NHI proposal to lift tax by R100bn

by Aug 17, 2009All Articles

Hike to fund health insurance will damage economy, economists warn
June 8, 2009

THE ANC task team on National Health Insurance (NHI) wanted taxpayers to fork out an additional R100 billion a year in taxes to finance the scheme, Alex van den Heever, a health economist who has attended two ANC task team meetings on NHI, said at the weekend.

The R100bn equals about 9 percent of general household spending.

In the February budget total state spending was projected to be R738.6 billion in 2009/10, with R87bn allocated to health.

Economists warned on Friday that a R100bn hike would cripple the economy, as the country could not afford to lift taxes.

Representatives from the private health care sector were reluctant to comment on the contents of a document that has still to be officially released. However, they emphasised their willingness to work with the government to ease the introduction of the scheme.

Van den Heever said at the Hospital Association of SA conference last week that he had disassociated himself from the task team led by Olive Shisana, the former director-general in the Department of Health, because he did not agree with the direction it was taking.

The proposal favoured a “big bang” approach instead of a phasing-in model. The proposals did not guarantee an improvement in the quality of health care, Van den Heever said.

Parliamentarians were being advised that NHI could be implemented in 12 months.

The ANC government is committed to rolling out NHI over five years. At present the plan is still at task team level. From there it is expected to move to the national executive committee of the ruling party for drafting into legislation.

Van den Heever’s presentation was based on the document released in February. He said there had been adjustments but nothing significant. The latest document is expected to be issued at the end of this month.

People would not be able to opt out of the system and the costs would be shared between employers and employees.

“The danger is that there seems to be an attempt to avoid debate on this issue,” said Van den Heever. The documents had been produced but they had not been subjected to external peer review or technical analysis.

There would be an NHI Authority. It appeared that the intention was to transfer the authority of the Department of Health to this new structure, which would negotiate and enter into contracts with health care institutions.

The document further says that whatever is covered by the NHI cannot be insured by a medical aid scheme.”In other words, you would not be able to buy cover in the private sector for cancer treatment if it was covered in the public sector.”

According to the proposal, members of medical aid schemes will pay 85 percent of their contributions to a global fund, irrespective of the option they choose. This would pay both public and private sector providers. Non-members of medical aids would pay 5 percent of their income to the fund.

Dawie Roodt, the chief economist at Efficient Group, said the additional R100bn tax proposal would damage the economy immensely. “We have had a huge increase in tax over the past 15 years. Because of our tax burden our savings are very low… I can’t see how we will afford this. The unintended consequence could be that people will leave medical funds because of this.”

Lumkile Mondi, the chief economist at the Industrial Development Corporation, said the government should postpone the NHI implementation because “there is no money for it”.

Dennis Dykes, Nedbank Group’s chief economist, said if the R100bn was added to the current budget, it would increase it by 14 percent and that was a high number at a time when revenue was falling significantly.

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