The “full implementation” of National Health Insurance (NHI) could cost R1 trillion, according to a cost analysis by statistician Garth Zietsman and Leon Louw, the chief executive of the Freedom Foundation and former head and founder of the Free Market Foundation.
“There is no plausible scenario under which this could happen. It would consume nearly half the annual Budget or a quarter of the entire economy (GDP). Lower figures that have been published are underestimates,” the authors say.
They say their cost analysis is the first published attempt at a “rigorous” costing of NHI. The absence of rigorous calculations is partly because no one knows what will constitute “full” or “incremental” implementation. “This is a fatal flaw in the concept and the [NHI] Bill,” Zietsman and Louw say.
Proponents of NHI believe it can be funded by increased taxes, especially payroll taxes, and by seizing medical scheme and medical insurance tax credits and contributions, in addition to other taxes.
But, the authors say, “everything spent on one thing is at the expense of countless others. More spent on NHI, for instance, is less available for protection, services, jobs, growth, etc. It is easy to say that something can be funded by diverting wealth from elsewhere. It is, however, much more difficult to carry this out and impossible to predict the unintended consequences.”
The proposed payroll tax to fund NHI could raise “no more than enough for minor improvements as opposed to anything remotely resembling what has been promised”.
“To the extent that wealth is taken from employees via their employers (payroll tax), it will cause more unemployment, reduce incomes, and prevent essential investment and production,” Zietsman and Louw say.
NHI is not real insurance
The primary motivation for NHI is universal healthcare, yet, as the study points out, South Africa already has universal healthcare – everyone is entitled to healthcare from government clinics, hospitals, pharmacies, and ambulances.
“The Bill is therefore not about extending healthcare to people who do not have it, but, at best, raising the quality for some by lowering it for others. In other words, the Bill entails, at best, small gains achieved by imposing substantial sacrifices.”
As Zietsman and Louw note, the term “NHI” is a misnomer. The Bill does not envisage healthcare “insurance”, but healthcare delivery and financing.
“Paradoxically, it proposes the prohibition of insurance. Real insurance would be achieved if unambiguous private healthcare insurance were fully decriminalised. The result would, arguably, be more realistically affordable for government, better quality care for all, especially the poor, and more expeditiously achieved.
“Under properly defined healthcare insurance, the government would require all people who can afford it to insure themselves privately and subsidise private cover for those who cannot afford it (on a means test).”
NHI Bill lacks details
Zietsman and Louw highlight the lack of substantive details in the NHI Bill.
It is not possible to know from the Bill what will constitute partial, incremental, or full implementation, or, more seriously, what constitutes “healthcare”; what it includes and excludes.
“Whoever voted on the Bill had no way of knowing what they were voting for or against because there is no way of knowing what they were or were not supporting. In its present form, it provides only abstract ideas rather than concrete law. The real – that is, substantive – law will not be legislated by Parliament, as required by the rule of law and separation of powers, but legislated arbitrarily by future ministers of unknowable identity, ideology, or political party,” the authors say.
The Bill contains no clear criteria for decision-making. This lack of clarity means that no one knows what the period of implementation will be, who will be the healthcare providers, how they will be selected, by which criteria, and by what process they will be phased out.
The Bill envisages am NHI Fund without specifying its purposes, such as what will be funded, or when. It envisages a single-payer system but does not say when such a system would be introduced. It could be many years or never that the transition to single-payer occurs.
