23 March 2010

NHI won't replace private sector

Pravin Gordhan, Finance Minister, recently spoke about the introduction of the NHI system, but stressed the need for the private sector to be retained alongside the public system.


Private medical schemes can play a positive role in South Africa in the short to medium term, Old Mutual Actuaries said on Wednesday.

"While Pravin Gordhan, Finance Minister, alluded to the government's intention to introduce a National Health Insurance (NHI) system in his recent budget address, private medical schemes will draw comfort from his remarks highlighting the need for the private sector to be retained alongside the public system," Old Mutual Actuaries healthcare consulting manager Margaret Hulme said in a statement.

This, as well as observations in the Budget Review, indicates an appreciation for the positive role private schemes can play, at least in the short to medium term, she added.

"The virtues of the Risk Equalisation Fund (REF) for private schemes were extolled in the Budget Review.

"This is highly encouraging, as the proposed introduction of NHI had appeared to bring the much-needed structural changes to the medical schemes environment to a halt," Hulme said.

Risk Equalisation Fund

Before the budget, most industry pundits believed the REF [intended to equalise risk amongst medical schemes] was unlikely to be introduced, which would effectively have sounded the death knell for many schemes with older age-profiles, she added.

Hulme said that last year there were some unofficial indications that the tax deductions on medical aid contributions would be removed with the introduction of NHI.

"The fact that the finance minister once again increased the deductible amounts reveals that the government is not planning to discourage membership of private schemes in the short term."

She added that from March 1, 2010, the tax deductible portion of monthly contributions to medical schemes for those under 65 had been increased by 7.2% for each of the first two beneficiaries from R625 to R670, and by 7.9% for each additional beneficiary from R380 to R410.

For those aged 65 and over, medical expenses, including contributions, continued to be fully tax deductible.

Need for public and private sectors

"The Budget Review confirmed that the election promise of implementing NHI this year was a desire rather than a realistic goal based on rigorous assessment of the costs involved."

Hulme said the timeline had shifted to five years, during which period the public sector needed to be overhauled.

"Treasury recognises the need for the public and private sectors to work in partnership to achieve a successful transition.

"Given the recent research by the Econex consultancy group, which shows that NHI could cost the government an extra R165 billion to R244 billion a year, in addition to the current expenditure on public health, the affordability of an NHI system is still in question," she said. - (Sapa, March 2010)


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