National Health Insurance System and how it affects you

The National Health Insurance (NHI) System that has been proposed by the South African Government is set to be implemented in 2013 and will span a 12 year implementation period, says Rob Cooper, a Payroll tax expert at Softline VIP.

According to a policy paper that was released by the Health Department, the rationale for introducing National Health Insurance is to eliminate the current tiered system where those with the greatest need have the least access and have poor health outcomes. National Health Insurance will improve access to quality healthcare services and provide financial risk protection against health-related catastrophic expenditures for the entire population. Such a system will provide a mechanism for improving cross-subsidisation in the overall health system, whereby funding contributions would be linked to an individual’s ability-to-pay and benefits from health services would be in line with an individual’s need for care. Moreover, by significantly reducing direct costs for health care, families and households under National Health Insurance are less likely to face impoverishing health care costs.

NHI will ensure that everyone has access to a defined comprehensive package of healthcare services. The covered healthcare services will be provided through appropriately accredited and contracted public and private providers and there will be a strong and sustained focus on the provision of health promotion and prevention services at the community and household level.

The system has quite steep ambitions and will most likely serve as a method to curb ever-increasing medical costs, one of the major advantages of the project.  “The funding of the scheme is however proving to be quite a contentious issue,” says Cooper.  “There are potentially three methods that government can use to fund the project.  One is to increase the VAT percentage that South Africans pay, another is to implement a super tax on higher income earners, or lastly to implement a levy that is raised on payroll systems.

In addition, government proposes a monthly contribution to NHI, starting not earlier than 2013. The value has not been specified directly, with speculation placing contributions between 1 – 8% of an employee’s remuneration that will scale according to income,” explains Cooper, saying that Government is being vague about it.

“No matter which way you look at it though, the National Health Insurance Scheme will boil down to the employed workforce subsidising the unemployed, which presents itself as quite a political hot potato at the moment,” says Cooper.

Cooper does however question the consequences the NHI system will have on existing medical aid schemes.  “The public at large will start to vote with their wallets once they are obligated to pay the NHI contribution.  It poses a very real threat to the sustainability of medical aid schemes in the next few years, which will necessitate the need for companies to reinvent themselves through top-up medical cover above the minimum health benefits from the public service, for example.”

According to reports, the NHI will utilise R120 billion to upgrade the public healthcare system.  “It begs the questions whether this will be enough to upgrade the ailing and neglected public healthcare facilities across the country.  Another question is how the NHI system plans to address the level of service and prevailing skills shortages in the industry that is a major cause for concern,” says Cooper.

As far as private healthcare is concerned, Government has stated that the changes are not intended to close private healthcare facilities and systems down but to make them more affordable.   “There is however no question that the NHI system will place pressure on both the private healthcare industry as well as medical aid schemes,” says Cooper.

Cooper says at present, employees that contribute towards a medical aid, receive some tax relief on their tax return.  Government however envisions this tax relief to fall away in time, which will make the NHI contribution more expensive in the long run.  “We can expect medical services and benefits to go through a number of dramatic changes in the next ten years.  The question to ask is whether South Africa will be able to afford it.  This is a well-intentioned project, but expensive,” concludes Cooper.