On May 15, 2024, South African President Cyril Ramaphosa signed into law the National Health Insurance (NHI) Bill, marking a significant milestone in the country’s efforts to provide equitable healthcare for all citizens. The NHI Bill, a landmark piece of legislation, aims to transform the healthcare landscape in South Africa. There are multiple concerns including the quality of the legislation, the constitutionality of the Bill and the processes followed during the adoption of the Bill. The market seems to estimate that the signing of the NHI Bill is an “industry-specific risk” (pricing in of higher policy uncertainty regarding the longevity of private medical schemes in South Africa) and not a risk for the entire economy. Key Features of the NHI Bill
Implementation and Funding The implementation of the NHI will be phased over several years to ensure a smooth transition. The first phase will focus on strengthening the existing public healthcare system and expanding access to primary healthcare services. Subsequent phases will involve the gradual integration of private healthcare providers and the establishment of the NHI Fund. Reactions and Challenges The NHI Bill has garnered mixed reactions from various stakeholders. Proponents argue that it is a crucial step towards achieving social justice and improving public health outcomes. They emphasize that the NHI will help reduce health disparities and provide financial protection against the high costs of medical care. However, critics have raised concerns about the feasibility of the NHI, particularly regarding its funding and implementation. Some fear that the transition to a single-payer system could be fraught with administrative challenges and inefficiencies. There are also concerns about the potential impact on the private healthcare sector and the quality of care during the transition period. Will it affect your medica aid? Adrian Gore the Group Executive of Discovery explains very well the impact of NHI to the medical aid industry. "People are concerned about the continuity of their cover in its current form. We understand this concern. It is based on a component of the Act - Section 33 - which is problematic. Section 33 states that once NHI is ‘fully implemented’ medical schemes will be able to cover only those services that are not covered by NHI. This implies that medical scheme cover will be replaced by the NHI at that point in time. While this appears threatening, practically it isn’t. This, for two reasons. First, the impact of Section 33 is that only once the NHI is ‘fully implemented’ will medical schemes be limited in the cover they provide to medical scheme members. Until this point, there will be no change to your medical scheme cover. We believe it will take a long time – a decade at least – to achieve ‘full implementation’ given the scale and complexity of reforms needed. Bear in mind the NHI is an inordinately large and complex initiative that proposes extraordinary change and restructure to public and private healthcare systems. This is unprecedented and will be incredibly difficult to achieve. Second, even when the NHI is ‘fully implemented’, medical schemes will still be able to provide cover for benefits not covered by the NHI. This is important because the NHI is unlikely to have sufficient funding to provide an extensive package of benefits. This is because our country unfortunately faces significant financial constraints linked to low economic growth and a very narrow tax base. Medical schemes will therefore still play a significant role post full implementation of the NHI." In summary, your medical aid benefits will continue to exist, but there may be changes in how they operate alongside the NHI. It is essential to stay informed about updates from both your medical scheme provider and the NHI developments to understand how these changes might affect your coverage. The signing of the NHI Bill represents a bold and ambitious move towards transforming South Africa's healthcare system. While significant challenges lie ahead, The successful implementation of the NHI will require concerted efforts from all sectors of society, including the government, healthcare providers, and the public, to ensure that the vision of universal health coverage becomes a reality.
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While the passing of the Bill by the National Council of Provinces (NCOP) was not unexpected, it was nevertheless a disappointing development, particularly given more than 100 detailed submissions provided by various parties and industry experts and the significant constitutional and economic concerns raised by a wide range of stakeholders, including Discovery. Having said this, it is important to state that Discovery’s position regarding NHI remains clear and consistent: Universal Health Coverage is crucial and a workable NHI is central to achieving this. Discovery therefore supports NHI, but to make it workable requires collaboration with the private sector and additional funding. Discovery will continue to engage on this basis and remain optimistic that a constructive outcome can be achieved. The next step in the legislative process; and the negligible impact on medical schemes for the foreseeable future The next step in the legislative process is for the President to consider the constitutionality of the Bill, including what will likely be broad petitions from several stakeholders. He could then either: (1) sign the Bill, resulting in the Bill becoming law (with effective dates to be defined), and then likely face a range of lengthy constitutional challenges.; or (2) refer the Bill back to the National Assembly for reconsideration. If the latter occurs, and following reconsideration of the Bill, the President can still refer the Bill to the Constitutional Court to verify its constitutional muster. Aside from the constitutional and legal hurdles that lie ahead, there are also significant operational challenges and financial realities that will need to be navigated. This is a massive structural change to South Africa’s health system and cannot be achieved overnight. Full implementation of the NHI therefore remains a long way off – more than a decade at least. During this period, very little to nothing will change in relation to medical schemes and Discovery will remain steadfastly focused on delivering against its client commitments and strategic priorities. In parallel, Discovery will of course continue with the extensive work it has been doing to achieve a constructive NHI outcome. A constructive NHI outcome requires collaboration with the private sector and additional funding, enabled by amendments to Section 33 in the Bill The key constraint to increased funding options and greater involvement of the private sector relates to Section 33 of the NHI Bill. Section 33 effectively limits the role of medical schemes to providing only complementary cover to the NHI once the Bill is fully implemented, effectively crowding out medical scheme funding and greater private sector participation. Additionally, the R200bn of additional tax funding required per annum to fund the NHI Bill, as estimated by the National Department of Health, is both insufficient and unrealistic. Collecting such a huge quantum of money would require either an increase of 31% to personal income tax, or a 6.5% increase in VAT (from 15% to 21.5%) or a 10x increase in payroll tax (current UIF contributions). In the context of the country’s macroeconomic environment, and a small tax base, the ability to raise an additional R200bn via taxation is simply not feasible. Without amendments to Section 33, the funding requirements for the NHI are unachievable and the proposed funding model is constitutionally flawed. Conversely, small but important changes to Section 33 can create an enabling funding environment and support the NHI Bill in successfully achieving its objectives. Alongside Business Unity South Africa (BUSA), Discovery has therefore proposed changes to Section 33 that would make it less restrictive and more enabling, allowing for greater collaboration and the role of medical schemes to form over time. While Discovery is pressing hard for amendments to the Bill to make NHI workable through collaboration, if it is passed without amendment, the effect of section 33 will only manifest in a decade or more, and in our view the funding realities will ultimately prevail. In the interim, Discovery remains fully committed to playing a constructive role in expanding access and quality of healthcare to more South Africans. Source: Discovery |
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January 2025
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