The cabinet has finally approved the National Health Insurance (NHI) bill for tabling in parliament, minister in the presidency for planning, monitoring and evaluation Jackson Mthembu announced last Thursday.
He said in a briefing that in 2018, the cabinet had approved the bill for release for public consultation over a three-month period from June 2018 to September 2018. The input following that process has now been incorporated in the latest version of the bill.
The full details of the latest version of the bill have not yet been made public. The large degree of uncertainty and lack of common understanding of how the NHI will be implemented and operate is of concern, given the magnitude of the proposed reform. At this stage a few pertinent observations can be made based on the draft NHI White Paper as well as the potential impact on taxes.
- There is currently substantial uncertainty about both the costs (R256 billion pa) and funding shortfall (R72 billion pa) of the NHI.
- A combination of tax instruments with as broad a base as possible would be preferable.
- Given that the NHI introduces a universal benefit, it is appropriate that its financing base be as broad as possible, in the interests of social solidarity.
- Excise taxes on alcohol, tobacco or sugar-based beverages are levied primarily to change behaviours, but high increases tend to lead to illicit trade, resulting in reduced collections, and are unlikely to fund a significant proportion of the NHI funding requirement.
- Given the considerable size of projected funding shortfalls, substantial increases in VAT or Personal Income tax and/or the introduction of a new social security tax would be required to fund the NHI.
- The magnitudes of the proposed NHI fiscal requirement are so large that they might require trade-offs with other laudable NDP programmes such as expansion of access to post school education or social security reform.
- The proposed NHI, in its current format, is unlikely to be sustainable unless there is sustained economic growth.
Clearly the proposed implementation of the NHI will have severe repercussions for the fiscus and accordingly requires a substantial review before implementation can be considered.