Wednesday, 30 March 2022 12:44

Government proposes payroll tax and other surcharges to fund NHI.

By Lehlohonolo Lehana.

The National Department of Health has presented its proposals to fund South Africa’s new National Health Insurance (NHI) scheme, including new taxes.

In a presentation to parliament on Tuesday (29 March), the department said the country ultimately spends as much on health care as it decides to.

"The implications for every person that lives in South Africa is that in exchange for free health benefits (services and care) at the point of care when you need the care, (they) will contribute via the tax collection mechanism.

This will include the normal tax collection methods like VAT, personal tax, excise, company tax and so on, which is collected by SARS.

The department added that the bulk of the required finances for the NHI is ‘already in the system’, with the bill providing for:

  • General tax revenue, including the shifting funds from the provincial equitable share and conditional grants into the fund. This currently accounts for R256 billion per annum.
  • Reallocation of funding for medical scheme tax credits paid to various medical schemes towards the funding of National Health Insurance. This is estimated to be around R27 billion in 2019/20.
  • Payroll tax – The department said the state already contributes around R50 billion to public service employee contributions in just one medical scheme.
  • A surcharge on personal income tax. This would have to be introduced through a money bill by the minister of finance and earmarked for use by the fund.

In time, when the NHI reforms are ready, then:

  • None of the NHI covered benefits will be covered by private schemes.
  • There will be no need for voluntary spending on these services.
  • Medical scheme premiums will be for only those benefits not covered by NHI.
  • A central NHI Fund is expected to cover all necessary health care and to exclude very little, but this will be progressive (over time) as the reforms are rolled out.
  • Private financing through medical schemes will be unnecessary.
  • A payroll tax will be considered, as one alternative collection method, since it replaces the need to buy care through medical schemes.

'The current system is broken'

The department also reiterated that the NHI is a necessity in South Arica as the current health system is 'failing everyone'.

"Many poor people are denied care when they need it. Many privileged people are given treatment that they don't need – some potentially harmful," it said.

"Even wealthy people who insure their health with medical schemes end up paying-in for costs not covered."

South Africa needs a health system that ensures that all people have access to the health services they need, when and where they need them, without financial hardship

"This is what universal health coverage means. National Health Insurance means that we pay for this public good in advance with no cost to us as patients at the point of care when we need health services."