Davis: NHI un­likely with­out sus­tained growth

• Davis tax com­mit­tee says plan not fea­si­ble with­out growth and will need to take fi­nances from other projects

Business Day - - FRONT PAGE - Sci­ence and Health Writer kahnt@busi­nesslive.co.za Tamar Kahn

Na­tional Health In­sur­ance (NHI) is not fea­si­ble with­out sus­tained eco­nomic growth. It re­quires so much money that the gov­ern­ment will have to make trade-offs with other spend­ing plans such as ex­pand­ing ac­cess to ter­tiary ed­u­ca­tion, the Davis tax com­mit­tee warned on Mon­day. The com­mit­tee, headed by Judge Den­nis Davis, re­leased six re­ports on var­i­ous as­pects of tax ad­min­is­tra­tion, in­clud­ing one on NHI.

Na­tional Health In­sur­ance (NHI) was not fea­si­ble with­out sus­tained eco­nomic growth. It re­quired so much money that the gov­ern­ment would have to make trade-offs with other spend­ing plans such as ex­pand­ing ac­cess to ter­tiary ed­u­ca­tion, the Davis tax com­mit­tee warned on Mon­day.

NHI is the gov­ern­ment’s am­bi­tious pol­icy for im­ple­ment­ing univer­sal health­care, which it prom­ises will pro­vide ev­ery­one with ser­vices that are free at the point of ser­vice.

The com­mit­tee, which is headed by Judge Den­nis Davis, re­leased six re­ports on var­i­ous as­pects of tax ad­min­is­tra­tion, in­clud­ing one on NHI. The re­port is based on an anal­y­sis of the gov­ern­ment’s first NHI white pa­per, which was pub­lished for com­ment in De­cem­ber 2015 and signed off sev­eral months be­fore Health Min­is­ter Aaron Mot­soaledi re­leased a re­vised white pa­per in June. How­ever, the two white pa­pers con­tain vir­tu­ally iden­ti­cal pro­pos­als for fi­nanc­ing.

The com­mit­tee ex­pressed con­cern about the lack of clar­ity on how NHI would be im­ple­mented and op­er­ated, say­ing more de­tails were needed to un­der­stand its re­source re­quire­ments. It con­se­quently stopped short of mak­ing firm rec­om­men­da­tions on ways of fi­nanc­ing NHI, say­ing to do so would be pre­ma­ture.

How­ever, it said sub­stan­tial in­creases in VAT or per­sonal in­come tax, pos­si­bly along with a new so­cial se­cu­rity tax, would be re­quired to fund NHI.

Rev­enue raised to fund NHI should not be ear­marked, as that risked un­der­fund­ing, it said.

The com­mit­tee sounded a note of cau­tion on the rev­enue short­falls pro­jected in the white pa­per, which it said were ex­tremely sen­si­tive to as­sump­tions about eco­nomic growth.

In the 2011 white pa­per, the rev­enue short­fall was es­ti­mated at R71.9bn in 2010 prices by 2025-26, as­sum­ing the econ­omy grew at 3.5%, and R108bn if eco­nomic growth slowed to 2%. More re­cent real growth fore­casts pub­lished by Econex ar­rived at a rev­enue short­fall of R111bn in 2010 prices by 2025-26. Econex econ­o­mist Paula Arm­strong said that the re­port pro­vided a thor­ough and ra­tio­nal anal­y­sis of the NHI land­scape.

“It doesn’t pro­vide pre­cise de­tail on how the tax sys­tem should be used to gen­er­ate the rev­enue re­quired, but this is un­der­stand­able, given the lack of clar­ity around NHI.”

Den­nis Davis

Health­care: Pres­i­dent Ja­cob Zuma with a pa­tient at the Steve Biko hos­pi­tal. Health Min­is­ter Aaron Mot­soaledi, left, signed off an NHI white pa­per in De­cem­ber 2015 and a re­vised one in June 2017. / GCIS

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