National Health Insurance
Phased Introduction of NHI based on Income
Download full PDF Document
Two of the major unanswered issues in proposals for National Health Insurance and for proposals for mandatory retirement cover are who will contribute and who will be covered at each stage of implementation. While there is no doubt about the end goal of universal coverage, the implementation of mandatory insurance is likely to be spread over a number of years.
There is a strong pattern of medical scheme membership by income 6, 8 and it seems logical to begin to extend coverage by beginning with the higher income groups where coverage is already of the order of close to 80%, as shown below.
Table 1: Proportion on Voluntary Medical Schemes, using Insurable Families Analysis on General Household Survey 2005
Information on income levels in the population is generally derived from StatsSA surveys, as the South African Revenue Service (SARS) does not make detailed information on income publicly available. Some people choose not to respond to the income question in the survey, giving rise to a category of “unknown income” and income is generally understated in surveys. This is useful for performing calculations for the cost of National Health Insurance as total income , as determined by SARS, may well be higher and hence provide a margin or buffer in the calculations.
It seems highly likely that all people earning above the tax threshold will be contributors to mandatory healthcare and retirement. It would be logical to limit contributors to those below age 65 as the tax regime for those aged 65 and older is different. However the current age for receiving he social old age grant is 60 for women and that for men is being equalised at age 60 over a number of years, following court challenges on gender equality. While there are some teenagers earning an income, it would also be logical to use age 20 as the minimum age for contributions.
The analysis which follows uses income patterns from the General Household Survey 2005, together with the population in 2009 from ASSA2003 and the most recently available age-gender profile in medical schemes. The number of contributors and their related insurable families and households are discussed in the following groups:
- The existing voluntary medical scheme environment;
- All people earning more than the tax threshold become contributors. The insurable families of contributors become members of medical schemes, together with those who were members in the voluntary environment.
- Add as contributors all those earning below the tax threshold but above the Low Income Medical Scheme (LIMS) 8 threshold of R2,000 per month .
- Add as Contributors all those earning below R2,000 but above R1,000 per month. These are typically formal sector workers. There may need to be a wage subsidy or other support to cover the cost of social security contributions for the group.
- Add as Contributors all those earning below R1,000 per month. This group is typically farm and domestic workers and informal traders. They will require almost complete subsidization.
- Inclusion of all people in the country as members of the National Health Insurance System. This phase will see an extension of beneficiaries but with no added contributors.
The graphs below show the number of people in insurable families that could be covered in the groups as defined above at various phases of a mandatory National Health Insurance system. The impact at provincial level varies with Gauteng and the Western Cape seeing the greatest impact.
 Figure 4: Health Insurance Coverage for Phased Introduction of Mandatory Insurance in South Africa (estimated for 2009)
 Figure 5: Health Insurance Coverage by Province for Phased Introduction of Mandatory Insurance (unadjusted proportions from GHS2005)
See overleaf for definition.
Income as reported in surveys is not taxable income as reported to SARS. A crucial decision in mandatory insurance calculations is the exact definition of income that will be used for determining any income-related contributions. Estimates made with survey data need to be improved at a later stage with data from SARS using the chosen definition of income.
The level from which income tax applies. This was R46,000 per annum or R3,833 per month in the 2008/9 tax year and R2,917 pm in 2005, for taxpayers under age 65. The level is announced in the annual budget speech by the Minister of Finance and tends to keep pace with inflation.
A contributor is a person between age 20 and age 64, excluding foreign workers, earning in the appropriate age band. Some families may have dual contributors if the spouse is also working.
An insurable family includes the insurable spouse and insurable children. The insurable spouse would include wife, husband or same-sex partner and there may be multiple spouses in traditional marriages. Insurable children for this analysis are all children under age 20 plus all children between age 20 and 30 who are living in the household and who are not earning in their own right.
Surveys are generally conducted at household level and this includes all people in the same household. Some may be part of the insurable family (as defined above) but will also include brothers, sisters or parents in the same house, as well as non-family members staying in the household. There may be multiple insurable families in one household.
The LIMS process confirmed an upper income limit of R6,500 in 2005 Rand terms. A lower limit is not mentioned but the original terms of reference expected a lower limit of R2,000 for products of this type. Affordability below that level is difficult without significant subsidies.
The provincial graph has not been altered to reflect more recent provincial coverage, given the difficulty of reconciling the CMS and StatsSA provincial percentages discussed earlier. Hence the “South Africa” figures in the provincial graph are slightly different to those for the national pie which has been updated for the growth in medical scheme members in recent years.
|
Contact Details:
Innovative Medicines SA
Val Beaumont
P.O. Box 2008
Houghton, 2041
Tel: +27 11 880-4644
Fax: +27 11 880-5987
Contact Us!
|
