Acts Online
GT Shield

National Health Act, 2003 (Act No. 61 of 2003)


National Health Insurance Policy towards Universal Health Coverage

Chapter 3 : Problem Statement

Chapter 4 : Rationale and Benefits of NHI


86. To address the structural problems outlined above as well as to effectively reduce the burden of disease requires a transformative and redistributive system as envisioned through the phased implementation of NHI.


87. NHI focuses on ensuring progressive realisation of the right to health care by extending coverage of health benefits to the entire population, in an environment of resource constraint whilst benefiting from efficiency gains.


88. The benefits of NHI are multiple and include: improved financial risk protection through prepayment funding and reducing out-of-pocket payments; reduced inequities and fragmentation in both funding and provision of health services in both the public and private health sectors; improved access to quality health care; improved efficiency and cost containment through streamlined strategic purchasing; improved accountability on the use of public funds through appropriate governance mechanisms and transparency in performance reporting; and better health outcomes across all socio-economic groups through improved coverage.


89. Households will benefit from increased disposable income because of a significantly lower mandatory prepayment level than current medical scheme contributions, savings that will be made due to economies of scale, efficiency gains because of reductions in non-health care costs, and affordability of health care as a result of active and strategic, monopsony purchasing arrangements.


90. The NHI reforms are premised on several key interrelated elements, namely:
(i) Micro-level reforms to increase efficiency and quality49: These NHI-reforms have been shown to slow the growth of health care costs by reducing wastage as a result of unnecessary care that does not contribute to better health outcomes – thus increasing quality at lower costs. The reforms include active purchasing by a single strategic purchaser, using explicit contracts that set prices; gate-keeping at a primary health care level50;and provider-payment reform that move away from a fee-for-service environment to alternative strategies for reimbursement(AMR)51. The AMRs include capitation for primary health care and ambulatory care or case-based payment systems such as diagnosis-related groupers (DRGs) for inhospital services whereby the unit prices for reimbursements decline after reaching a fixed budget52. Furthermore, in situations where health care providers are salaried, the introduction of an activity-based bonus or capitation has been used to motivate employees.
(ii) Macro level reforms to control costs: These reforms include managing escalation of prices of healthcare services and consumer protection from catastrophic spending through instruments such as: a) Price controls to regulate health care inputs using reference prices for pharmaceutical products and price setting for health services53; b) health care financing reforms that eliminate out-of-pocket spending and prohibiting low-quality benefits and benefit options that limit coverage and predisposing to catastrophic health expenditure; c) Delinking health insurance as an employment benefit, where people rely on their employers for insurance especially in situations of members having pre-existing medical conditions that confine them to a particular job54, and instead making financial protection and access to quality care a universal entitlement.


91. The implementation of NHI will provide an opportunity for significant economic and social benefits to South Africa. A well implemented NHI could contribute significantly to improved life expectancy. Economic impact assessments indicate that the NHI can have positive impacts in the long-run in improving the health indicators of the country, including significant improvement in life expectancy and child mortality. Estimates also show that a one-year increase in a nation’s ‘average life expectancy’ can increase GDP per capita by 4% in the long run55. This will also translate to increased happiness of the population as it ensures improved quality of life and increased longevity.


92. The health of a country’s labour force can impact on its productivity levels. If NHI is successful in its aim to reducing bottlenecks in the provision of healthcare in South Africa, it could lead to an improvement in the health of the labour force in the long term. The better health outcomes and a healthier workforce will translate into significant improvement in labour productivity. International studies have estimated that the increase in labour productivity can be from between 20% and 47.5% in the medium to long term56. Other benefits are increases in labour participation rates and reduced absenteeism.


93. Slowing the growth in health care costs also has macroeconomic benefits to the labour market and the general economy. NHI reforms have been shown to create stability in the rate of escalation of NHI-related taxes, thus providing certainty to the tax-payers. In the short term, mandatory prepayment for the NHI, through tax payments, at levels that are lower than current medical scheme contributions, can promote employment by reducing the cost to the employer of hiring additional workers57. Reductions in medical scheme contributions paid by employers can be translated into higher wages and increased disposable income, which can be spent on other goods and services to stimulate economic growth.


94. South Africa follows an evidence-based approach to health reforms by implementing a highly effective, fair and cost-effective NHI that promotes health care coverage and financial risk protection for households. The timing of its implementation is appropriate as NHI will help protect the poor, prevent cost escalation and help secure a wealthier and healthier future for South Africans.