National assembly adopts the fatally flawed and harmful NHI Bill

On June 13, 2023, the National Assembly passed the National Health Insurance (NHI) Bill, touting it as a revolutionary piece of legislation that would provide comprehensive healthcare services to every citizen for free. However, skeptics argue that the bill’s ambitious promises and its alignment with the ANC’s communist-inspired national democratic revolution raise concerns about its feasibility. This article examines the magnitude and complexity of the NHI proposal, highlights the dangers of reckless policies driven by political motives, and presents achievable alternatives that could enhance the efficiency of both the private and public healthcare sectors without jeopardizing the economy or burdening the state.

By Michael Settas

On 13 June 2023, the National Assembly unsurprisingly passed the National Health Insurance (NHI) Bill, amidst much rhetoric from health minister Joe Phaahla, who declared it in the lower house as “one of the most revolutionary pieces of legislation presented to the National Assembly since the dawn of democracy”.

Unfortunately, the only revolutionary aspect of the bill is its shared terminology with the ANC’s communist inspired national democratic revolution.

So drenched in populist promises is the NHI policy, that Minister Phaahla asserted that it would deliver comprehensive healthcare services for free to every citizen in the country. This would make the NHI the only health system globally to achieve such lofty ideals.

The fact that substantially wealthier countries, such as Canada, the United Kingdom, and the Nordic states are unable to achieve free and comprehensive healthcare would elicit instant doubt in the mind of any rational person about South Africa succeeding. But this did not prevent the ANC from proudly proclaiming that they will deliver this to all South Africans. Given the current administration’s woeful track record in managing far simpler state entities, alarm bells should be ringing everywhere.

Nonetheless, these claims from the ANC are highly insightful and hence useful – they provide a crystal-clear understanding of what underpins current ANC strategic and policy thinking.

There now permeates an air of desperation in promises made by the governing party. Regardless of what they entail, whether it is on loadshedding, jobs, education, municipal services, infrastructure, rail services, Transnet, etc., critical thought on proposed policies or remedial actions is suspended entirely in favour of grandiosity and wildly unrealistic possibilities.

This is a very dangerous space, as it provides a policy environment where reckless and dangerous policies, such as the NHI, can be implemented in the selfish hope that these promises keep the ANC in power.

In assessing the NHI policy, what is exceedingly obvious is the magnitude of the proposal as well as its complexity. In fiscal terms, it entails a very substantial re-arrangement of around 8 to 9% of GDP, involving the wholesale upending of both the private and public sector simultaneously and amalgamating as one into NHI. This amply illustrates that when those things that are almost certain to go wrong do so, the impact will be significant and disastrous.

In terms of the overarching design of the NHI, it entails monopolising currently devolved health financing services that are within the provincial domain, into a single national funding pool, i.e., the NHI Fund. This is entirely the opposite of what the strategy is now for Eskom, which is to devolve a national state monopoly but also to dismantle it into its separate functions because of the inherent and obvious dysfunctions of the monopolised state-run national form.

All South Africans are well aware of the concentration risks that have played out within Eskom – when the system fails it does so both profoundly and for everyone. The NHI Bill now proposes to replicate Eskom in its current form, naively believing it has the skill and capacity to operate it. We must shudder to think what the inevitable healthcare equivalent of loadshedding will be.

The reason that the NHI design is fatally flawed is largely owing to the ANC’s collective desire for control over greater sectors of the economy. Whether the policy actually delivers a public good is of secondary importance. As we witnessed through the Zondo Commission, this policy strategy enables it to feed the enormous patronage machine that now has its tentacles virtually everywhere the ANC operates.

What the centralisation of all healthcare funding now does under this NHI is to move the current patronage, that is pervasive within the provincial health departments, into a national level, where a single entity will hold sway over many hundreds of billions of rands of largesse each year.

And to ensure easy access to such patronage, the NHI’s governance framework concentrates all authority and decision-making powers within the post of the health minister, handing total control of the NHI Fund to politicians.

Every citizen in the country is well aware of where that will lead.

Fortunately, there are achievable alternatives. Technically, there is little fault with the institutional design of both the private and public health sectors. This means that to get them working more efficiently requires attainable targets that bring far lower risk than the wholesale changes demanded by the NHI.

Public sector problems currently emanate from a breakdown of governance and management capacity – not a lack of resources as is often claimed. This can be rectified without considering any changes to the design of the public system and it has the advantage of having no impact on the fiscus. Given how precarious the economy is currently, this should be an imperative rather than a consideration.

The private sector is hampered by an imbalanced regulatory framework that is long overdue for an overhaul. The system would have a shot in the arm from two simple enhancements, both of which are eminently attainable through basic regulatory alteration. The first would be to introduce a level of mandatory cover to reduce the risks associated with anti-selection, that have had a substantial impact on costs in the private sector. The second would be introduction of the so-called ‘low cost benefit options’ which would extend private healthcare to millions of citizens who are formally employed but unable to afford the existing medical scheme arrangements.

These changes are readily attainable within a short time frame, represent much lower implementation risk and have no financial impact on the state. These are the discussions that should be happening in the policy space as opposed to grandiose promises such as NHI that are as unachievable as they are risky.

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Author:  Michael Settas is the Chairman of the Free Market Foundation’s Health Policy Unit. The views expressed in the article are the author’s and not necessarily shared by the members of the Foundation.