NHI will spark exodus of top taxpayers, warns IRR

The Institute of Race Relations (IRR) has called on health minister Aaron Motsoaledi to repeal the National Health Insurance (NHI) Act.

The think-tank warns that the act’s restrictions on medical schemes will increase emigration of SA’s biggest taxpayers and dent the corporate tax take, reducing funds available for government spending across the board. SA has only about 862,000 individual taxpayers with an annual income above R750,000. They contribute 58.6% of all personal income tax paid, said the IRR, citing Treasury estimates for 2024/25.

NHI also posed a threat to corporate income tax, as a flight of skilled mid- to higher-level staff would cause corporate profits to plummet, said the IRR. Only 842 companies in SA generated annual income of more than R100m, and they contributed almost three-quarters (72.4%) of corporate income tax, it said.

One of the act’s most controversial aspects is restricting the role of medical schemes. Section 33 says the schemes will be reduced to providing “complementary cover” when the NHI is fully implemented. They will be unable to offer cover for services that the NHI provides.

Medical schemes are used to prefund access to healthcare services, almost entirely in the private sector. The act was signed into law by President Cyril Ramaphosa in May, but has yet to be brought into effect.

Most people in SA’s highest tax brackets are medical schemes members. If they quit SA in response to diminished access to private healthcare, the state will no longer collect enough revenue to maintain spending on social grants and civil servant wages, or have enough money for infrastructure investment in water, electricity, and transport, said the IRR.

“We would like to see the … act revoked … and the adoption of low-cost benefit options [for medical schemes], which the government through the council for medical schemes has been blocking,’ said IRR campaign manager Majone Maja.

“There are various solutions on the table for universal health coverage. NHI in its current form is not one,” she said.

The minister’s comment last week that he would not compromise on section 33 even if it meant the demise of the government of national unity, was at odds with his offer to consult stakeholders in a national NHI road show, said Maja. Disregarding grievances about section 33 would reduce the road show to a tick-box exercise, with no genuine discussion or negotiation. “Dialogue is effectively defeated. There is no point in continuing the road show if NHI will be jammed down the throats of stakeholders.”