Wednesday, 17 April, 2024
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NHI may not be best solution, Finance Minister says

With Finance Minister Enoch Godongwana expressing frank scepticism about the sustainability of the National Health Insurance (NHI), a new survey has shown that the vast majority of medical professionals distrust the plan, notes MedicalBrief.

In a candid interview, Godongwana admitted he would prefer to invest in government-run hospitals and healthcare infrastructure rather than National Health Insurance, and that he was still unsure how the NHI would work as the Bill passed by the National Assembly “is missing a lot of things”.

In particular, it is missing a source of funding that is sustainable, he said.

During News24’s On The Record Summit, Godongwana said while the country required some form of universal health coverage, at present it lacked a sustainable funding source.

“I am not worried about the number of people who currently rely on public hospitals. They do it today already. The system is already under pressure,” he said.

But NHI may not be the best solution to this problem, because “the mechanics of it are difficult”.

“I would rather we invest more in upgrading our hospitals and our infrastructure to make them more attractive to everybody.

“In that sense, you could make private provision of healthcare irrelevant. But for now, we have not done that.”

Godongwana’s concerns align with a recent report compiled by the Solidarity Research Institute (SRI), which noted that the NHI plan would require an additional R300bn that the country’s strained budget and taxpayers cannot afford, reports BusinessTech.

Economist Dawie Roodt said South Africa’s fiscal deficit for 2023 is set to be between 6% and 6.5% of gross domestic product (GDP), much higher than the Minister’s expected 4%.

Roodt added that Godongwana said the government wants to stabilise South Africa’s debt level at 70% of GDP, but it has already increased to 72%. He further expects the country’s debt to increase to 75% of GDP by the end of the year and reach 80% by the end of 2024.

Roodt noted that South Africa currently spends 20% of tax revenue on servicing debt. This cost crowds out other much-needed expenditures – crippling the government’s ability to invest in essential sectors like healthcare and education.

According to the SRI report, in 2026 (when the NHI is supposed to be implemented), an enormous extra R300bn will be required to balance the books. This means healthcare would be the biggest item in the budget by far, at a total cost of R660bn.

The report found that R300bn could theoretically be generated by abolishing the medical tax credit (about R30bn) and levying the following taxes:

• A 40% surcharge on income tax
• Increasing VAT from 15% to 22%
• A payroll tax of 13.4%
• Increasing corporate income tax from 27% to 45%
• A combination of these

“In real terms, none of these is possible because the taxpayer is already overtaxed. These theoretical suggestions serve for illustration only and to demonstrate their absurdity.”

The report’s concern regarding the Bill’s need for significant changes to tax in South Africa is shared by Discovery Health CEO Ryan Noach and Roodt, who both warn this strategy will result in a tax revolt.

Roodt said only 1.12% of taxpayers (roughly 163 702 South Africans) pay 30% of total personal income taxes in the country, while 19% pay 87% of total personal income taxes.

Additionally, a staggering 0.09% of corporate taxpayers (only 770 companies) pay 62.5% of total CIT, with 4.4% paying 95% of total corporate income taxes.

“This means the country has an alarmingly narrow tax base, which is a massive concern for the state’s finances. You cannot increase this.

“If this increases, the tax base will collapse, as many of the 1.12%, as well as businesses, will simply leave the country – which they are already doing,” said Roodt.

Noach said even if these taxes were adjusted to meet the needs of the NHI, it would only get the government to around 50% of what the scheme requires.

“These three scenarios are entirely unfeasible. You don’t need to understand that there will be a tax revolt. You will never raise it,” he said.

Some of the strongest opposition yet against the NHI is coming from the medical sector itself, with the SRI’s report indicating just how deep-seated medical professionals’ distrust of NHI plan is.

An overwhelming 99% of respondents were also concerned about the government’s ability to administer and manage the fund, and about the consequences for practising their profession.

Likewise, they dread the NHI’s consequences for patients as well as for the economy if the government pushes ahead with its plans.

SNI manager Nicolien Welthagen said healthcare workers’ level of understanding and awareness of the NHI had increased sharply, rising from 54.4% in the first study in 2018 to 79.4% in the 2023 study, reports PoliticsWeb.

“This means an increase of 25% of respondents who feel they now have more knowledge about it. What is important is how their perceptions about the NHI changed, along with this.

“Most of them now have a more negative and sceptical outlook than five years ago. There has been an increase of 21% negativity over this period,” she said.

Participants in the study came from diverse medical professions and demographic groups. While more than half of them recognise the unaffordability of medical funds for the majority of citizens, they are, for various reasons, concerned about the impact of NHI as a substitute.

