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NHI expenditure will be R450bn, projects Fitch


National Health Insurance (NHI) will be funded through payroll taxes, a surcharge on personal income tax, the reallocation of medical scheme tax credits to the NHI Fund, and general taxes. Photo: Chris Collingridge African News Agency (ANA)

JOHANNESBURG – Fitch Solutions, a unit of the Fitch Group, said on Friday that it projects the government’s healthcare expenditure will reach nearly R450 billion by 2028 following its decision to implement the National Health Insurance (NHI) system.

Fitch Solutions said in a research note that NHI bodes well for a significant expansion of access to healthcare services. However, it said the implementation phases will pose significant challenges to the government and will test the feasibility of the project.

“We now expect government health expenditure to post a 9.9percent 10-year compound annual growth rate (CAGR) reaching R449.9bn by 2028,” Fitch Solutions said. “Conversely, we expect private health expenditure to gradually decline, posting a 1.6percent five-year CAGR, amounting to R224bn by 2028.”

The NHI Bill was signed off by Health Minister Zweli Mkhize and adopted by the Cabinet in July, and introduced in Parliament last month.

The National Treasury had initially estimated that NHI would cost R256bn, but has said that the department plans to release a paper with a revised costing.

The government has envisaged a scheme that will operate on the basis of single purchaser and single payer of healthcare services, by pooling funds and the strategic purchasing of healthcare services and goods from accredited and contracted healthcare service providers.

The NHI Bill states that the scheme will be funded through payroll taxes, a surcharge on personal income tax, the reallocation of medical scheme tax credits to the NHI Fund and general taxes.

Morné Malan, senior researcher at the Solidarity Research Institute, said anyone who assumes that an increase in the scope of state involvement in healthcare to cover all South Africans would run concomitant with an increase in the ability to deliver quality services is either naive or dishonest.

“While we welcome the notion of making quality healthcare more accessible to all South Africans, we are convinced that the regulatory capture and technocratic control proposed by the NHI represents the worst possible vehicle to achieve this goal,” Malan said.

Lee Callakoppen, the principal officer of Bonitas Medical Fund, said for the NHI Fund to be a success, collaboration between medical schemes and the government is essential.

“There are various aspects to consider when it comes to the bill, but, most importantly, central to it all is the impact on its users – South Africans,” Callakoppen said.


“We also note that the bill outlines a transitional arrangement. This can be seen as a positive, because the roll out of NHI will not happen over night.”

There has been scepticism on whether the costs of NHI can indeed fit into the deteriorating overall fiscal picture.

Shares in private healthcare companies have come under pressure since the NHI Bill was introduced.

However, Brian Ruff, the co-founder of PPO Serve, said the reaction to the NHI Bill is ill-informed and that a constructive discussion was needed.

“It is tragic that, despite the Medical Schemes Act of 2000 obliging medical schemes to do active purchasing for their members, they have failed to do so,” Ruff said. “Rather, they have interpreted their role to be securing low prices from providers per service.”