Health funders also heading to court about NHI Act

The Health Funders Association (HFA) is also heading to court to challenge the constitutionality of the NHI Act and is asking the Gauteng High Court to set it aside because it is also unaffordable and unworkable.

The Medical Association, Board of Healthcare Funders, Private Practitioners Forum and Hospital Association have already initiated legal steps against NHI.

Before launching the court case, the HFA also commissioned a study to build a financial and economic model to test the viability of National Health Insurance (NHI) under different assumptions and determine a viable pathway towards a workable NHI.

The HFA covers 46% of the private healthcare market, equivalent to approximately 4.1 million beneficiaries.

“South Africa needs a healthcare system that delivers equitable, quality care to all. We fully support that vision. However, in its current form and without private sector collaboration, the NHI Act is fiscally impossible and operationally unworkable, while it also threatens the stability of the economy and health system, affecting all South Africans,” Thoneshan Naidoo, CEO of HFA, says.

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Health funders going to court to help ensure national health reform

“HFA is taking this legal step not to delay progress, but to help ensure that national health reform is grounded in constitutional principles, financial realism and patient choice. We continue to advocate for a more inclusive, hybrid funding model that incorporates medical schemes in NHI. We believe such a model would expand access to care while protecting the rights of all South Africans.”

The NHI Act centralises control of all healthcare financing in a single, state-run fund, removing the ability of medical schemes to offer cover for healthcare services reimbursable by the NHI. Naidoo says this effectively outlaws the constitutional right of citizens to choose how to access or fund healthcare beyond what the state provides.

He points out that independent economic modelling shows that funding the intended benefits in the current NHI framework would require unprecedented increases in tax at levels far beyond South Africa’s fiscal capacity.

“The proposed model offers no guarantee of improved outcomes, while restricting the mechanisms that currently drive quality and innovation in healthcare.”

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Financial and economic model of NHI

HFA commissioned Genesis Analytics, an independent economic consultancy with experience in more than 115 countries, to build a financial and economic model to test the viability of NHI and compare NHI, including its anticipated prohibition of most forms of private health insurance, to systems in other countries, such as South Africa’s middle-income peers.

Genesis was also requested to identify measures that would improve the affordability of NHI overall and address its negative impact on medical scheme members.

The report, released today, unequivocally demonstrates that the NHI Act requires unsustainable tax increases while reducing healthcare access for medical scheme members, Naidoo says. “Critically, the Genesis analysis also reveals the diverse profile of South Africa’s medical scheme membership with more than 68% of members who are black, Indian or coloured and up to 83% earning less than R37 500 per month.

“The proposed NHI would therefore disproportionately impact working-class households who currently rely on medical schemes for quality care.”

The Genesis modelling showed that the NHI Act is fiscally impossible and that even under the most optimistic assumptions, it is not possible to raise the funds required for NHI.

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Health funders warn about 115% increase in tax to fund NHI

For NHI to fund a level of care equivalent to what medical scheme members currently receive, as government indicated the intention is, the Genesis model shows that personal income tax would have to increase by 2.2 times (a 115% increase in tax) from the current average rate of 21% to an average of 46% of income.

This would push marginal tax rates in the lowest income bracket from 18% to 41% and in the highest bracket from 45% to 68%. While VAT is not mentioned in the NHI Act as a means to raise funding for NHI, HFA estimated for illustrative purposes that VAT would have to increase from 15% to 36%, which is completely unrealistic, Naidoo says.

The Genesis model also considered a scenario of pooling existing private and public healthcare expenditure. To enable this, personal income tax would have to increase by 1.5 times its current rate (a 47% increase in tax) from its average of 21% to 31%.

Naidoo points out that at the same time, medical scheme members would face a 43% reduction in the level of healthcare services compared to what they currently receive. “In simple terms, the equation for medical scheme members therefore becomes a matter of ‘Pay 1.5 times more tax for 43% less healthcare’.

“Such tax increases are fiscally impossible, particularly given South Africa’s narrow personal income tax base of 7.4 million taxpayers. In addition, this would result in healthcare expenditure accounting for 22% to 33% of total annual government expenditure, well above any global standard and with no additional allocation to other critical areas of government expenditure.”

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Tax to fund NHI will reduce disposable income, health funders say

“The steep tax increases required to fund NHI will reduce disposable income, curb consumer spending across all sectors of the economy and may well trigger an exodus of high-income taxpayers. At the same time, destabilising the private healthcare sector will deter investment, put jobs at risk and slow gross domestic product (GDP) growth in a sector that contributes over 4.3% to South Africa’s GDP.”

The economic analysis also shows that NHI could reduce the availability of medicines and health services, while it will need more than 286 000 additional healthcare professionals.

For members of medical aid schemes, the NHI Act will mean a reduction of access to healthcare for South Africa’s 9.1 million medical scheme members because NHI will not offer the same level of access and quality, Naidoo says. 

“The NHI Act will prohibit individuals from using their own funds to buy private medical scheme cover for services included in the NHI, removing their right to supplement public provision with private care.

“The NHI Act contravenes the state’s obligation in section 27(2) of the Constitution to adopt reasonable measures to achieve the progressive realisation of the constitutional right of everyone to access healthcare services within available resources.”

Naidoo says it is important to remember that the analysis shows that this prohibition is not necessary to achieve the equity objectives of the NHI Act, as the prohibition will channel public resources into higher-income population segments and could deliver worse outcomes for uninsured people.

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Health funders want a hybrid multi-fund model that includes NHI and medical aid schemes

Therefore, the HFA would like to see a hybrid multi-fund model that includes NHI and medical aid schemes.

The HFA’s proposed hybrid funding model allows the NHI Fund and medical schemes to operate in tandem, preserving individuals’ freedom to choose supplementary private cover which is an essential feature of most effective universal health care systems worldwide where public resources are focused on those most in need, while regulated competition supports innovation, efficiency and cost control.

The proposed model offers a common benefit package with built-in cross-subsidisation to ensure equitable access for vulnerable populations. Grounded in a strong primary healthcare foundation, the model reflects international best practice and is especially relevant for middle-income countries like South Africa.

“The hybrid multi-fund model is a practical solution for South Africa. It offers a faster, more affordable and lower-risk route to achieving universal health coverage through progressive reform, strengthening public healthcare while leveraging private sector funding and capacity to expand access and drive innovation.”