NHI first phase to start in 2013

22 February 2012

The national health insurance (NHI) is to be phased in over a 14-year period beginning in 2012/13, Finance Minister Pravin Gordhan said in parliament on Wednesday.

“The new system will provide equitable health coverage for all South Africans,” he said.

Over time, the new system will require funding over and above current budget allocations to public health.

Funding options include an increase in the VAT rate, a payroll tax on employers, a surcharge on the taxable income of individuals, or some combination of the above.

“Achieving an appropriate balance in the funding of national health insurance is necessary to ensure that the tax structure remains supportive of economic growth, job-creation and savings,” Gordhan said.

“The role and implications of co-payments or user charges under certain circumstances (for example, to limit overuse and risky behaviours) will also be explored.”

A discussion paper will be published by April this year.

SA spent about R258.4bn (8.6% of gross domestic product) on health services in 2011/12, split about equally between public and private expenditure.

Provincial health departments are the largest public providers of health services. Private health spending is largely paid or reimbursed by medical schemes.

Over the medium term, general taxes will remain the primary financing mechanism for the public health system and NHI pilot projects.

“Over the longer term, new sources of financing will be required to fill the funding gap associated with improved access to more comprehensive health services,” Gordhan said.

It is expected that an additional revenue source will be needed in 2014/15 amounting to about R6bn in that year, which is not currently provided for in the medium-term expenditure framework.

Longer-term financing requirements will depend on the progress of institutional reforms and health service delivery capacity, and cannot yet be reliably determined.

Preliminary modelling suggests that full NHI implementation by 2025 may require public health financing to rise from about 4% of GDP to 6%.

“Alongside options for increased tax revenue, the role of user charges is also being investigated. A discussion paper on revenue options will be released later this year, together with a review of associated transition issues, including the role of medical schemes,” Gordhan said.

He said longer-term financing requirements will depend on the progress of institutional reforms and health service delivery capacity, and cannot yet be reliably determined.

There were several broad models of funding internationally. The UK, Australia and Canada have single-payer arrangements, although purchasing and provision networks are typically geographically decentralised.

Countries using multi-payer systems with some form of risk equalisation between funds include Germany, the Netherlands, Japan and South Korea.

The transition to an integrated comprehensive health insurance system typically takes several decades, involving a progressive consolidation of funding pools and broadening of health service coverage.

The NHI green paper favours a single-payer option to maximise purchasing power and promote equity.

The green paper suggests that a new public fund be established towards the end of the first five-year phase; its capacity would be built up within the department before being launched as a separate public entity.