National Health Insurance: the most appropriate method of financing it
Date
2016-04-06
Authors
Tu, Terry
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Abstract
This research paper seeks to answer the question, “How should National Health Insurance (NHI)
be funded using the current tax system in South Africa to achieve the best outcome for all citizens
within its population?” The study was done as there is ample literature available on NHI funding
due to NHI being a fairly new topic within South Africa. This research aims to contribute in making
a decision on the most appropriate method of financing the NHI in South Africa once the system is
incorporated.
In order to answer the question, 91 respondents working as tax academics, tax practitioners and
economists were surveyed. The respondents were contacted via email and an electronic
questionnaire was completed online. The data was subjected to various statistical analysis
methods including, factor analysis, Kruskal-Wallis tests and Cluster analysis.
The results revealed that the respondents were of the opinion that an increase in VAT would be the
most appropriate method of financing NHI. The analysis also revealed that reason the respondents
felt this way as an increase in VAT was perceived as justifiable, fair and efficient. The research
also showed that all the respondents surveyed were opposed to an increase of taxes on individuals
or an introduction of payroll taxes.
Finally, the paper investigated whether or not the funds should be ring fenced specifically for NHI
or added to the general fiscus for budgetary allocation. It was the opinion of the respondents that
the funds should be specifically ring fenced for NHI. The research suggested that the respondents
were of this opinion due to the fact that ring-fencing the funds would create more accountability
over the funds and that if the funds were ring fenced this would not subject them to political
infighting during the budgetary process.
The paper was limited due to the low response rate and the respondents mainly coming from a tax
background as opposed to an economics background. The paper also only examined qualitative
factors that may have influenced the funding method and no quantitative data was used.
Key Words:
Hypothecation of funds, National Health Insurance, Progressive tax, Regressive tax
Description
A research report Submitted in partial fulfilment of the
Master of Commerce degree