How National Health Insurance (NHI) will be funded seems to raise endless questions and provide few answers. It was hoped Finance Minister Enoch Godongwana would answer some of these questions in his 2024 Budget speech.

Unfortunately, says Larisse Prinsen – a senior lecturer in public law at the University of the Free State – no new provision was made for NHI as such, ‘which perhaps indicates that the Treasury has not yet engaged with the issue’.

Overall, health was allocated R848bn over the medium-term expenditure framework, which includes R11.6bn to address last year’s wage agreement, R27.3bn for infrastructure, and R1.4bn for NHI.

According to the Finance Minister, this allocation demonstrates the government’s commitment to the new health insurance system.

Writing in the Sunday Times, Prinsen says we are left to speculate on how the NHI system will be funded and will not be seeing any tax proposals for NHI in the short term.

The Department of Health has said about R2bn will have to be raised for NHI funding (other sources say the figure is closer to R3bn), and that this is likely to be done via a surcharge on personal income and payroll taxes. Other potential sources of funding might be found in redirecting the existing tax revenue now provided to provincial Health Departments and scrapping medical scheme tax credits.

In response to claims the NHI will make employed people pay for all costs, the Department of Health said taxes are paid not only by the employed, but also by about 62m South Africans who pay indirect taxes such as VAT and fuel levies.

Prinsen say this is a dubious claim.

About 22.1m South Africans are below the age of 18, meaning they do not pay direct taxes and contribute very little in indirect ones. A further estimated 3.1m South Africans are between the ages of 65 and 80 or older, meaning they pay taxes at a different, lower rate.

SA’s latest unemployment statistics show that the country has a joblessness rate of 32.9%, and SARS recorded just under 26m active taxpayers in the 2022/23 tax year.

Prinsen believes funding NHI from taxes could have disastrous effects, as this could lead to a 31% increase in personal income tax, a rise in VAT from 15% to 21.5%, and the imposition of a payroll tax of about R1 565 a month on those employed in the formal, non-agricultural sector.

She asks: If the wealthy are going to suffer under this increased tax burden, how much more will lower-income South Africans suffer? How is a person on minimum wage of about R4 000 to R5 000 a month supposed to afford food if VAT is so massively hiked?

‘It seems what NHI will supposedly give in access to healthcare it will take from other socio-economic rights.’

As to where else could the money come from, she says it will not be from medical aids, as any attempt by the government to fund NHI using medical aid contributions probably is not possible.

‘According to Discovery CEO Ryan Noach, legal protections are in place to guard against the nationalisation of these funds, as they are voluntary contributions by medical aid members that are effectively held in trust by these schemes.’

Full analysis in the Sunday Times