The National Health Insurance aims to make a package of essential healthcare free to all citizens and legal residents of South Africa through compulsory employee contributions to a national NHI Fund – a noble cause with a hefty price tag.
But the health department’s attempt to introduce the scheme has floundered over the past five years, – partly dogged by huge management weaknesses in the public health sector.
According to yesterday’s Budget Review, the NHI will get R4,2-billion made up of allocations of R700 million, R1.4 billion and R2.1 billion over the next three years. This money will come from “an amendment to the medical tax credit”.
Tax credits reduced
It will be used to contract general practitioners to work in the public sector, increase schools’ eye and ear testing, for “community mental health” and “expanding the Chronic Disease Medicine Distribution Programme to enable three million patients to collect chronic medicines at their collection point of choice instead of at a clinic”.[quote float = right]It is plain wrong to increase VAT to pay for public health as it means that the people who are using public health will be the ones who are paying for this.”
Medical tax credits are given to taxpayers who opt for private medical aid. By offering below-inflation increases in medical tax credits (ranging from 2,2 to 2,5%), government estimates that it will save R700-million this year – the sum total of this year’s NHI allocation.
But Professor Alex van den Heever from Wits University’s School of Governance, says this reduction in tax breaks is unlikely to save much money, as it is likely to drive some of those who are already battling to pay private medical aid back into the state sector.
“The medical tax credit is an entitlement to compensate people who are paying for medical cover themselves rather than depending on the public sector. As most medical schemes have higher-than-inflation annual increases, the reduction in the medical tax credit will mean that people will be out of pocket and some will drop out of cover,” said Van den Heever.
Discovery Health CEO Dr Jonathan Broomberg described the medical scheme tax credits as a “progressive tax instrument which plays an important role in assisting low income families to afford medical scheme cover”.
“This assists the public sector by reducing the population and disease burden which the public sector has to deal with. It is not clear that the net effect of reducing the tax credits will actually save the government money, as the financial impact of the increased burden on the public sector may outweigh the savings on the tax credit,” said Broomberg.
“The changes announced by the Minister in the budget speech are incremental, and represent a pragmatic approach to balancing the need for additional funds for the NHI while not undermining the important role of the tax credits.”
VAT increase ‘wrong’
To Van den Heever, “it makes no sense to take the subsidy away from people but offer no substitute for what is lost. What the R4,2-billion NHI allocation is for is unknown. It is likely to go to institutions and consultants that will not improve healthcare.”
Van den Heever also decried the increase in VAT as “the wrong thing to do as it taxes the poor more than the rich”. Instead, government could have introduced an extra tax bracket for the super-rich, gone after pension tax subsidies for very high end earners and increased corporate taxes, which are “the lowest in 20 years”, said Van den Heever.
“It is plain wrong to increase VAT to pay for public health as it means that the people who are using public health will be the ones who are paying for this,” he said.
The Rural Health Advocacy Project’s (RHAP) Russell Rensburg was also against the VAT increase, arguing that it would affect poor communities more and “deepen inequality of access”.
Rensburg also warned that money alone would not create a viable universal healthcare system: “Adding additional resources to an increasingly inefficient system does not increase efficiency.”
The “on-going freezing of critical health posts, under-investment in the maintenance of key infrastructure, including medical equipment”, and “the under-allocation of resources” to rural areas were undermining the health system, he said.
Last week, The Davis Tax Committee said that the uncertaintly around how the NHI would be funded was a cause for concern. Government itself has estimated that it will need R256-billion (2010 prices) a year for the scheme. The Davis committee said that, if the economy only grew by 2%, there would be a shortfall of R108-billion by 2025.
Sugary drinks tax on 1 April
“The proposed NHI, in its current format, is unlikely to be sustainable unless there is sustained economic growth,” said committee, which urged more realistic costing and a detailed framework for implementation.
The Department of Health says that an NHI Bill is passing through the last stages of a Cabinet review process on its way to Parliament, and this is likely to also set out the creation of an “NHI Fund” to pay for the scheme.
Meanwhile, the tax on sugary drinks – referred to as the Health Promotion Levy – will be introduced on 1 April, according to the Budget Review. Government expects that this tax – approximately 11% on a can of Coca Cola – will net it around R1,93-billion.
The aim of the levy is to reduce consumption of sugary drinks, a leading cause of obesity – which drives a number of health problems including diabetes, strokes and cancer.
But Wits School of Public Health Professor Karen Hofman said that the tax “has been significantly watered down and needs to be around 20% in order to have a serious impact on reducing obesity”.
“It also exempts fruit juices, which sends the wrong message as fruit juice is also very high in sugar content,” added Hofman, who heads Priority Cost Effective Lessons for System Strengthening South Africa (Priceless SA).
An edited version of this story was also published by Daily Maverick