NHI: pay 31% more tax and get 70% less healthcare not workable

Funding the current model of the NHI will require personal income tax to increase by 31%, or VAT to increase by 6.5% or employed people to pay 10 times the current UIF contributions. And according to the CEO of Discovery, their model shows you would get 70% less healthcare benefits if NHI is implemented.

Adrian Gore, CEO of Discovery, touched on the subject of National Health Insurance (NHI) when he presented the company’s results last week. However, he also had good news for medical scheme members who are worried that they will lose their cover: if you read the NHI Act carefully, it states that medical schemes will only be barred from funding what the NHI funds once NHI is “fully implemented”.

He explained that Discovery did this modelling for a draconian view of the NHI where there is only one fund, the NHI Fund, with no other funding allowed:

Gore says according to some of the estimates additional funding of R200 billion is needed for NHI. “Currently, employed people who use private healthcare spend about R2 300 per person per month on benefits. Funding in the public sector amounts to about R410 per person. If you add the R200 billion to the public sector spend, everyone then gets R700 per month.”

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R700 per month for healthcare benefits not much

This can then work out well for people who use public sector health care, but Gore points out it is not a dramatic increase, as you cannot buy much with R700 in healthcare benefits. “For people using healthcare benefits in the private sector, it means that their benefits go down by 70%. How is this possible and where will the R200 billion come from?”

He says people who are employed will then lose their healthcare benefits and also have to fork out more money for the extra R200 billion needed for NHI by paying more personal income tax.

“Raising taxes will mean you have to say to employed people they must pay 30% more tax and get 70% less healthcare benefits. That is of course not a sustainable situation. This illustrates the complexities of our country, the lack of resources and the inequality, but a simple analysis also shows that the draconian form of NHI cannot work.“

Gore says to achieve this without making employed people pay more tax or VAT, requires economic growth as illustrated in the righthand side of the chart.  “Our modelling illustrates the problem quite clearly.

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SA needs economic growth of 9% for 20 years to afford NHI

“This shows you how much economic growth we need to fund different levels of benefits, for example in the middle of the chart, where we show other ways to generate enough gross domestic product (GDP) to fund NHI.

“If we were to generate enough GDP to fund NHI, our economy will have to grow by about 9% for twenty years to fund primary care, extended chronic benefits, maternity benefits, in other words, a package of benefits.”

This is obviously incredibly low, he says, but it does illustrate the almost intergenerational issue of the NHI. “We need economic growth. We need time. We need resources to achieve it and we need the collaboration of all.”

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Medical scheme members should not worry about NHI for now

Gore says Discovery has also made it clear to its members that they should not be concerned about NHI implementation. “Section 33 of the NHI Act is the pinch point although many other areas of the Act are problematic.

“But section 33 really is the fork in the road around the private sector and what is given people calls for concern is that it says once NHI has been fully implemented as determined, medical schemes may not cover what the NHI covers, except for complementary cover.

“We are confident of the way forward and certainly in the short to medium term there is the implication that until the NHI is fully implemented, there are no restriction on medical schemes and therefore there is a lengthy process before there will be any real impact on medical schemes.”

Gore says Discovery sees no difference to its business, its members or the Discovery medical scheme, but Discovery will work and engage with government to make NHL workable and the process has already started last week when Business Unity South Africa (Busa) met with the president about NHI to find solutions.”

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NHI is not workable as there is no funding available

Just before the results, Gore said at a Discovery Day event that NHI is a complex issue. “It is a problematic piece of legislation. We have been unequivocal as business, as Discovery, as a sector, that NHI is not workable without private sector collaboration, the funding is just not available.”

He also pointed out that making employed people pay 31% more tax and get 70% less healthcare benefits will wreck the economy while it will also not do much for people using public sector healthcare.

“We need more funding, more doctors and more resources, not less. I am hopeful that we can engage in a way that makes NHI workable.”

He said the fact that once NHI is fully implemented, medical schemes cannot cover wat NHI covers of course sounds threatening. “There are all kinds of potential wiggle room around that. What is complementary cover? But the key issue to remember is the flip side of this. Until NHI is fully implemented, there is no threat to medical schemes.”