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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