Increasing taxes to fund NHI will ‘destroy economy’ – expert

Increasing taxes to fund National Health Insurance (NHI) will destroy the economy, an expert warns, but on the other hand, there is no other way to fund government’s plan for universal health care for everyone unless the private sector gets involved.

According to Adrian Gore, CEO and founder of Discovery, universal health coverage is required for all South Africans, but making taxpayers fund the NHI will not be a good idea. Gore was speaking at a webinar for the PSG Think Big series.

While Discovery supports the need for NHI, Gore says his company’s unequivocal point is that the NHI is not workable without private sector collaboration. “I think, to be fair, you must consider the numbers. This is not a pretty clear-cut problem of how a country like ours can afford NHI.”

Gore pointed out that the country currently spends about R435 per person per month on healthcare in the public sector. It is estimated that NHI will cost R200 billion to R300 billion. Discovery estimates that government would have to increase income tax by 30% or more or increase VAT to 22% to get to R200 billion.

“How do we get that money? The only way is to raise taxes. If government does that, I will argue that you would destroy the economy. It is also important to consider what government could buy with that extra R200 billion.”

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Another R200 billion will not really help

According to the current NHI Bill, private medical schemes will not be allowed to provide coverage for items covered by NHI once it is fully implemented and Gore says if government manages to raise the additional R200 billion, it will only mean that the amount government currently spends on public healthcare will increase to around R680 per person per month.

He points out that this is not a dramatic increase in finance available per person. Medical scheme members or the employed sector currently spend around R2 400 per person per month. This means that government could increase taxes for employed people by 30% while lowering their healthcare costs by 70% – from R2 400 rand per month to R680 per month.

“This illustrates the tragedy of affordability and the level of inequality in the country—that it is not doable without wrecking the employed sector. It is not a healthcare issue. It creates a real economic problem. I do not think people will pay 30% more taxes for 70% less healthcare.”

Gore emphasised that the country cannot afford the NHI Bill in its current form. “If we get rapid economic growth and, over time, we find ways to do this in different ways with many different methodologies, it may be workable.”

The only way to achieve a workable NHI is to keep the private sector in place because there is a need for that funding. “We need more doctors, more hospitals and more money, not less. The private sector is made up of thousands and thousands of doctors and 850 different healthcare facilities. People on that medical schemes have prescribed minimum benefits that are an incredibly powerful asset.”

About nine million people are members of medical schemes and Gore says people must remember what is at stake here. “I think just making sure the sentiment is right, that we can keep investing in healthcare, we must make sure these debates support the medical aid we end up with in a piece of law that is workable.”

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More doctors, more hospitals and more money

Gore says if the economy grows rapidly or we find ways over time to do this in different ways using many different methodologies, NHI can be workable, but he warns that we need more doctors, more hospitals and more money.

“At today’s economics, it is not workable. I think it is a blended and multi-funder model. You need the NHI structure and you will need medical schemes to be in the funding pool as well and others if that is appropriate.”

He says when the public and private sectors work together, they find solutions, as they did with the vaccine. “I think we can do it with the NHI as well. The private sector business is not saying it understands how to fully do this because it is complicated.

“The country does not have the resources. If you look at the amount of money available for healthcare, even if we can afford it, it is so small for the needs that we have that it will be a real problem. It is not a simple thing to solve.

Gore says the quality of the private health care system is remarkable. “It is not that it cannot improve. But the quality of doctors, the access to quality care, the speed of treatment if you have cancer, whatever it maybe you can get access to the best quality drugs. You can have a scan on the day you need it.

“It is unusual compared to other countries in the world and South Africans appreciate that. I see a lot of people who emigrated actually come back for healthcare.”