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NHI, MEDICAL SCHEMES AND FPI NEWS: CMAC JUNE 2018

FINANCIAL PLANNING INSTITUTE CEO PLACED ON SPECIAL LEAVE AMID EXAM PROBE:
• The FPI placed its CEO Godfrey Nti on special leave pending the outcome of an investigation into allegations of mismanagement.
• Exam fraud allegations confirmed from June 2017. The FSCA is investigating allegations of irregularities in regulatory examinations of the FPI.
• Mr Godfrey Nti NOT found guilty until investigation is complete.
• Stephany Pillay (FPI’s Chief Operating Officer) will step in as acting CEO with immediate effect while Mr Nti is on leave.
• The Financial Services Conduct Authority instructed the FPI to discontinue regulatory exams while it conducts an investigation. Exam body Moonstone is to conduct future exams until further notice.
• The authority confirmed those who had written the exam in the past will not be affected by the development, except those implicated in the alleged irregularities.
• The Regulator warned SA public against the following unregistered financial entities:
o Destidex Investments T/A Stock Traders – claimed to be associated to Johannesburg based financial advisors Emperor Asset Management as well as Hollard Insurance. Hollard as well as Emperor confirmed with the FSB that they are not associated with Destidex.
o Blue Granite Investments (trading vehicle for Fair Finance, Daily Finance SA and Capital Loans under registration number of Simon Mnyandu). None are registered Financial Service Providers.
o Services You Need & Tracing Services (Pretoria based Samantha Langeveldt/Jonker).

HEALTH MINISTER AARON MOTSOALEDI TO UNVEIL CRUCIAL HEALTH BILLS:
• Two Bills to be presented to the public for comment -:
o The Medical Schemes Amendment Bill – a bill to regulate medical schemes which aims to benefit members. The Bill will be published in the government gazette for public comment. The Bill amends the Medical Schemes Act 131 of 1998 to align with the NHI White Paper and the Draft National Health Insurance Fund Bill.
▪ The aim is to improve the regulation of the medical schemes industry and to align the regulatory framework.
▪ To ensure that beneficiaries are better protected and promotes better access to private health funding.
▪ To eliminate co-payments for healthcare.
▪ To ensure medical practitioners charge according to negotiated rates and medical schemes cover the cost in full.
o The National Health Insurance Bill.
• The Bills will require amendments to 12 pieces of legislation (12 Acts which will have to be amended to accommodate NHI).
• Minister Aaron’s words quotes (source Fin24) – “…this will necessitate a massive re-organisation
of the whole healthcare system, both public and private, and completely change the
relationship between our spheres of government, but also change the relationship between
the rich and the poor…””…you might have to dismantle some of the relationships between
spheres of government and also rattle the corporate world in health…””…in the same way the
land issue is raging all over the country, NHI is going to rage in a similar way, not only in the
field of health but in the economic and social lives of our people…”.
• His view : The rich will subsidise the poor, the young will subsidise the old and the healthy will
subsidise the sick.
• He advised members of Parliament to monitor four factors that have destabilised the
healthcare system:
o Human resources
o Financial management
o Procurement and supply chain management
o Maintenance of infrastructure and equipment

NATIONAL HEALTH INSURANCE BILL:
• What is universal health coverage?
o People will receive the health services they need without “suffering financial
hardship”.
• What is National Health Insurance?
o A policy which is to be publicly financed aimed at providing a “uniform package” of
access to quality and affordable health services to South Africans based on their
needs, irrespective of their socio-economic status.
o The main reason for the NHI put forward by the White Paper lies in the need to
eliminate the huge disparities between access to health care services in the public and
private sector.
o The fund is expected to enter into contracts with both public and private hospitals,
specialists, public clinics and private GP practices to deliver health services free of
charge to all citizens and legal residents.
• How much will NHI cost?
o According to the White Paper on NHI the Davis Tax Committee noted that it would
cost R256 bn in annual funding.
o According to the committee, by 2025 a funding shortfall of R72bn would be expected,
even at an assumed average economic growth rate of 3.5%. Economic growth of just
2% would result in a shortfall of R108bn by 2025.
• How will NHI be funded?
o According to Minister Motsoaledi: The rich will subsidise the poor. The young will
subsidise the old. The healthy will subsidise the sick. The urban will subsidise the
rural.
o Tax instruments will be used to fund NHI.
o There were talks that medical tax credits would be removed to fund NHI.
• What must South Africans do about it?
o The public will be able to comment on the 12 Acts which will have to be amended to
accommodate NHI once the bills are gazetted.
• How does the Medical Schemes Amendment Bill fit in?
o This will only become apparent once the bills have been published for public
comment.
o The Medical Schemes Amendment Bill was approved by Cabinet in May.
• What are the biggest obstacles to the implementation of the bills?
o Translating political will into action.
o Money.
o To convince consumers that they will receive quality health care from the public
sector.
• What is the timeline for implementation?
o A three month period for the public to submit their comments once the bills are
gazetted.
o Comments must be considered and if material amendments are to be made to the bill
that will ad to the timeline. It will take time to have a national health scheme
operating legally.
o Bills should be submitted to Parliament by May – the new bills are too late to be
adopted and will probably only be submitted after the elections.

DAVIS TAX COMMITTEE’S WARNINGS AND COMMENTS REGARDING NHI:
• The proposed NHI in its current format, is unlikely to be sustainable unless there is sustained
economic growth. A real economic growth rate of just 2% will result in a shortfall as large as
R108 bn by 2025.
• Given the magnitude of the funding requirement of the NHI, will require “trade offs” with
other National Development Plan programmes e.g. social security reforms and tertiary
education.
• The pace of implementation must be consistent with the fiscal resource envelope – detailed
implementation plans should be sensitive to human, infrastructure and financial resource
constraints.
• NHI will result in additional public expenditure, which should be financed by tax instruments
which are “sufficiently buoyant” to yield a structural increase in revenue.
• VAT should not be ruled out as a funding source. Most member countries of the Organisation
for Economic Co-operation and Development (OECD) rely on personal income tax and social
security taxes to fund Universal Health Care. This would not be feasible in South Africa since
a high proportion of the population is not in regular formal employment.
• A surcharge on Personal Income Tax (PIT) may be preferred to an increase in payroll tax. This
is because it is based on income sources beyond labour income, and captures those who are
self-employed and is less likely to negatively affect employment. Increasing payroll tax could
knock job creation, and lead to informal and unprotected employment.
• Given the considerable size of projected funding shortfalls, substantial increases in VAT or PIT
and/or introduction of a new social security tax would be required to fund the NHI.
• They suggest cost-sharing among patients to help manage health care demand for nonessential
services. The poor should be exempt from these out-of-pocket payments. User
charges may cover services not created for in the NHI benefit package.
• It would be compulsory for all South Africans to belong to the NHI, and make prepayment to
a special fund based on their ability to pay.
• NHI could go the same route as e-tolls if planned and managed properly.

Sources:
Davis Tax Committee – Judge Dennis Davis
City Press
iStock
Fin24
News24
FPI
Health Minister Aaron Motsoaledi – Budget Vote Speech

E&OE: Disclaimer – Any views expressed in this composition are for information purposes only and based on various sources.
CMAC do not guarantee factual correctness. CMAC is not liable whatsoever for any loss or damage resulting from the use
and distribution of this composition. CMAC cannot be held liable for any information noted in this composition.
Dated: 21 June 2018