Bad news for medical aid members in South Africa
The Department of Health provided a roadmap to the implementation and funding model for the NHI, which includes the eventual removal of medical aid tax credits.
However, stakeholders are strongly against this idea, and have argued that most of the members who receive the credits rely on them, and are not ‘rich’.
This follows a presentation by the health department to parliament earlier this week in which it indicated phasing out medical scheme tax credits could begin as soon as April next year.
The Standing Committee on Appropriations was presented with a potential scheme for generating the funding requirements for NHI over a 15-year period that includes a rapid withdrawal of medical scheme tax credits.
Thoneshan Naidoo, CEO of the Health Funders Association (HFA), is strongly against the government’s proposed plan to fund the National Health Insurance (NHI) by cutting medical aid tax credits, particularly for higher-income earners.
Naidoo explained that medical aid tax credits could be phased out for the richest third of people using medical aid, effectively meaning that if you use medical aid now, you would no longer get a tax credit.
The government intends to use the extra funds raised through this change to finance the NHI.
However, Naidoo said the proposal lacks rational detail and consistency. “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 R1 million 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.”
The finance model put forward would be catastrophic
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 afree that this a large number.”
“However, but let me give you context: today, the combined healthcare expenditure (public and private) is just under R600 billion. 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 R150 billion 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.
Responding to the argument that medical aid tax credits unfairly benefit wealthier South Africans, Naidoo rejected the assumption that medical scheme members are “rich.”
“There is a misnomer that medical scheme members are rich. 84% of medical scheme members earn less than R40,000 a month, and that’s not rich. Those are the people that actually receive the subsidy,” 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.
Naidoo also dismissed suggestions that ongoing court challenges are simply meant to delay the NHI’s implementation.
“It’s not about court cases. We have always wanted to engage with the government to put forward a solution for all 63 million South Africans, because we believe in equity and equality,” he said.
However, he argued that the NHI in its current form falls far short of international best practices.
“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.”
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