be done without destroying private healthcare. The first requirement is to fix the country’s public health service through a combination of merit-based appointments, strict accountability for poor performance, and effective action against corruption and wasteful spending. Public-private partnerships could be used to improve public facilities.

The burden on the public system should be reduced by enabling increased access to private healthcare. Low-cost medical schemes and primary health insurance policies should be allowed, while poor households should be helped to join these schemes or buy these policies through tax-funded health vouchers.

To help spread risks, medical scheme membership and/or health insurance cover should be mandatory for all employees, with premiums for lower-paid employees buttressed by employer contributions for which businesses would garner tax credits.

Medical schemes and health insurers would then have to compete for the custom of South Africans, which would encourage innovation and help to hold down costs. Private providers should also be allowed to provide more day hospitals, as well as train doctors, and other specialists.

The good ship South Africa needs a change of course to avert disaster. Implementing NHI will only guarantee a collision with the iceberg that looms ever closer.

Marius Roodt is head of campaigns at the Institute of Race Relations (IRR), a liberal think tank that promotes economic and political freedom.

 

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