Ramaphosa ponders giving private sector more say in NHI roll-out - presidency spokesperson

The incoming CEO of BUSA Khulekani Mathe. (Photo: Supplied)

By Ferial Haffajee and Ethan van Diemen

19 May 2024

President Cyril Ramaphosa had ‘noted the concerns expressed by some business leaders about his signing into law of the NHI Bill’, and was considering how to give the private sector greater input into its implementation, according to his spokesperson, Vincent Magwenya.

In response to substantial backlash elicited by his signing of the National Health Insurance (NHI) Bill into law on Wednesday, President Cyril Ramaphosa is “giving thought to a mechanism” for greater engagement and collaboration with business, labour and other social partners, according to his spokesperson, Vincent Magwenya.

“Our legal framework also allows for amendments to be made if necessary,” Magwenya said.

On Friday, Business Maverick reported that one of the biggest concerns around the implementation of NHI was that there is very little solid detail in the Act. Costs and benefits were the two key issues in the NHI Act that faced constitutional challenges, said Neil Kirby, the director and head of healthcare and life sciences at Werksmans Attorneys.

Legal challenges are already in the works from the trade union Solidarity, the Health Funders’ Association, the South African Medical Association, the Board of Healthcare Funders, the South African Health Professionals Collaboration and the Democratic Alliance.

Read more in Daily Maverick: It’s business as usual for medical schemes, with NHI implementation years away

Business Unity SA CEO designate Khulekani Mathe said, “The Act has procedural unconstitutionalities. The Bill provides for public consultation and the Constitution’s drafters did not just mean a tick-box exercise. We put substantive considerations to Parliament that were completely ignored, and this violates important parts of the Constitution.

“What makes this difficult is that we are passing a law without knowing how it will be funded. The government has not put forward substantive funding details. There is a flimsy reference to pooling (public and private sector spending on health). Still, unfortunately, money in the private medical aid sector comes from individuals making individual decisions to contribute to a fund. The only way to make them contribute is by imposing a tax.”

Read more in Daily Maverick: Everything you ever wanted to know about the NHI but were afraid to ask

Mathe queried why the government had not partnered with business to work out the details of NHI. “Why does a government that has seen the benefits of working together in the energy space, logistics, crime and corruption, and pooling our resources, think it can do it alone regarding healthcare? We are trying to get our heads around it.”

Responding to questions from Daily Maverick on Sunday, Magwenya said, “We’ve noted the varied responses towards the President’s assent to the NHI Bill. The President has found it heartening that large sections of our country’s population have welcomed his signing of the Bill. Equally, we have noted the concerns expressed by some business leaders.

“The President is giving thought to a mechanism that will allow for more engagement and collaboration with business, labour and other social partners as we begin to roll out the implementation of the NHI.

“The implementation will be rolled out in a phased manner; there is no element that is going to happen overnight or be managed in haste. Our legal framework also allows for amendments to be made.

“Therefore, the President will be looking for those opposed to the NHI to rise to the occasion and be part of a collaborative effort to make it work for the benefit of all South Africans. We already have successful case studies of collaboration between government and business, particularly in the energy and transport and logistics sectors. Therefore, we can collaborate to ensure that NHI truly delivers to the vision and commitment of universal access to quality healthcare.”

Read more in Daily Maverick: NHI fund will take decades to roll out — we answer your burning questions

The cost

Asked about the money that will have to be raised to fund the NHI, Mathe said, “We calculate that what’s needed is an additional R200-billion to fund the NHI. The questions include how you will impose a tax and whether it will be personal income, VAT, or corporate tax. Whichever way you look at it, it will be substantial.

“We have maxed out our ability to tax individuals — we are taxed at among the highest levels in the world. To pass a law without dealing with these issues is a challenge. It will have massive macroeconomic implications.

“The Act creates a fund called the NHI Fund (like the Road Accident Fund or the Unemployment Insurance Fund), which has substantial governance difficulties. Do you want to do that in the health sector with all the risks attached? Even if you can guarantee no corruption, there are still difficulties.

