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Alarm over NHI inconsistency
Notes of caution ring out from unions and economists as government eyes medical tax credits to fund health care for women, children and the aged under NHI
Treasury and health may appear to be singing from different hymn sheets when it comes to National Health Insurance (NHI) — but behind the scenes officials are quietly crafting a pilot structure to test crucial aspects of government’s grand plan for universal health care.
This interim entity will purchase a limited set of services from public and private sector alike, possibly as early as next year, while the legal framework required to breathe life into the NHI is being finalised.
The NHI is, at core, a set of financing reforms that promise health care that is free for everyone at the point of service. On that much, everyone in government agrees. But how this will be achieved, at what pace, and where the private health-care sector fits in, remains deeply ambiguous.
Even the health department itself appears divided: the NHI white paper it released in June says medical schemes should be scrapped, yet a gazette it published immediately afterwards says there should be an investigation into introducing mandatory medical scheme cover for all formal-sector workers.
"They are dramatically different suggestions. The internal inconsistency of it is quite alarming," says Econex economist Paula Armstrong.
The ministers of health and finance have also been sending different signals: health minister Aaron Motsoaledi said when he released the white paper that medical tax credits would be abolished and that the billions of rand saved could be used to pay for a set of "priority programmes" that include care for women, schoolchildren and the elderly. Tax credits allow people to claim a "credit" for part of the amount they pay to their private medical aid, which reduces their overall tax liability to Sars and alleviates some of the pressure on state hospitals.
On the other hand, former finance minister Pravin Gordhan and incumbent Malusi Gigaba have articulated a more progressive approach, suggesting that "small adjustments" be made to the medical tax credits. These are typically increased in line with inflation, so a "small adjustment" could be something as modest as a below-inflation increase.
Gigaba’s medium-term budget policy statement (MTBPS) last month was expected to provide details of an interim NHI fund to pay for the priority programmes identified by Motsoaledi. But as with so many other spending plans, treasury kicked the can down the road, saying it needed to consult the Davis tax committee, and promising more detail in February’s budget.
Treasury made it clear that any significant new spending initiatives would require new sources of revenue, given the dire state of government finances.
"There is ongoing work to look at how the medical tax subsidy might be reformed," says treasury’s chief director for health and social development, Mark Blecher. "This MTBPS did not want to [make] commitments on future spending when we are sitting with such a large deficit, but the priority programmes are still being worked on and I hope we will have announcements in the budget [next year]."
Treasury spelt out in no uncertain terms that the medical tax credits currently benefit millions of low and middle wage earners who might not otherwise be able to afford medical scheme cover: more than half (56%) of the total credits claimed in 2014/2015 accrued to 1.9m taxpayers with a taxable income of less than R300,000. A total of 3m taxpayers claimed R18.5bn in medical tax credits that year.
"We are very wary of government rushing to end that rebate if it’s not ready to implement NHI because it will affect middle-class and working-class families," says trade union federation Cosatu’s parliamentary co-ordinator Matthew Parks. "Our concern is that Motsoaledi is rushing to get the money but not in a rush to deliver the product."
The health department’s head of regulation and compliance, Anban Pillay, says progressive adjustments to the medical tax benefit make sense. "Given the quantum, I’m not sure we’d want to have all the money at once," he says.
While health officials put the final touches on a draft NHI Bill, which they hope to get through cabinet and out for public comment by year-end, they are also working with treasury officials on an interim mechanism to deliver the priority programmes. This structure, which has yet to be defined, is expected to build the state’s capacity to purchase from providers in the public and private sectors.
"We want the agility to procure and deliver services in the way you would anticipate under NHI," says Pillay.