Govt must answer where NHI money will come from – IRR

New Health Minister Zweli Mkhize told a joint sitting of parliament participating in the debate of the state-of-the-nation address that they will work faster to ensure the National Health Insurance Bill is tabled in parliament soon, 25 June 2015. Photo: GCIS

The increased tax burden will fall particularly heavily on the 700,000-odd individual taxpayers who currently pay about two-thirds of all personal income tax.

The Institute of Race Relations has called on government to provide much-needed answers on where the money for the National Health Insurance (NHI) will come from and how much it will cost.

Raising concerns over the current debt the country was facing, IRR says government fingered the NHI as the answer to the ailing healthcare in the country, “but remains silent on the multi-billion rand cost implications”.

In a statement, the institution said: “In the light of President Cyril Ramaphosa’s approving remarks on Sunday that NHI would deliver quality healthcare to all, just how the scheme will be paid for requires urgent scrutiny.

“The 2019 NHI Bill tellingly omits details on what NHI will cost. The 2017 white paper put the scheme’s costs at its intended launch in 2025 at R256 billion a year (in 2010 prices). This figure is now a number of years out of date and was a ‘thumbsuck’ from the start. The white paper also suggested that the government would need an extra R80 billion in revenue in 2025 to implement the NHI – and that this additional sum could be garnered by hiking the VAT rate, increasing personal income tax, and/or introducing a payroll tax.”

The institute indicates the NHI will more likely cost around R700 billion a year when it becomes fully operational in 2026, which according to the IRR will lead to more tax hikes in order to generate this amount.

“These increased taxes will be depicted as vital to the NHI, but the extra revenue generated is unlikely to be ring-fenced for NHI purposes. Instead, it will probably be used (like the ‘sugar’ tax, for instance) to help fund government spending on such items as the public service wage bill and bailouts for failing SOEs.

“The increased tax burden will fall particularly heavily on the 700,000-odd individual taxpayers who currently pay about two-thirds of all personal income tax [and a hefty chunk of VAT besides]. If a third of those taxpayers were to emigrate in the face of increased taxes and reduced health services, the impact on revenues – and hence on all government spending – would be severe.”

Pointing out that government appears to be shrugging off key questions regarding how much the NHI will cost, the IRR said the NHI was likely to be worse than the disease it was trying to cure.

IRR deputy head of policy research Hermann Pretorius warned that the NHI was fundamentally dangerous as a policy as it promised improvements in healthcare, but ignores enormous failures of healthcare already under government control.

“The government must answer two simple questions: what will the NHI cost, and where will the money come from?”

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