The Department of Health and the Presidency recently distributed a factsheet to stakeholders that “partly answered” the “billion-rand question” on how National Health Insurance (NHI) will be funded, News24 reported this week.
As is clear from the article, the factsheet confirms what is already stated in section 49 of the NHI Bill and what health department officials have said on numerous occasions: NHI will be predominantly funded through general revenue allocations, supplemented by a payroll tax payable by employers and employees, and a surcharge on individuals’ taxable income.
According to News24, the factsheet states, “the NHI taxation system must not create an increased burden on households compared to the current system. However, a payroll tax such as the type used by the Unemployment Insurance Fund would apply equally to all employees in the formal sector, including the seven million people below the threshold for personal income tax.”
The factsheet does not disclose at what level these taxes will be applied.
National Treasury told News24 it has not done any “new work” to determine the cost of NHI.
However, Treasury said the proposal for a payroll tax levied on both employers and employees would raise the cost of employment for employers and mean lower take-home pay for workers, according to the report.
South Africa spends about 8.5% of GDP on health care, of which about 4.1% is accounted for by the public healthcare sector, which is used by 84% of the population.
The Department of Health has said health expenditure will be capped at 8.5% under NHI.
According to News24’s calculations, if NHI cost more than 8% of GDP, the NHI payroll tax will have to be 6% and personal income tax rates will have to increase by about six percentage points.
