The future of South Africa’s healthcare system remains a hot topic, particularly with the looming implementation of National Health Insurance (NHI). According to Adrian Gore, CEO of Discovery, the current funding model proposed for NHI will significantly impact both tax rates and healthcare coverage. His stark warning? Personal income tax may need to increase by 31%, while employed individuals may face contributions to the Unemployed Insurance Fund that are 10 times higher than current levels. All of this, Gore says, could result in a staggering 70% reduction in healthcare benefits for many South Africans.
The Cost of NHI: A 31% Income Tax Hike or 6.5% VAT Increase
At Discovery’s recent results presentation, Gore shed light on the potential financial challenges of NHI. He warned that funding the NHI in its current form will demand a dramatic increase in taxes or significant VAT hikes. Specifically, he suggested that personal income tax would need to rise by 31%, VAT by 6.5%, or employed South Africans would need to pay 10 times more into the Unemployment Insurance Fund (UIF) to cover the R200 billion required. The implications are clear: higher taxes for reduced healthcare benefits.
What Does a 70% Reduction in Healthcare Benefits Mean?
For those currently using private healthcare, the potential impact of NHI is alarming. Gore pointed out that the average person using private healthcare in South Africa spends around R2,300 per month. Under NHI, public healthcare spending would increase to R700 per person, representing a 70% reduction in benefits for those relying on private healthcare services. Gore questioned how such a funding model could be sustainable: “Raising taxes will mean you have to say to employed people they must pay 30% more tax and get 70% less health care benefits. That is, of course, not a sustainable situation.”
The Need for Economic Growth
The CEO clearly stated that funding NHI without heavy tax burdens is possible only with substantial economic growth. Discovery’s financial models indicate that South Africa’s economy would need to grow 9% annually for the next 20 years to provide adequate healthcare funding under the NHI model. This level of sustained growth is unprecedented and would require monumental changes to South Africa’s economic landscape. Gore emphasised: “We need economic growth. We need time. We need resources to achieve it, and we need all collaboration.”
Will Medical Schemes Disappear?
Gore offered reassurance to medical scheme members concerned about losing their private health cover. While the NHI Act states that medical schemes will be prohibited from funding services covered by the NHI once fully implemented, he pointed out that the Act allows for “complementary cover.” He also noted that full NHI implementation is a long way off, giving private healthcare users and medical schemes time to adapt. “Until the NHI is fully implemented, there is no threat to medical schemes,” Gore said.
Discovery’s Role in Shaping NHI
Discovery has made it clear that it is committed to working with the government to make NHI workable. Gore stressed the importance of collaboration between the private and public sectors to address the funding gap and resource shortages that plague South Africa’s healthcare system. At a recent Discovery Day event, Gore described the NHI as a “problematic piece of legislation” but remained hopeful that private sector involvement could help shape a more feasible solution. “We need more funding, doctors, and resources, not less,” he stated.
Key Takeaways:
NHI may require a 31% income tax increase or a 6.5% VAT hike.
Private healthcare users could see a 70% reduction in benefits under the NHI model.
Economic growth of 9% annually for 20 years is needed to fund NHI without significant tax increases.
Medical schemes will still offer complementary cover until NHI is fully implemented.
Collaboration between the private and public sectors is crucial for making NHI workable.