Is this the death of medical aids?

Is this the death of medical aids?

Picture: iStock

Once National Health Insurance is fully in place, medical aid schemes will only be allowed to offer ‘top-up cover’ – and the taxpayer’s burden will increase.

The National Health Insurance (NHI) Bill, which is to be placed before parliament, will mean that medical aid, as most middle-class South Africans know it, will disappear.

According to the Bill, which is still open for comment and which will be debated in parliament before being passed into law, medical aid schemes will only be allowed to offer “top-up cover” once NHI is fully in place.

And while the medical aid sector will never be the same again, government is once again lining up taxpayers to dig through what is left of the small change in their pockets to pay for NHI.

“There is no doubt that taxpayers will find the additional tax burden a bitter pill to swallow,” said Aneria Bouwer, tax partner at Bowmans. “The memorandum on the objects of the Bill explains that the reforms will be implemented in six phases, more details of which will be released in a series of implementation plans to be released by the department of health.”

Bouwer said there was as yet no indication how much the proposal would cost taxpayers.

“Interestingly, the memorandum refers to the evaluation of the new tax options in a favourable economic environment,” said Bouwer. “What seems more certain is that taxpayers will no longer receive medical scheme fees tax credits, which for a family of four currently gets relief of just more than R12 000 per year.”

Council for Medical Schemes CEO Dr Sipho Kabane said “whatever is remaining of medical schemes” will still have a role to play, once the NHI is up and running.

“They will provide a complimentary service benefit which is not covered by NHI,” Kabane said. “NHI won’t be able to provide all the medical services the population needs. Some will be unaffordable, some will be not clinically justified, so whatever is covered inside the service benefit package will not be covered by schemes.”

These could include elective procedures such as a plastic surgery for nose surgery for aesthetic purposes, or unaffordable essential services such as rare diseases with a poor prognosis.

Currently, just 16% of South Africans pay medical aid contributions and it is this money, along with current medical aid tax deductions and possible future tax surcharges, which will be used to subsidise the medical services of the remaining 84% of the population, according to analysts.

The overall aim is for all South Africans to have access to quality healthcare.

Anthea Jeffery of the Institute of Race Relations said the NHI Bill was “kicking the can down the road” by failing to answer critical questions.

“Under NHI, the state will also control every aspect of healthcare. This means the state will decide on the healthcare services to be covered; the fees to be paid to doctors, specialists, and other providers; the medicines to be prescribed; the blood tests to be allowed; the medical equipment to be used; the health technologies to be permitted; and the prices to be paid for every item, from aspirins and ARVs to sutures and CAT scanners,” Jeffery said.

“The government claims these controls will be effective in cutting costs and enhancing quality. But the huge bureaucracy needed to implement them will be costly in itself. Pervasive regulation will also stifle innovation, reduce efficiency and promote corruption. But neither the Bill nor its explanatory memorandum answers any of the key questions about NHI.”

There is still no clarity on what NHI will cost (at least R450 billion a year, based on current state and private healthcare spending), how the supply of healthcare services will be increased to match demand, how the enormous administrative burden will be met, said Jeffery, who noted the spectre of SA’s rampant corruption.

“It is time to say no to the uncosted and unsustainable NHI proposal and find far better ways to improve universal health coverage,” said Jeffery.

“Waste, fraud and inefficiency in the public health sector must be ended.

“Low-cost medical schemes and health insurance policies should be encouraged, not restricted.”

Kabane said because SA’s health system was in a crisis, NHI was not only a good thing, but essential. “If you look at the public sector, there is poor quality, understaffing, all kinds of issues.

“If you look at the private side, there are high costs which are unaffordable to members, so these all need to be corrected to improve the overall health outcomes of the country,” Kabane said.

“The only way we can appropriate or deal with this is universal health coverage.”

How the fund will work

According to the National Health Insurace (NHI) Bill, the idea behind it is to “create a single framework throughout the country for the public funding and public purchasing of healthcare services, medicines, health goods and health related products, and to eliminate the fragmentation of healthcare funding in the country”.

To do this, the fund is “entitled to money appropriated annually by parliament in order to achieve the purpose of the Act” and will be “appropriated from money collected” from “general tax revenue, including the shifting of funds from the provincial equitable share and conditional grants into the fund, reallocation of funding for medical scheme tax credits paid to various medical schemes towards the funding of NHI, payroll tax [employer and employee] as well as a surcharge on personal income tax”.

Phase one was supposed to begin in 2017 and end in 2022, with part of the legislation being rolled out.

Phase two would run from 2022 to 2026 and “must” include “the continuation of health system-strengthening initiatives on an ongoing basis, the mobilisation of additional resources where necessary; and the selective contracting of healthcare services from private providers”.

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