How South Africa’s National Health Insurance Can Work — If Government Fixes the System First

Economists from the Bureau for Economic Research (BER) have mapped out a way the National Health Insurance (NHI) system could work in South Africa — but only if the government implements crucial reforms and adopts a phased rollout plan.

Dr Anja Smith and financial journalist Claire Bisseker say the current outlook for the NHI is “deeply uncertain” given South Africa’s constrained fiscal space and political resistance to new taxes. Their comments come as Health Minister Joe Phaahla pushes forward with the controversial NHI Bill, which is facing legal and financial scrutiny ahead of the 2025 elections.

VAT Backlash Highlights the Bigger Problem

The BER economists warn that South Africa’s resistance to tax hikes—evidenced by the swift reversal of the proposed VAT increase in the 2025 Budget—signals just how hard it will be for the state to fund the NHI as currently envisioned.

“With the government struggling to push through even a 0.5% VAT hike, raising the billions needed for NHI seems unlikely under current economic conditions,” they noted.

Fixing the Private Sector First

Smith and Bisseker argue that rather than eliminating private medical schemes outright, the NHI should compete with them to offer universal coverage—starting with formally employed workers. This approach would preserve the country’s current health risk-pooling infrastructure, which they say is already under severe strain.

Low job growth, stagnant wages, and an ageing member base are driving up the cost of private medical aid—pressuring the very systems the NHI aims to replace.

Their proposal: mandatory health coverage for all formally employed individuals, with the option to choose between the NHI Fund and existing medical schemes.

A Risk-Sharing Model That Already Exists — Sort Of

Key to this idea is the revival of the risk equalisation fund (REF), which would balance out the cost of covering sicker and poorer members by pooling resources across schemes. South Africa piloted a version of this model between 2011 and 2022 before shifting focus entirely to the NHI.

“Much of the groundwork was already done. It’s time to dust off those plans,” said the BER analysts.

The Missing Middle

They also point to an overlooked group: about 3 million South Africans who are too wealthy for public hospitals but can’t afford private medical aid. Some limited products exist for this group, but they may inadvertently draw young, healthy people out of traditional schemes—further destabilizing the system.

What’s Needed to Make NHI Viable

To make the NHI functional and sustainable, the BER experts recommend:

• A phased rollout starting with employed individuals

• Establishing a multilateral pricing forum in the private sector

• Introducing a mandatory minimum benefits package

• Creating an independent healthcare regulatory authority

• Joint employer-employee contributions for universal coverage

• Income-rated contributions to ensure equity in funding

These reforms, they argue, would allow for the eventual expansion of coverage to the rest of the population on a solid financial footing.

The Urgency Is Real

“We have postponed critical health financing reforms for almost 20 years,” the economists warn. “Without urgent action, even those with current private coverage could end up relying on an overstretched public system.”

{Source: BusinessTech}

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