As more details about plans to phase out medical scheme tax credits to fund the NHI are released by government, opposition from healthcare schemes and funders is mounting, with the Board of Healthcare Funders (BHF) now demanding urgent answers, notes MedicalBrief.
The BHF has warned that phasing out medical scheme tax credits will eventually make membership unaffordable for up to 690 000 people, while the Health Funders Association says the proposals are irrational.
News24 reports that the BHF has written to National Treasury DG Duncan Pieterse requesting clarity on recent government statements that the credits will be phased out – starting with higher earners – saying this would have “profound public-interest implications”.
Dr Katlego Mothudi, MD of the BHF, said 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.”
Citing an independent analysis it commissioned, the BHF said removing these credits could make scheme membership unaffordable for between 430 000 and 690 000 members, that these credits could be eliminated for all income groups as early as the beginning of 2029, even though the NHI itself is only expected to be fully implemented over 10 to 15 years.
This would leave millions of ordinary South Africans without cover for their medical needs long before a functioning alternative option is available, it argued.
The BHF also alleged that the plan to phase out the medical scheme tax credits contradicted a sworn affidavit to the High Court just weeks ago by deputy DG for Health Nicholas Crisp, where he said there was no intention in the short or medium term to remove the tax credits of low- and middle-income taxpayers.
Eliminating the flat-rate medical scheme tax credit (R364 a month) would eventually hit lower-income members hardest because the credit represents a far larger share of income and contribution towards affordability at the lower end of the income spectrum, the organisation added.
The BHF also pointed to household data from Stats SA showing that almost 30% of uninsured South Africans already use private healthcare providers as their first point of care. The implication is that should they lose their medical aid cover, it would merely shift the burden to an already overstretched public healthcare sector.
Thoneshan Naidoo, CEO of the Health Funders Association (HFA), was also strongly opposed to the plan, saying it lacked rational detail and consistency, according to Business Tech. “There’s a lot of new information coming out. In fact, it’s new today from what was, let’s say, last week,” he said.
For example, Naidoo referenced affidavits submitted by the department in several court cases against the NHI scheme, which contradicts what was presented this week.
“In the affidavits, it was originally said only people earning about R1m would have their medical tax credits removed.”
“Now, it is apparently going to be one-third of medical scheme members. So there are so many moving parts and pieces to it.”
Naidoo noted that the HFA has already filed multiple objections, including a supplementary affidavit opposing the consolidation and stay of existing NHI court cases.
“By last count, I think it was eight court cases currently against the introduction of the NHI,” he said.
Looking at the long-term roadmap presented for the NHI, Naidoo said it appears to be a decades-long project.
“Unfortunately, what I’ve seen is that by 2040, the budget is meant to reach R450 billion. Now, I agree that this a large number.”
“However, but let me give you context: today, the combined healthcare expenditure (public and private) is just under R600bn. So it doesn’t make rational sense. There’s no inflation, there’s no kind of rationality to it,” he said.
Naidoo said his own calculations suggest that the government plans to raise about R150bn in additional taxes over the next several years to fund the NHI.
“It would mean that personal income tax rates would have to increase by around 21% to 26%. Somebody who currently pays 18% tax would have to pay 23% tax,” he said.
He explained that medical aid tax credits serve a broader purpose in health systems around the world.
Across the world (including in Australia and South Africa), these subsidies are designed to take pressure off the public sector.
They allow those who can afford it to remain in private healthcare, freeing up public resources for the vulnerable.
“Hopefully, there will be an opportunity soon to sit down and discuss what a viable solution for South Africa is. But it’s definitely not this NHI – the financial model that’s been put on the table here would be catastrophic.”
The Treasury, meanwhile, has confirmed it is investigating the implications of limiting medical tax credits, and told Business Day it had “had engagements with the Health Department”. However, Finance Minister Enoch Godongwana had not made any announcements or stated any policy position on the issue.
Various potential implications were possible if the credits were reduced or removed, and “these are being investigated internally”, it said.
The issue has come to the fore after two presentations to Parliament last month in which the Health Department proposed its plans to scrap these credits, starting with high-income earners.
Last week it indicated phasing out medical tax credits could begin as early as April next year.
The Treasury drew attention to the fact that it had not increased medical tax credits in line with inflation in recent years.
The savings had been used to bolster the Health Department’s expenditure on preparation for NHI, but that had been done indirectly through the budget process rather than explicitly ring-fencing the savings for that purpose, it said.
The government provided R30.4bn in tax credits to medical scheme members in 2022/2023, and a further R9bn in tax credits for qualifying out-of-pocket healthcare expenditure.
Crisp said last week that the initial target would be people earning more than R750 000 a year. His presentation to MPs suggests that phasing out medical tax credits would shift R11bn to NHI in the 2026/27 financial year and R34bn a year after that.
However, critics say eliminating the credits will disproportionately affect lower-income households, older people and those with disabilities.
Business Tech – Bad news for medical aid members in South Africa
Business Day – Medical schemes demand clarity on plan to scrap tax credits for NHI
See more from MedicalBrief archives:
Richest medical aid members first to lose tax credits – Crisp
Changes to medical tax credits aimed at big earners – Crisp