The Health Funders Association (HFA) has slammed the idea of medical scheme tax credits being a potential solution to funding the National Health Insurance Fund, cautioning that the broader economic consequences for all South Africans could be dire, and should be carefully considered.
“Changes to taxation can only be introduced by the Minister of Finance in a Money Bill and medical schemes, and members should be aware that the NHI Bill has no power to implement tax changes,” warned Craig Comrie, chairperson of the HFA, which represents medical schemes and accounts for more than 50% of lives covered on medical aid in South Africa.
“If it becomes necessary, the HFA will strongly oppose any proposed legislation to this effect through all available avenues, not only to safeguard the rights of medical scheme members but also because it does not make economic sense for the country and its people,” he said, writes MedicalBrief.
The HFA said removal of the tax credits would “effectively increase medical scheme members’ tax and stifle what little disposable income remains to stimulate our economy”.
Medical scheme members already contribute substantially to the public health system, despite not using it, so the tax credits provide partial compensation by reducing the tax they are paying, depending on how many dependants they have.
“For now, the tax credits will remain in place until the National Treasury determines otherwise through the appropriate channels,” said Comrie.
“It is reckless to create the impression that removing the tax credits is a foregone conclusion – especially under the guise of allaying stakeholders’ valid concerns about how the NHI will be funded.”
The HFA said the public health budget is more than the tax credit amount at around R5 000 per person per year, therefore, medical scheme members are receiving a benefit that is much lower than the benefit currently received by non-medical scheme members.
Furthermore, it is essential to highlight that more than half of those belonging to medical schemes have a monthly household income below R30 000, and the tax credit is a key factor in their ability to afford cover, added Comrie.
For a family of four, removing medical scheme tax credits would effectively result in a monthly loss of R1 220 in household income, or R14 640 per year. Additionally, neither employers nor medical schemes benefit from the tax credits.
“The approximately R27bn rebate in the form of tax credits to medical scheme members pales in comparison to the colossal projected costs of the NHI, amounting to a mere 5% to 8% of the estimated total,” he said.
The resulting additional financial burden that would be placed on the public healthcare system should members of medical schemes leave private healthcare far outweighs this amount.
“Unfortunately, there is currently no established mechanism in place to ring-fence or allocate these funds exclusively for the funding of the NHI, creating a critical gap in financing for what is an ambitious, albeit much-needed, healthcare initiative.”
The HFA is also concerned about suggestions that public service medical scheme subsidies could be an early source of revenue for the NHI.
“These funds are private money earned by government employees,” said Comrie. “The medical aid contributions paid by the government as an employer on behalf of employees to the Government Employees Medical Scheme (GEMS), Polmed and other schemes, therefore, cannot be regarded as government expenditure that is available for redistribution.”
See more from MedicalBrief archives:
Medical aid tax rebates to go to NHI
Budget 2018: Med scheme tax credits capped for NHI
Tax credits worth R25bn to be phased out to fund NHI