NHI – biggest threat to your wealth (and what to do about it)

I am not a fearmonger, and actually abhor people who play on people’s fears to bolster their popularity or business – but the National Health Insurance Bill (NHI) which is about to be promulgated is different.I have been covering news around the NHI for decades. This is not a new concept but was first touted in 2007 with the green paper going back to 2011 and there have been numerous (failed) tests done in the interim. Every time there is an election the ANC puts it back on the table, and over the many years, it has progressed from a green paper to a white paper and has now been passed by the parliament and NCOP and is sitting on Cyril’s desk waiting to be signed.

Why is this so problematic – universal health care should be celebrated, surely?

One popular misconception is that the present health system is failing because it is chronically underfunded, but a simple look at the graph below (courtesy of Mike Settas from the IRR – details in his excellent article which you can find here: https://dailyfriend.co.za/2024/02/27/the-ancs-dangerous-dalliance-with-the-nhi/)

The biggest problem is not that the Government Health service is underfunded, but that there is rampant corruption, incompetence and abuse. Government doctors are permitted to ‘moonlight’ while still taking their full salaries, which has been abused beyond all recognition. Unions refuse to allow incompetent staff to be fired, and threats of violence are used. The above trend of increased spending and staffing, already underway, and if the funds already allocated were spent properly, we would already be in a far better situation. (In the UK and US the average number of nurses is around 80 per 10,000 so we have a long way to go to get to that situation – but in all fairness, the West has an aging population which always requires more healthcare).The NHI was finally passed by NOP 6/12/2023. If you want a more comprehensive list of why the NHI cannot work, you can go HERE:  https://www.da.org.za/2023/05/50-reasons-why-the-nhi-will-never-work.

Constitutional challenges

 Robust constitutional challenges to the bill are the last resort to stop this folly from seeing the light of day.  Only when the NHI is signed into law by Cyril can constitutional challenges begin – which will delay the start for years, if not decades. There are constitutional concerns on a wide number of fronts:

* lack of clarity of the benefits that will be provided by the scheme, because the bill obviously is supposed to progress the States’ obligation to realise access to healthcare services in terms of section 27 of the Constitution.

* Section 27 points out it would be unconstitutional to exclude asylum seekers and undocumented people from healthcare services, especially reproductive or including reproductive health services and HIV treatment.

* denying the right of access to healthcare and freedom of association.

* the constitutional requirement of participatory democracy has not been observed (they only paid lip service to the calls for public comment and admitted to not even bothering to read important submissions by major stakeholders) https://www.medicalacademic.co.za/news/nhi-bill-faces-constitutional-challenges/

Before any of this NHI Bill can be implemented a robust, confidential and secure patient chart tracking system would be required – and that has to be written from scratch. That alone is a huge task. Recent attempts to do this have, to all intents and purposes, gone nowhere.


Total contributions to medical schemes in 2023 was circa R240Bn, with 8.9m beneficiaries or on average R2250 per person per month. The number of main members is less than half this.

Nobody in government, in the 20-plus years since its inception, has ever had the courage to publish a budget as to what this will cost nor how they will fund it. (https://irr.org.za/media/nhi-remains-uncosted-and-unaffordable-2013-irr). Until the Treasury publishes a bill (the Money Bill (section 77)) to fund this, this hair-brained scheme is dead in the water. If you want a copy of the NHI Bill, go here.  https://www.gov.za/sites/default/files/gcis_document/201908/national-health-insurance-bill-b-11-2019.pdf (If you don’t want to wade through the bumf for the relevant stuff, go to chapter 8, or page 30.)

To quote the NHI Bill:
49. (1) The Fund is entitled to money appropriated annually by Parliament in order to achieve the purpose of the Act.

(2) The money referred to in subsection (1) must be— (a) appropriated from money collected and in accordance with social solidarity in respect of— (i) general tax revenue, including the shifting funds from the provincial equitable share and conditional grants into the Fund; (ii) reallocation of funding for medical scheme tax credits paid to various medical schemes towards the funding of National Health Insurance; (iii) payroll tax (employer and employee); and (iv) surcharge on personal income tax, introduced through a money Bill by the Minister of Finance and earmarked for use by the Fund, subject to section 57; and

If you want to equate the NHI to the NHS-lite (UK) the government is going to need an extra at least R550Bn, bringing the expenditure on health to around R800Bn. The government could get 250Bn of that from our current medical aid contributions, but they’d still be R300Bn shy.

