The Department of Health is working with the National Treasury on imposing medical tax credit limits before the roll-out of the National Health Insurance (NHI) scheme, Health Deputy DG for NHI Nicholas Crisp has said.
BusinessLIVE reports that during a briefing last week to Parliament’s Health Portfolio Committee on the department’s annual report for 2024/25, Crisp said this was likely to affect only high-income earners in the short term as the department had stressed in a court affidavit last month that it was planning “modest changes impacting high income earners only”.
It had denied statements from opponents that low- and middle-income earners would be targeted in the initial phases of the scheme’s implementation.
Taxpayers benefit from medical tax credits or rebates for qualifying medical expenses including contributions to medical aid schemes. They reduce the amount of income tax payable, particularly for low income earners, and their eventual removal is envisaged in the NHI Act as one of the ways to fund the system.
Higher tax burden
However, their removal or limitation will increase the tax burden on medical scheme members and make membership unaffordable for many.
Crisp said these credits represent a loss to the fiscus of about R34bn, an amount that could be used for NHI.
In the 2025/25 budget, tabled by Finance Minister Enoch Godongwana in May, no inflationary adjustments were made to medical tax credits at a cost to taxpayers over three years of R3.8bn. There was also no inflationary adjustment of income tax brackets.
Answering questions by MPs last week, Crisp said: “The bottom line is that the state provides credits to the value of somewhere close to R34bn to members and beneficiaries of medical schemes, and once those services are paid for by the (NHI) fund, it would serve no purpose – in fact it would be double funding – for the government and tax authorities to allow that money to be paid back to the public when it is actually being spent for the delivery of their health services through the … NHI fund.
“There seems to be a lot of misinterpretation in the various court applications but it can happen systematically and that is what we have been discussing with the Treasury… various thresholds over a period of time without collapsing the current services.”
‘Concerning contradiction’
Board of Healthcare Funders MD Katlego Mothudi told Business Day it was “deeply concerning to note the contradiction between Crisp’s recent affidavit submitted to the High Court where he states the government is not considering the removal of … tax credits in the short or medium term, and his statement in Parliament confirming discussions with the Treasury are under way to systematically phase out these credits to fund NHI”.
“Such inconsistency raises questions about transparency and policy coherence, given that the NHI’s financial framework is being challenged in court. The narrative that tax credits are a subsidy for the rich is misleading. Close to 67% of medical scheme members come from previously disadvantaged backgrounds and many are lower- or middle-income earners who rely on these credits to afford healthcare cover.
“Phasing them out would effectively punish people for trying to fund their own healthcare and push many out of the system entirely, placing further pressure on a public sector that is already stretched,” Mothudi said.
Crisp said the government was “ on track for the five targets set out in section 57, which are the transitional arrangements for the NHI”.
“Some have been fully implemented and others are in progress,” he told MPs. “In terms of phase one as outlined in the Act, we can be fairly confident we are not behind schedule.”
The second phase would involve getting the machinery of the implementation of the NHI to work. During this period the first funds would go to the NHI.
The fund itself as an entity would be established only once section nine of the Act was proclaimed, which could only happen once the mechanics of the board and various governance structures had been approved. Processes in this regard were well under way, Crisp said, and a proclamation had been drafted.
Until the NHI has been established as an entity it cannot be awarded a budget by Parliament.
Crisp also addressed the question of the digitisation of all medical records as required by the NHI Act.
“We are confident the health patient registration system is now fully functional ..now we need people to start using it as is designed,” he said. Very rapid implementation of hospital information systems was also taking place.
See more from MedicalBrief archives:
HFA opposes proposed medical scheme tax credits’ removal
Tax credits worth R25bn to be phased out to fund NHI
NHI will need giant PAYE hike of 115%, says consultancy