Rising taxes and falling benefits

By: Adrian Gore, Founder and Chief Executive of Discovery Limited

Adrian Gore

South Africans need and deserve universal health coverage – that much is unequivocal. But the National Health Insurance (NHI) Bill, in its current form, does not offer a viable or workable solution to this demand. Considering factors such as the high rate of medical inflation, the issue of fiscal feasibility, long-term affordability and the complexities involved in administering a public healthcare system, what has been included in the NHI Bill will be unattainable without private sector collaboration. 

These were the opening sentiments expressed by Adrian Gore, Founder and Chief Executive at Discovery Limited, and the featured guest on the final Think Big episode for 2023. The webinar, which forms part of a series powered by PSG and hosted by award-winning journalist Alishia Seckam, saw Gore addressing the viability of the hotly debated NHI Bill, passed by South Africa’s National Assembly in June this year. 

Far-reaching economic consequences 

As it stands, Clause 33 of the Bill stipulates that once the NHI Bill is in full force, private medical aid schemes, like those offered by providers like Discovery, will not be allowed to provide coverage for the healthcare services that are covered by the state fund. Furthermore, Health Minister Joe Phaahla has been quoted as saying that the state would require a capital injection of at least R200bn to transform the country’s current infrastructure in line with the provisions of the Bill.

For Gore, however, these proposals raise several key concerns, the greatest of which relates to the affordability of the scheme. As he explains, the financial burden of funding such a system would fall on the shoulders of economically active taxpayers and would inevitability lead to an insurmountable economic fallout. 

Crunching the numbers: Rising taxes, falling benefits

In illustrating this point, Gore explains that to raise R200bn, income tax would need to increase by at least 30%, or a VAT hike from 15% to around 22% would be required. The implications of such a substantial increase in taxation are currently unimaginable, even though the implementation of the NHI Bill will not take shape for at least another decade. 

Currently, the state spends around R425 per month per person on healthcare services. For argument’s sake, should higher taxation provide the required boost of R200bn, the state would be spending around R680 per month per person. From a public sector standpoint, Gore believes this increase to be marginal and simply inadequate in achieving any real, tangible benefit for the greater society. 

Furthermore, as Gore explains, medical aid scheme members typically pay around R2 400 per month for a private healthcare policy. Considering this, if the NHI Bill were to be rolled out in its current state, with the proposed backing of a higher fiscal structure, medical aid policyholders would be paying 30% more tax to fund the public healthcare system, but (at a rate of R680 per person per month) would be getting 70% less access to healthcare services. 

The numbers, as Gore asserts, simply do not add up. “We are faced with a very real tragedy of unaffordability, despite having the most noble intentions. The current Bill and its exclusion of private healthcare funding from the equation cannot be implemented without wreaking havoc on the economy and the employed segment of the population.” 

Global perspectives: Why the UK’s NHS is not South Africa’s answer

It stands to reason, therefore, that any workable solution going forward needs to begin with the freeing up of Clause 33 and bringing private healthcare into the funding model. Any realistic plans for a fully functional national healthcare system need to rely on a blended, multi-funder model,” he says. 

And while the UK’s NHS system has often formed part of popular discourse on the subject, it cannot be seen as a viable model for South Africa, which, as a developing country, has its own set of unique challenges. The amount of money that the UK government currently spends on its population to fund the workings of the NHS amounts to at least half of South Africa’s entire GDP. To follow a similar course of action, South Africa would need to increase its expenditure by over ten times what has been proposed. 

In contrast, countries like America and Australia provide practical examples of how a blended approach to healthcare can provide the most tenable solution. As Gore adds, a public-private collaboration would also provide the added benefit of leveraging the quality of South Africa’s private healthcare system, which, in his opinion, is remarkably well run in comparison to the rest of the world. 

“The quality of care we can provide as private market players should not be underestimated. We need to listen and learn – to preserve and amplify what works and build on that foundation. Our private healthcare structure is a national asset and needs to be brought into NHI architecture,” he says. 

Stronger together

The good news is that public-private sector collaboration is indeed a possibility. In speaking to this point, Gore references the rollout of the Covid-19 vaccine as a use case for the power of partnership. “The pandemic put many hurdles in our way in terms of the demand for the fast and efficient procurement and delivery of the vaccine. But we applied our minds and worked together to find a solution. 

“Research continues to prove that the local business sector is trusted by society at large and can be an incredible force for good. This is the narrative we need to take into discussions on the future of our national healthcare system, so that we can move forward in a way that is truly constructive.”

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