Will government’s approach to the adoption of the NHI do more harm than good?

19 Oct 2017

The Minister of Health, Dr Aaron Motsoaledi (Minister), has been entrusted with the unenviable task of overseeing South Africa’s transition to universal health coverage through the implementation of a National Health Insurance scheme (NHI).

The NHI represents a paradigm shift in respect of the funding of healthcare and the manner in which healthcare will be procured in South Africa in future. A “single-payer” and “single-purchaser” fund, for the entire population, is envisaged.

On 30 June 2017, the Minister released a government report (Report) on the NHI, and in terms of which the government re-affirmed its intention to formulate a comprehensive legislative framework for the successful implementation of the NHI.

Many have commented that government has set an almost impossible timeline for the development and implementation of the required NHI legislation, which it proposes formulating by 2022.

Notwithstanding the information and proposals that are included in the Report, many questions remain unanswered, and there is uncertainty regarding matters such as funding, legislative reform and the future of private healthcare.

Funding of the NHI

Funding in respect of the NHI remains a major point of contention.

To date, the government has not provided any concrete indication regarding the projected costs of the NHI, nor the manner in which it will be funded.

The current projected cost of some ZAR256 billion, by 2025, has drawn widespread criticism, as the cost projection is based on questionable and outdated assumptions that have not been updated since the release of the preliminary report by government in December 2015.

Government deflected the question in respect of NHI costing in the Report, by simply stating that focus should not be placed on funding, and that the focus should instead be redirected to the different scenarios for the design and implementation of reforms, so as to move towards universal health coverage.

According to the Report, the funding requirements will be determined, discussed and announced during the annual budgeting process, and consideration will be given to the scope of the health services that will be covered by the NHI.

Notwithstanding the limited feedback provided by the government regarding questions of funding, the current proposals include funding by means of payroll taxes, surcharges on taxable income and/or increases in VAT. Some of the more controversial proposals are the scrapping of medical scheme contribution subsidies provided to state employees, as well as the abolishment of medical tax credits.

The latter proposal has recently been criticised, as a study by a prominent economic consultancy has warned that the abolishment of the medical tax credit could have a disproportionately negative impact on lower income medical aid users.

Medical schemes

In addition, the Department of Health has expressed the view that medical schemes have an important a role to play as regards the transition to an NHI scheme. However, it is unclear what this role will entail.

The Report does state that in the interim, medical schemes must consolidate their benefits options to one option per scheme. Medical schemes covering government employees will be consolidated into the Government Employee Medical Scheme. The question remains, what will happen to private medical schemes once the NHI has been implemented?

One theory is that medical schemes will be made entirely redundant by the NHI. It has further been speculated that medical schemes will be prohibited from funding health services covered by the NHI, thus relegating medical schemes to financing complementary health services.

Legislative framework and legislative reform

As regards the requisite legislative reforms in the Report, the government has stated that an NHI Act is required, and government has further identified at least 11 Acts of Parliament that will have to be amended, in order to cater for the implementation of the NHI. It is, however, conceivable that many other Acts of Parliament may have to be amended to accommodate the NHI.


Despite the highly anticipated Report being issued, the South African public is no closer to understanding how much the NHI will cost, how it will be funded and or how it will be administered.

Notwithstanding the Department’s voluminous Report, we can no doubt expect more detailed, and possibly surprising information, when the NHI bill is released, and this is expected later this year.

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)

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