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Type Working Paper
Title The implementation of the national health insurance: the fiscal constraints and challenges facing the South-African economy
Publication (Day/Month/Year) 2016
It is said that the health status of a human being is one of the most basic capabilities which
gives value to the “well-being” of an individual (Crocker, 2006). There is a direct link between
the growth and development of an economy, and the health of its citizens. Whenever health
is poor, it may have a certain degree of restriction an individuals’ capacity to earn a source of
income or accumulate a substantial amount of assets by either limiting the work capacity, or
increasing the amount of medical expenses on a monthly basis (Smith, 1999). Todaro and
Smith (2011:362) posit that there is a direct link between health and education levels, which
are much higher in developed countries. The authors argue that people with higher income
tend to spend more on health and education, thus with better education and health, increased
productivity will prevail within an economy.
South Africa is characterized as a low-income country, with large disparities in health and
income, with a Gini co-efficient (measure of income inequality) of 0.679 in the year 2009
(Banatar, 2013:1). According to Banatar (2013:1) more than 55% of South Africans had an
income of less than R22 per day in 2009, the top 10% of South African individuals account for
nearly 57% of the personal income, while 75% of the population received a mere 16.7% of
total income. The Human Rights Watch (2011) reiterates that the South African population
comprise more than 16% of the global population living with the disease HIV/AIDS.
The implementation of the National Health Insurance (NHI) program in South Africa is part of
the underlying principles of achieving equality, efficiency and quality health services. However,
given that South Africa faces numerous fiscal constraints, including high government deficits,
low economic growth and high unemployment, the implementation of such a program will have
a severe impact on government expenditure, but more specifically, the expenditure on
healthcare. The core goal of the (NHI) policy proposal is to have (a) a transition in health
service delivery, (b) a restructuring of the South African health care system, and (c) the
transformation in management and administration in the health care system (Naidoo,

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