“For example, if it’s a single purchaser model (where the state purchases all health goods and services), it and only it pays a GP for seeing me. I walk in, the GP takes my details and collects no cash. That GP may not get paid. The government struggles to pay small businesses, and GPs may be forced to close their shops and go somewhere else to make a living. This model has these risks for suppliers of healthcare, medication and equipment, for example. How will that doctor live if they are not paid for six months?

“Section 33 of the Act says that when the law is fully implemented, medical aid will provide those services not provided by the fund. Right now, the benefits package needs to be defined. Will whatever is not covered still make medical aid viable? It shuts the door to medical aid by that. If you tweaked that section and created a provision for the fund to co-exist with medical aids, it can be successful.”

Business Unity SA CEO designate Khulekani Mathe. (Photo: Supplied)

Optimal outcome

Mathe also answered the following questions:

Question: The status quo does not work because it creates a massive inequality in healthcare. What does an optimal outcome look like?

Answer: There is definitely a need to reform our health sector. We support the goal of universal health coverage. It’s how we get there that matters. There are ways to get us there without causing the damage we foresee.

The private sector has made submissions proposing a low-cost benefit option for 10 years now (since 2015). This would create a medical aid-lite. People contributing roughly R300 could access a package of primary health in the private sector that would cover between five and 10 million people.

You can transition people to the private system by making a minor tweak. That’s not been approved for over 10 years — these incremental improvements can go a long way to make improvements rather than a sledgehammer approach. You can tweak section 33 of the legislation for a start (this is the part of the law which could outlaw medical aids once fully implemented).

Q: Does that deal with the health Gini coefficient, the massive gap between what most people get through healthcare and what some who can access the private system receive? In addition, the health market inquiry has shown significant profiteering and overpricing in the private sector, which pushes up costs for those same burdened taxpayers.

A: I can’t answer the profiteering question, but I’ve given an example of reforms that would get us on the way to universal health coverage. The private sector has the capability and means to train healthcare personnel, but the law prevents them from doing so. We are astonished at the inability to see these ideas.

Making wrong decisions could result in a system that collapses. It’s not sustainable. If the whole system collapses, that equalises human suffering. I’m not pretending to be a health systems expert — others can do that. Given the direction of the position of our country’s ability to finance things, as things stand today, we have all but exhausted the ability to borrow because of our debt stock and debt levels. If you borrow more, you run into unsustainable debt levels — that would mean expenditure cuts.

Borrowing to fund the NHI is not an option. Taxing to fund only makes sense in a growing economy. We could see a system collapse without getting the economy into shape before imposing a tax.

Q: Has South Africa hit the Laffer Curve (where additional tax increases can result in lower compliance and collections)? SARS Commissioner Edward Kieswetter is finding more and more revenue, so perhaps we have not.

A: I’m not a tax expert. Where he [Kieswetter] is finding more and more is among tax evasion culprits. What we’re talking about is that the NHI would increase taxes for everybody. Would the SA economy be able to tolerate a 1% tax increase in VAT (although we know it requires far more) or one or 2% in personal income taxes? This could impact tax morality. The higher and higher you raise taxes, the less people can tolerate it.

Q: What is the way forward?

A: It will be unfortunate when this ends up in the courts. We lose when things lose the opportunity to progress. Even if Busa does not [go to court], a queue of others will take this to court. We pleaded with the President to return the Bill to Parliament for reconsideration.

Q: What did he say?

A: He did not respond. We wrote a petition, which was not responded to, and the announcement was made.

Q: Has Busa sent another petition [after the law’s announcement]?

A: In reality, it will change nothing. We don’t believe it was made because the Presidency was unaware. A different calculation was made. The impact on investor confidence, especially in the health sector, is huge. Anyone thinking of investing in healthcare is thinking twice. DM

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The cost

Optimal outcome