Estimating the Financial Cost of the NHI Plan

NHI NOTE 7, FEBRUARY 2010

In the previous Econex NHI Notes we dealt with certain of the main issues raised by the ANC NHI proposal. This final note is a culmination of the information gained from the research conducted on aspects such as supply constraints, changes in demand and utilisation, issues of rationing, burden of disease, etc. In this note we calculate the overall cost of implementing a plan with the essential features of the current NHI proposal. It is shown that the resources required for such a plan exceed the available human and physical capacity of our current health system and will put enormous strain on the fiscus.

In order to be able to estimate the overall cost of a NHI plan for South Africa, it is important to restate the main features of the proposed plan (as set out in NHI Note 1). The essential features are:

  • Universal coverage of the population, irrespective of contribution.
  • Comprehensive cover, i.e. almost all medical conditions would be covered.
  • Service to be sought from the provider of choice.
  • No co-payment would be required, i.e. service is free at the point of delivery.

It will be argued in this research note that this combination of features would lead to a financial cost which is far beyond the country’s fiscal resources. In order to illustrate this point, this note starts with a brief overview of alternative ways of estimating possible costs. We then present our own cost estimates based on our demand model developed earlier in this study (and used in NHI Note 3). Finally, we put the various cost scenarios in the correct fiscal context in order to illustrate the enormous burden that such a plan will put on the fiscus.

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