The government appears to be divided over whether the imposition of a National Health Insurance (NHI) system – which will see all salary earners forced to belong to a state-controlled medical aid – is affordable.

One of the key drivers of the plan, the ministerial advisory committee chairwoman on the NHI, Olive Shisana, is adamant that the system will not be derailed.

While she said it could be revised – through a process of public hearings and alterations forged by Parliament – she told the Cape Town Press Club that all citizens and permanent residents would be obliged to belong to the system.

But the Treasury appears to have some doubts about whether the country’s taxpayers can face another layer of tax – this time in the form of an administrative expense that is likely to be a proportion of a person’s pre-tax income.

Many taxpayers will have the stark choice of paying for two medical aids, a voluntary private one that will give them access to hospitals and doctors not contracted to the state and an involuntary public one.

Treasury deputy director-general Andrew Donaldson told a Hospital Association conference in Cape Town last week that NHI taxes would not be introduced in the short term. Spokeswoman Bulelwa Boqwana confirmed that Donaldson had made the statement.

Donaldson said discussion papers would be released early next year before financing arrangements for health care would be changed. He told delegates that Finance Minister Pravin Gordhan had raised several options for increasing the funding required for the NHI – which is similar to the system introduced in the UK in 1945 – but “no decision had been taken on specific funding arrangements”.

Shisana, who is a former health director-general, said that there would be a R5 billion shortfall of funding in the 2012 year and this would rise to up to R25bn over a few years, which would have to be funded by the taxpayer.

Asked if 16 percent of the population currently on medical aid would be able to opt out of private schemes – to lessen the burden of an imposed system – she said this would have to be a matter of negotiations by trade unions with their employers. However, the NHI would be a “mandatory system”.

While the details of the plan still had to be fleshed out, it was envisaged that wealthier taxpayers would contribute more than less-well paid taxpayers.

It was envisaged that about R125bn would be spent on national health in 2012 with about R120bn of this coming from the national revenue fund – money already in the kitty – “that is from taxpayers”, Shisana said.

While she argued that spend on health – about 8 percent of gross domestic product (GDP), roughly half of this representing private sector spend – could be reduced to about 6 percent of GDP through spreading spending over the entire population.

But Donaldson said increasing state expenditure on public health care from 4 percent to 6.2 percent of GDP as estimated in the green paper on NHI would place a substantial strain on the country’s public finances.

But Shisana believed that better health care being available to a greater number of people could be beneficial to GDP growth. She believed that with an increase of just one year of life expectancy, a country’s GDP could be raised by up to 4 percent.

Donaldson highlighted “significant constraints” in terms of institutional and human resources supplies, such as a shortage of doctors and nurses in the public sector, which would limit the amount that could be spent on NHI.

“A great deal of work also needs to be done to address bureaucratic barriers to service delivery,” he added. He pointed to inadequate costing systems and unresponsive procurement systems as major challenges in the public sector.

However, Donaldson said: “Merging public and private procurement arrangements will be an important part of health-care reforms. The integration of supply chain management between public and private sectors could help lower costs and bring modern logistics into the delivery” of public sector health care.

He said public and private hospitals would be placed on a level playing field. This required institutional change, including putting both public and private hospitals on a common tax footing, recognising private hospital’s investment requirements in infrastructure and creating a common set of rules to govern the employment of professional staff.

Difficult questions around NHI included what exactly it should finance, who should be covered and on what terms, what role out-of-pocket payments should play and the financing of the considerable hospital and clinic infrastructure required.

He said much of the success of the UK’s National Health Service depended on the balance between private and public support for investment, but difficult choices needed to be made about what to keep and what not to keep in the system.

Donaldson said there was scope for public private partnerships, especially in the construction, maintenance and equipping of facilities. “But the complexity, cost and lengthy timelines need to be addressed, with revised contract terms of between 20 and 30 years.”

He also said multi-payer arrangements, where medical schemes provided supplementary financing to the NHI, could still be accommodated. - Donwald Pressly