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HomeA FocusSubstantial tax hikes needed to cover NHI – economists

Substantial tax hikes needed to cover NHI – economists

The government would have to hike taxes by an average of 10.8% to fund the National Health Insurance (NHI) to provide the services set out in the Bill before Parliament. That, notes Rapport, is the view of two economists in a study conducted for the public consultation process.

Professor Jannie Rossouw, of Wits, and economist Mike Holland, of PriceMetrics, calculated that the financing gap for the NHI would be R226bn in 2026. At 2019 prices, the gap is R166.5bn, the equivalent of 12.3% of government revenue for this year. Painting a scenario of how this gap could be filled – and explained in a detailed graphic attached to the report – they suggest a hike in companies tax of three percentage points, a 10% increase in income tax, a 0.75 percentage point VAT hike and a 2% payroll tax would be needed.

Rossouw and Holland were contracted by trade union Solidarity to carry out the analysis. The economists say in their study lawmakers and the public are being misled by the memorandum accompanying the Bill and the existing cost estimations in the two White Papers which are reliant on figures from 2010. The memorandum accompanying the Bill merely says further costings would be done.

In the latest budget documents, Treasury estimated a projected funding gap of R33bn based on an unspecified but limited package of services. However, the economists say the NHI Bill that was published is not limited to a handful of services, but in fact proposes unlimited healthcare for all.

Concern that the NHI will result in another state-run monopoly that will be susceptible to greater levels of corruption and mismanagement is raised in a Moneyweb report quoting Alex van den Heever, an adjunct professor at the Wits School of Governance. He was one of the speakers during a recent panel discussion on the NHI at the SA Vision 2030 Summit in Ekurhuleni.

Van den Heever, who is chair of social security systems sdministration and management studies at the Wits school, is a vocal critic of the NHI and has more than 25 years of experience around public healthcare policy and advocacy. “Tenders and the existing framework in government healthcare have also been affected by a system of patronage, which is already endemic in the current system,” he said.

“Besides the huge costs associated with the NHI, I believe the plan will create another state-run monopoly that is destined to fail and become racked by some of the corruption and state-capture issues the likes of Eskom, Transnet and other SOEs have faced in recent years,” he added.

The Portfolio Committee on Health on Friday started the KwaZulu-Natal (KZN) leg of its public hearings on the Bill in Jozini. According to a report on the IoL site, committee chair Dr Sibongiseni Dhlomo told the meeting that the right to healthcare and the right to life superseded all other rights. He said the committee was there to listen to all concerns and suggestions and would consider them during deliberations on the Bill.

Concerns and questions that were raised include the lack of clinics in some areas of this municipal district, the quality of ambulance services that needed to be addressed urgently and the role that traditional healers would play in the proposed system. Some recommendations were that proper facilities, rather than community halls and child care centres should be used to address providing quality healthcare especially for the poorest communities.

The report says the need for medical professionals to improve their services to the public was also raised. Residents also raised concerns about the urgent need for the NHI, suggesting that it should be introduced immediately. Dhlomo said the committee would continue with its programme in KZN until today before moving on Friday to the Eastern Cape.

Public interest law centre, Section27, has outlined its three major concerns with South Africa’s incoming NHI, reports Business Tech. Open for public comment until 29 November, the Bill aims to provide universal access to quality health care services across the country. However, the Bill has courted controversy since its inception with concerns raised about how it will be funded, the quality of care, and the future of private medical aid schemes.

In an analysis, Section27 says that there are currently three major aspects of the NHI Bill that need to change. These include: governance; transparency; and try before you buy.

Business Tech notes a recent report by trade union Solidarity has also warned that the incoming NHI will have an impact on the healthcare industry. Nicolien Welthagen, a research psychologist at the Solidarity Research Institute, said that the report is based on questionnaires sent to healthcare practitioners in the private as well as the public sector across the country. The general feedback shows that healthcare practitioners have huge concerns about the proposed NHI.

“The findings indicate that there is distrust towards the government regarding the way they want to implement and manage the NHI. 80% of respondents are negative or sceptical about the NHI,” said Welthagen.

Meanwhile, the Democratic Alliance (DA) has brought into question parliament's public participation process over the Bill, saying some of the public hearings were hijacked for political purposes. The DA said participants in the public meetings were being misinformed about the legislation. The Times reports that DA MPs have claimed that at some of the public hearings, fraudulent and misleading leaflets, which spread misinformation, were distributed. These were produced with parliamentary details, giving people the impression they have been produced by Parliament.

The leaflet urged people to sign their consent to support the Bill, DA MP Lindy Wilson said. It was withdrawn after the DA reported their distribution to Cedric Frolick, the National Assembly's chair responsible for committees. “People have been seriously misled about what the NHI is. It is a funding model; it is not a service delivery model. They are supporting it on the grounds that they have been misled as to what the actual NHI is and what it means,” said Wilson.

The report says that Wilson was addressing Parliament-based journalists alongside other DA MPs, just before the party made its 17-page written submission on the Bill. Party MPs brought with them boxes with some of the 87,000 submissions it had received on the Bill through its online petition launched some months ago.

In its briefing on the DA's opposition to the Bill, chief whip Natasha Mazzone and health spokesperson Siviwe Gwarube say they have also handed over the party’s own submission as the official opposition, reports Eyewitness News. Gwarube said: “We have, in fact, within clause by clause analysis discovered that there are 25 areas of this legislation that we will be opposing in the parliamentary process when we get started with the clause by clause analysis.”

Mazzone said the party had also managed to get Parliament to obtain a legal opinion on the constitutionality of the Bill. “The first huddle compelling Parliament was for it to obtain legal opinion into the constitutionality of the bill even before we began with the constitutional process. This was absolutely critical, Parliament cannot neglect its role in lawmaking and we as parliamentarians must remember that our fundamental role is that of legislators.”

Also, the report notes, the DA said it would continue to attend public hearings and compile a body of evidence on how the hearings have been conducted and whether there was any political influence.

[link url=""]Rapport report (subscription needed)[/link]

[link url=""]Moneyweb report[/link]

[link url=""]Report on the IoL site[/link]

[link url=""]Business Tech report[/link]

[link url=""]Analysis[/link]

[link url=""]The Times report[/link]

[link url=""]Eyewitness News report[/link]

[link url=""]IRR’s updated proposal to solve the South African healthcare crisis[/link]

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