‘Much work to be done before schemes, tax credits fall away’

Private healthcare and medical schemes will not disappear overnight, and medical tax credits and employer subsidies of medical scheme contributions will be withdrawn only once the National Health Insurance (NHI) system is fully functional, Mariné Erasmus, the head of the health economics unit at Econex, says.

Erasmus was commenting on the recently released White Paper on NHI. The paper, like the Green Paper released in 2011, suggests that NHI should be funded by way of a payroll tax, a surcharge of between one and four percent on taxable income, and an increase in value-added tax.

It also suggests that tax credits for medical scheme contributions and tax deductions for out-of-pocket medical expenses be reduced to augment government funding for NHI.

But Erasmus says slow economic growth will reduce the funds available for NHI and is

likely to retard the implementation of NHI. The White Paper’s worst-case scenario for how NHI could be funded is based on an economic growth rate of two percent, whereas the economy is expected to grow at only 1.5 percent this year.

The implementation of the first phase of NHI has not progressed sufficiently to allow the second phase to proceed soon, she says.

Health Minister Dr Aaron Motsoaledi said the third phase will start in 2030, she says.

Many commentators are disappointed that the White Paper does not provide more detail on how NHI will be funded – something National Treasury has worked on – and the benefits that NHI will provide.

Any changes to the Medical Schemes Act will take time to implement, and there will be some opposition and, possibly, some challenges in the Constitutional Court, Erasmus says.

In the meantime, schemes need to remain sustainable and, to this end, she says the Competition Commission’s inquiry into private health care, the revision of the regulation that requires schemes to pay in full for prescribed minimum benefits, changes to schemes’ solvency requirements, and the demarcation of health insurance and medical schemes are important.