News Desk | NHI
How the NHI will be funded: what we know so far
Time to read: 3:34 seconds
Type of article: News
MedED Catalogue Reference: MNHI005
Category: News
Category Cross-reference: NHI| Health Policy
Keywords: NHI, Healthcare policy, Healthcare funding
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23 May 2024, 14:00
Contributor: Linda Ravenhill
When the President signed the NHI Bill into law on May 15, 2024, the outcry from political parties, businesses, and civil society was overwhelming. Despite widespread acknowledgement, including from the National Treasury, that the system is currently unaffordable, political efforts to advance the NHI have prevailed.
It’s important to note that this figure is not the total cost but rather a budgetary allocation, which has its origins in the Department of Health’s National Health Insurance (NHI) Key Update delivered by Nicholas Crisp in December 2022. Experts estimate the true costs will be closer to R1 trillion.
The NHI Act provides for the establishment of the NHI fund, which will collect and distribute the monies to run the NHI.
This fund will start pooling resources by 2026, well before the system is fully functional.
Money for the fund will come from budget reallocations and new taxes, including payroll taxes and surcharges.
This is the so-called "triple tax" scenario, in which South Africans will pay:
2. Additional NHI taxes, including a 2% surcharge on income tax and a 2% payroll tax, and
3. Private medical aid fees
Private medical aid fees, I hear you ask. How can this be?
The short answer is that rather than eliminating medical aid, the government envisages a situation in which these funds will simply operate on a smaller scale. In doing so, the government hopes to simultaneously garner your tax dollars to enable the NHI while ensuring that you are not an unnecessary burden on the public healthcare system. At face value, this sounds similar to what we have now, albeit with fewer services for more money.
As things stand, what will happen in regard to your medical aid is that medical aid tax credits will end.
Taxes and Rebates
The elimination of the medical aid tax credit and the imposition of a 2% income tax surcharge and a 2% payroll tax will add a considerable financial burden on individuals.
Even these measures will not be enough to raise the conservative estimate of R200 billion needed, requiring further drastic tax increases, will could include:
To sum up, no one knows how much the NHI will ultimately cost, when these financial measures will be implemented, or how or where the money will be allocated.
Even if we did, the Act is likely to be entangled in litigation for years. Given all these unknowns, it is difficult to interpret the timing of the signing as anything other than political manoeuvring ahead of elections rather than a genuine effort to bring about the real changes necessary to deliver quality healthcare to the majority of South Africans.
My advice: stay calm, don’t panic, and whatever you do, don’t cancel your medical aid.
Note from the Editor:
We've set up a Special Coverage section called What's up with the NHI to keep you up to date with developments in this space. All news stories related to the NHI can now be found in one convenient location.
Access the Coverage here
Information for this article was gathered from various sources, including:
FTI Consulting | NHI Funding – Macro-Economic Implications
BusTech | NHI ‘triple tax’ and the end of medical aids – what you need to know
DoH | National Health Insurance Key Updates
MoneyWeb | A primer: What the NHI means for South Africa
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