Extra R1,220 per month tax for one group of people in South Africa
The implementation of the National Health Insurance (NHI) scheme in its current form could have severe financial consequences for millions of South Africans, particularly those who are already paying for private medical cover.
This was reaffirmed by recent data published last month by the Health Funders Association (HFA) in partnership with Genesis Analytics, an independent economic consultancy firm.
The data showed that the scheme could more than double personal income tax rates and lead to a significant loss of disposable income for medical aid members, without guaranteeing any improvement in healthcare outcomes.
The HFA, which represents medical schemes covering over half of all people on medical aid in South Africa, has launched a legal challenge against key parts of the NHI Act.
While the organisation supports the principle of universal healthcare, it argues that the current version of the NHI is unaffordable, unworkable, and unconstitutional.
“South Africa needs a healthcare system that delivers equitable, quality care to all. We fully support that vision,” said Thoneshan Naidoo, CEO of the HFA.
“However, in its current form, and without private sector collaboration, the NHI Act is fiscally impossible and operationally unworkable, and threatens the stability of the economy and health system, impacting everyone in South Africa.”
To test the viability of the NHI, the HFA commissioned Genesis Analytics to model different scenarios and funding assumptions.
The report showed that implementing the NHI as envisioned would require a 115% increase in personal income tax (from an average of 21% to 46%) just to maintain the care that medical scheme members currently enjoy.
As a result, lower-income earners could see their tax rates jump from 18% to 41%, while the highest earners would face marginal rates of up to 68%.
Genesis also considered a scenario where public and private health expenditures are pooled. Even then, income tax would still have to rise by 47%, from an average of 21% to 31%.
Double blow for medical aid members
At the same time, medical scheme members would receive 43% less healthcare than they currently do, by paying 1.5 times more tax for 43% less healthcare.
Despite the immense tax burden, there is no guarantee that the NHI would deliver better outcomes.
“The proposed model offers no guarantee of improved outcomes, while restricting the mechanisms that currently drive quality and innovation in healthcare,” Naidoo added.
The HFA’s legal action is not aimed at blocking reform but at ensuring that any national health initiative is grounded in sound constitutional principles, economic feasibility, and respects individual choice.
“We continue to advocate for a more inclusive, hybrid funding model that incorporates medical schemes in NHI. We believe such a model would expand access to care while protecting the rights of all South Africans,” said Naidoo.
In addition to the massive tax implications, the NHI would also result in the loss of medical scheme tax credits, a key mechanism that helps lower- and middle-income households afford private healthcare.
According to HFA Chairperson Craig Comrie, these tax credits are essential for many South Africans and are a key factor in their ability to afford cover.
He highlighted that the loss of these credits, worth R1,220 per month or R14,640 per year for a family of four, would not only hurt household budgets but also drive more people onto the already overstretched public health system.
“For some families, this would make private healthcare cover unaffordable, transferring at least 400,000 to 700,000 more people onto an already overburdened public health system,” said Comrie.
NHI will impact working-class households the most
He also stressed that medical scheme members are already contributing significantly to the public healthcare budget, despite not using it.
“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,” he explained.
While there has been speculation that medical tax credits could be scrapped to help fund the NHI, Comrie pointed out that only the Minister of Finance can introduce such changes through a Money Bill.
“The NHI Bill has no power to implement tax changes. Should it become necessary, the HFA will strongly oppose any proposed legislation to this effect through all available avenues,” he said.
The Genesis model also explored whether value could be extracted through greater efficiency.
Even under optimistic assumptions, such as a 45% reduction in private sector costs, the model found it would still be impossible to fund the NHI without extreme tax increases.
For example, raising VAT from 15% to 36% would be necessary if the government sought an alternative source of funding, a scenario HFA said is entirely unrealistic.
The report also highlighted the diversity of medical scheme members, countering the perception that only high-income, white South Africans benefit from private healthcare.
Over 68% of medical scheme members are Black, Indian, or Coloured, and up to 83% earn less than R37,500 per month, meaning the proposed changes would disproportionately impact working-class families.
As Comrie warned, removing medical aid tax credits would effectively reduce household income and stifle what little disposable income remains to stimulate the economy.
Loading ...