Updated 06 July 2011

NHI: what will it cost?

NHI: the bottom line for taxpayers revealed.


In his State of the Nation address, President Jacob Zuma announced the introduction of a National Health Insurance system. We're in possession of the confidential document in which an ANC task team sets out its NHI plan. Here are the key points relating to the cost of the NHI. By Mari Hudson, for What’s New DOC

The costing scenario
How much will it cost to establish and run the NHI in a sustainable way? According to the NHI health economists, 5% of the GDP may be sufficient. But what does it entail? Financial and health economists provide some insights:

  • The real public health expenditure for 2007/08 was 3,1% of GDP, 2,9% of GDP for 2008/09 and 2,7% for 2009/10. The real public health expenditure for 2008/09 (2,9% of GDP) = R64.64 billion
    (source: NHI document)
  • GDP for the last quarter of 2008 equaled R588 billion and for 2008/09 a total of R2 304 billion
    (source: National Treasury budget highlights 2009)
  • If the real public health expenditure will be increased to 5% of GDP, the budget needs to be R115,2 billion based on 2008/09 prices. The shortfall is more than R50 billion based on 2008/09 prices. The 2008/09 projected personal income tax = R199 billion
    (source: National Treasury Revenue projection as at 31/1/2009).

The bottom line for taxpayers
Funding 5% of GDP from personal income tax requires a huge increase in rands collected from employed taxpayers. Consider that 2007/08 medical scheme contributions totalled R64.7 billion and it’s clear that individual contributions (either via increased personal income tax or a mandatory payroll levy) will amount to about 75% of current medical scheme contributions paid by employers and employees.

In addition, filling current vacancies, creating new posts and implementing OSD for doctors is likely to amount to about R20 billion:

For more posts, without taking occupation-specific dispensation (OSD) into account. The staff head count in the public sector has to be increased from 251 000 to 330 791 (based on population growth and burden of disease in the public sector alone) - that’s 79 791 additional staff members – and R12 billion is needed to create these extra posts (source: Roadmap document). These figures exclude the current the current 30% plus vacant posts.

  • R12 billion - creation of extra posts
  • R4 billion to implement a 50% increase in doctors’ remuneration packages, only for doctors currently employed by the public sector.
  • R3,1 billion just to fill the current vacant doctors’ posts, and another R1,5 billion to implement OSD for these posts as well.
  • R27 billion is needed just to re-capatilise the backlog in the public health infrastructure. (Source: The Roadmap document).

Many questions remain

  • Given the proposed huge increases in either personal tax or mandatory pay roll levies, it is unlikely that current medical scheme members will be able to afford much more than a slight top-up package in the private sector. This may result in the implosion of the private sector. There can be little doubt that a major exodus of South African doctors will be the inevitable result.
  • Pooling R50 billion more from tax payers into a NHI fund and using the health budget to provide services for 48 million people, is like spreading a very thin layer of butter on a slice of bread: it will lead to a slight improvement of services for the public patient, and to about a third of the health services currently available and used by the private patients.
  • The managerial capacity of national, provincial and especially district health authorities is questionable. Mismanagement of funds and incompetence can no longer be concealed or tolerated.

Anything to add? Mail Health24 on to let us know how you feel about this issue.

(This is an edited extract of an article that originally appeared in What's New DOC, the new magazine for doctors produced in association with Health24.)


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