Email to advisers dated 24 May 2024 (edited for concisemeess)
Last week the President signed the NHI Bill into law. Previously, the Bill was passed in the National Assembly in June 2023 and later by the National Council of Provinces (NCOP) in December 2023. Although the NHI Bill is lauded as a big step in creating access to universal health coverage for all South Africans, we believe there to be many challenges facing the implementation of the Bill.
The Bill has clearly created anxiety amongst brokers, providers and members alike and we therefore wish to clarify some of the concerns raised.
Impact on Medical Schemes and Health Insurance
Section 33 of the NHI Bill stipulates that once full implementation is achieved, as determined by the Minister at that time, medical schemes may only offer complementary cover not covered by the NHI Fund.
We expect the full implementation of the NHI Fund to take a very long time – certainly more than 10 years and perhaps as long as 20 years. This means that medical schemes and existing health insurance programmes (including primary healthcare and Gap cover) will be allowed to continue with a full set of benefits as they do today.
We also expect there to be many legal challenges against the provisions of the NHI Bill, in particular Section 33. The arguments, largely based on constitutional grounds, appear to be robust and it is not inconceivable that Section 33 will be amended to allow medical schemes and other health insurance programmes to continue as they do today indefinitely.
We therefore foresee continued growth in the private sector and encourage brokers to continue to market medical scheme and health insurance products to their clients based on the needs of the individual.
Members should certainly refrain from cancelling their existing coverage as it will take the NHI Fund at least 10-20 years to provide some of the benefits currently available in the private sector.
Next steps
The next step in the process is the formation of the NHI Fund and board, an autonomous public entity in terms of the Public Management Act. We envisage this will take about another 12 months to conclude. Thereafter, the NHI Fund requires funding in order to fulfil its functions of procuring healthcare services and contracting with providers nationwide. The NHI Fund needs to outline a set of benefits to be provided to citizens which is likely to start off with a minimal set of benefits to be increased slowly over time as funding allows. We expect this initial phase to take about another 2-3 years. This will have no impact on existing medical scheme and health insurance coverage.
Funding constraints
The current health budget is R272Bn and the funding required for full implementation of NHI is in the region of about R600Bn to R800Bn in today’s terms. The government has indicated that it plans to remove the medical scheme tax subsidy and create a special ear-marked tax on individuals to raise funding for the NHI Fund.
However, tax rates are already at a point where any increase in tax rates (including the removal of the medical scheme tax subsidy) will likely lead to lower consumer spending and growth and likely lead to an increase in unemployment. In fact, unemployment has increased by 0.8% in the first quarter of 2024 – this is likely to worsen if there is an increase in tax rates/removal of subsidies.
Given the funding constraints, we envisage very small increases in the future health budget to help fund NHI. This means that the implementation of NHI from a funding perspective notwithstanding other challenges, will take a very long time – not years but decades - and may never reach a point of desired full implementation.