  • 94% of the respondents believe the successful implementation of the NHI is unlikely
  • Only 3% believe the government has consulted properly with stakeholders about the NHI
  • Only 2.9% believe all citizens will have access to high-quality healthcare under the NHI.

The distrust in the NHI is such that 94% of respondents believe private health practitioners may decide to go and work abroad because of the NHI.

Welthagen said the report indicated that 19% have already initiated the emigration process.

“What is even more worrying is that 47% say they would initiate the emigration process as soon as NHI is adopted. The concern about their independence, in particular, weighs heavily upon medical professionals.

“A total of 90.9% believe they should be granted the autonomy to work in private practice,” she said.

There is clearly also concern about the NHI’s impact on the economy as a whole, and particular concern about such a system’s exposure to corruption.

“Corruption is considered to be the main obstacle to the NHI’s feasibility. For this reason, healthcare workers are not only suspicious of the NHI; they are against it.

“The perception about the anticipated corruption is, of course, reinforced by the corruption in every other state-controlled institution,” Welthagen said, adding that there was consensus among respondents that corruption would penetrate the NHI, and be a vehicle for government officials to enrich themselves.

“Then we do not even mention the general feeling that it simply cannot work. Shortages of essential elements like funding, skilled staff, sound infrastructure and expertise are prominent.”

Treasury at fault – Nehawu

The National Education, Health and Allied Workers’ Union (Nehawu), however, said it was “flabbergasted” by the Minister's comments, and called on” all progressives to defend NHI implementation … from doomsayers and market-fundamentalist like Minister Godongwana”.

Lwazi Nkolonzi, national spokesperson for the union, wrote in PoliticsWeb that Godongwana’s suggestion to prioritise the fixing of public hospitals over implementing the NHI was flawed – but then he appeared to contradict himself.

“The challenge … isn’t about choosing one aspect of healthcare reform over another; what’s required is a comprehensive overhaul and restructuring of the entire system.”

Nehawu blamed the appalling state of public healthcare facilities and the system on National Treasury’s “relentless pursuit of austerity measures and ongoing budgetary reductions”, and pointed out, among other things, that:

  • In the current 2023/24 financial year, the total budget allocated to Health stands at R60.1bn, down from R64.6bn for the 2022/23 adjusted appropriation (R64.5bn in 2022/23 Main Budget). This marks a concerning reduction of 4.9% in Health expenditure.
  • The decrease translates to a drop in spending for each user in the public health care system from R5 028 in 2022/23 to R4 605 in 2023/24 (constant 2022/23 Rands).

It said it was also worth noting that corporate income tax rates had decreased to 27% for the fiscal year ending in March 2023, down from the previous rate of 28%.

“This change in tax policy has implications for government revenue and resource allocation,” it said, adding that additional tax revenue of R94bn was collected in 2022/23 compared with the 2022 Budget estimates, and that last year, SA recorded a government debt to GDP of 67.40%, “signifying the level of debt relative to the GDP”.

“…the austerity measures championed by Treasury disproportionately affect the already marginalised and disadvantaged segments of our population, particularly those who depend on public services for their well-being.”

Refuse to listen

The DA said it was clear “the rest of the Minister’s comrades in the ANC either do not understand simple economics or refuse to listen to logic”.

Writing in PoliticsWeb, shadow minister of health Michele Clarke said Godongwana’s admissions were evident confirmation that the NHI was “nothing more than a cheap political trick by the ANC to garner support from poor South Africans in desperate need of quality healthcare, only to be hoodwinked once elections have gone”.

Despite the Treasury’s continuous and crystal-clear communication that the NHI is not a feasible solution to the multiple problems of the public health system, Health Minister Dr Joe Phaahla has steadfastly refused to see reason. And neither he nor his department has revealed a viable funding plan, she wrote.

Although it had spent at least R26bn on the NHI in the past decade, in February this year, Phaahla revealed that only 37% of hospitals and only 55% of Primary Health Care (PHC) facilities have “ideal” status.

 

BusinessTech article – Godongwana suffers a bout of the NHI jitters (Open access)

 

PoliticsWeb article – Doctors fiercely opposed to NHI – Solidarity (Open access)

 

PoliticsWeb article – Finance Minister admits govt too broke to afford NHI (Open access)

 

PoliticsWeb article – Godongwana’s comments on NHI flabbergasting – NEHAWU (Open access)

 

See more from MedicalBrief archives:

 

Income tax hike and payroll tax proposed for NHI funding

 

Government dodges issue of NHI funding model – DA

 

Solidarity: Judgment reserved in application to have NHI ‘certificate of need’ declared invalid

 

Solidarity launches PAIA application regarding NHI remarks by Dr Nicholas Crisp

 

Solidarity dissatisfied with 'irresponsible' way NHI Bill is being dealt with

 

 

 

 

 

 

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