The controversial suggestion that withdrawing and then eliminating medical scheme tax credits by 2029 could effectively bankroll the NHI has again come in for criticism, with experts saying it may harm both the funding goal and the healthcare system.
IOL reports that the current allowances are R364 monthly for the principal member, R364 for the first dependant, and R246 for each additional dependant, with the government’s theory being that ending these credits could pull in between R30bn and R35bn annually towards NHI funding. Universal healthcare is expected to cost anywhere from R300bn and R1.3trn annually, depending on the level of care.
However, industry experts say the Minister’s confidence is misplaced, and that the numbers don’t add up.
Garth Zietsman, Freedom Foundation analyst, has run the figures and found a critical flaw. If credits are eliminated, as many as 700 000 lower income medical scheme members could be forced to rely on public health, he estimates.
This will then cost the state as much as R6.3bn yearly to treat people who were medical aid members, dropping the net benefit to around R27.7bn.
“Private healthcare and medical aids relieve the state of the burden. Instead of eliminating tax credits, they should be extended to all forms of health spending,” Zietsman said.
The Board of Healthcare Funders (BHF) has already expressed concern at the proposal to do away with tax credits, with MD Dr Katlego Mothudi saying it would have “profound public interest implications”.
Who bears the cost
Fikile Matabane, executive of Employee Benefits at ASI Financial Services, said removing these credits means less take-home pay for taxpayers.
“For many families, this would feel like a tax increase when the cost of living is already high. Middle- and lower-income earners, pensioners, and families with dependants who rely on the credit to manage healthcare costs would be most affected,” said Matabane.
Dr Katlego Mothudi, MD of the BHF, noted that “nearly 67% of medical scheme members come from previously disadvantaged communities”.
“These are not the wealthy elite, they are teachers, nurses, security guards, and office workers doing their best to fund their own healthcare.”
Removing tax credits would make medical aid more expensive, pushing leading members to downgrade plans, remove dependants, or exit schemes altogether, Matabane added.
Older risk pools
Matabane also highlighted the fact that only about 15% to 17% of the population belongs to a medical scheme, usually because it is offered or subsidised by employers.
Because younger and healthier members are the most price-sensitive, they are the most likely to leave. “As they exit, schemes are left with smaller, older risk pools, which increases average claims costs and drives premiums higher.”
Inadvertently, this would place additional pressure on the public healthcare system, potentially before NHI services are fully established.
“Medical aid tax credits play a stabilising role by supporting private healthcare participation and easing pressure on the public system. Removing them too early, without clear improvements in public healthcare capacity, risks weakening both systems simultaneously,” Matabane said.
Strained public system
About 86% of South Africa’s population relies on government healthcare, with the annual budget for this service at R70.9bn as of the 2025/26 tax year.
Of the Budget announced last July, Health Minister Aaron Motsoaledi had said that of this amount, R1.7bn will go towards hiring 1 200 doctors, 200 nurses, and 250 other health professionals, while beds and mattresses, among other articles of furniture, will cost R1.3bn.
Permanently hiring 27 000 community health workers will add another R1.4bn to the expenditure line.
According to World Bank and WHO data, South Africa had about 0.81 physicians per 1 000 people in 2021, up slightly from earlier years. However, this measure, the latest available, includes both public and private doctors.
In presenting his Health budget, Motsoaledi aimed “to lay a strong foundation in preparation for improvement of the public health system… to lay the ground for the NHI”.
Phase two of the NHI programme, which includes establishing the NHI Fund and starting service purchases, is scheduled to begin this year.
IOL article – Removing medical aid tax credits could backfire on NHI funding plans (Open access)
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Oversimplified NHI medical tax credits hides complexities
Finance Minister’s tax stance will perpetuate health inequality