National Health Insurance – good idea, but is it sustainable?

The sustainability of the National Health Insurance (NHI), which government hopes will be able to provide free basic health care services to all South Africans remains questionable, with affordability and state capacity being its biggest challenges.

Add to that the recent implementation of free higher education and things look even more difficult.

Economist from the University of Johannesburg Dr Sean Muller says the sustainability of the project is difficult to ascertain, as even the NHI white paper says the “financing requirements are uncertain”.

He said the affordability and state capacity challenges depend on the design of the system, as well as possible sources of funding, to succeed.

“Low economic growth in the past decade and a rapid increase in national debt relative to GDP reduced the capacity of the state to finance large, new social programmes.”

He said the recent commitment to dramatically expand higher education funding, partly financed through an increase in VAT, had made these limitations even more acute and, as things stood, it would be irresponsible of the government to finance the NHI through a significant increase in borrowing.

So, unless economic growth increased dramatically, Muller suggested additional sources of revenue would be needed.

“One possible source of funding is the tax revenue government currently ‘loses’ to medical aid tax credits, which in 2015/16 amounted to more than R20 billion. In fact, the 2018 Budget announced that below-inflation increases in those tax credits will be used to fund an expansion of NHI preparation over the next three years. The challenge here is coordinating the withdrawal of these credits with the provision of the same resources. And even these revenues may not be enough.”

Muller said that for the NHI to be sustainable as a project, it needed to be operationally successful, which required the expansion of health care services in a way that facilitated cross-subsidisation of poorer South Africans by wealthier ones.

Muller further explained that one major challenge to come from this was the ability of the national and provincial departments of health to deliver health services to a suitable standard, that was not only good enough to meet the requirements of poor South Africans, but also those who might be able to afford alternatives.

“Given the many failures in the current health care system, and under-resourcing of that system, it remains an open question whether the NHI can be implemented in a successful, sustainable way,” said Muller.

The national health department says to ensure the financial sustainability of the project the NHI will take years to be implemented.

Health department spokesperson Popo Maja said: “The NHI is intended to be implemented over several years, so that financing can be increased progressively…

“The funds will be allocated from multiple sources, which National Treasury will identify on an annual basis.”

– jenniffero@citizen.co.za

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