Here is the projected revenue collection for RSA Inc as published in the budget last month:

R800Bn would be more than all the personal income tax for 2025. It is likely, that if and when this is implemented it is going to come from the following sources:

* Med aid will be effectively banned, so all those contributions are fair game and income tax NHI deductions will probably aim to collect that R250bn – but on a sliding scale maybe capped at the high end. (A flat rate, even though that is what med aids do already, would be unpopular). Medical aids charge per member, but this form of sliding scale taxation (as used in the UK) does not – so single people with no dependents will be subsidizing everyone else). This still leaves a R300Bn deficit.

* What about VAT? At 15% the revenue from this is currently R476Bn, so if they want to get the extra R300Bn from there then the VAT rate would need to be 25%. This is a fairer way of taxation as it is more broad-based (but protection for the poor with zero rating – already in place – would have to stay.)

* The medical aid reserves that are required by the Medical Schemes Act (25%) belong to the members and cannot (theoretically) be appropriated by the government. Will medical aids disburse this to members on their dissolution? (Insert rolling on the floor laughing emoji here).

End of medical aid

To quote the bill directly:

Role of medical schemes

33. Once National Health Insurance has been fully implemented as determined by the Minister through regulations in the Gazette, medical schemes may only offer complementary cover to services not reimbursable by the Fund. So what does the NHI cover that Medical aids could “complement”? If you read the Bill, the list is extensive. Cosmetic surgery perhaps? Oh yes, medical aids don’t cover that either.

One unintended but inevitable consequence will be mass emigration of doctors (and this will begin long before the full implementation). If doctors opted out of direct payment from medical aids because they couldn’t survive on 100% of medical aid rates – what do you think they’ll do when they, de facto, become government employees? Nowhere in the NHI bill is the reality of actual payment scale of (currently private) doctors addressed, and government doctors are so poorly paid that they have to moonlight.  

The biggest difference between NHI and NHS (UK) is that at least with NHS you can choose to have, and pay for, private health care – this is not the case here. Obviously, given some notice of a medical condition, you can fly to the UK, Dubai or wherever and pay for the medical procedure, but if it is an emergency, you’re done for. Heart attack? Stroke? Accident?

What can you do about it?
I believe that this Bill is still a decade or more from being implemented. Do you think that the huge medical aids like Discovery are going to roll over and declare defeat? If I were them, I’d be looking to see if I could get the ‘administration’ of this massive, centralized megafund and funding every constitutional lawyer out there to keep this tied up in the courts for decades (or until the ruling party finally lose enough of the votes for a new coalition to throw it out). What can you do? Keep voting!

Have an offshore nest egg. This needs to be done sensibly, and unemotionally. 15 years away from retirement you should be giving thought to how and where you’re going to retire, and get a professional advisor to align your funds accordingly. Just because you only have a green mamba passport, doesn’t mean you don’t have options (without the need for having millions to buy a golden visa). If you’re going to retire here, get your investment advisor to do the math to ring-fence your capital retirement needs and send everything else out. I have written other blogs about this that you can read HERE. https://www.moneyweb.co.za/financial-advisor-views/offshore-investment-sorting-the-fear-from-the-fact/

While we still have med aids, gap covers are almost a no-brainer. You can save on your main premium and get full cover with a fraction of the savings. Make the most of your medical tax credit by putting all your claims through med aid, even if you know you’ve blown your savings portion – especially if you’re over the age of 65. This puts all those unclaimed expenses on your med aid tax certificate which is easier for tax.

If there was ever a time to be an activist, this is it. Only through significant public pressure can this hair-brained Bill be confined to the dustbin of history.

Articles and Blogs: 
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Tax Residency – New Rules new headaches Are retirement annuities dead 
A new look at retirement
Offshore investing – an unpopular opinion

Cobie Legrange and Dawn Ridler, 
Rexsolom Invest, Licensed FSP 45521.
Email: cobie@rexsolom.co.zadawn@rexsolom.co.za
Website: rexsolom.co.zawealthecology.co.za