The department of health is working with the National Treasury on the imposition of thresholds for medical tax credits before the introduction of the National Health Insurance (NHI) scheme.
This is likely to affect only high-income earners in the short term as the department stressed in a court affidavit last month what was planned were “modest changes impacting high income earners only”.
It strongly rejected the assertion of NHI’s opponents that low- and middle-income earners would be targeted in the initial phases of the rollout of the scheme.
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
Their removal or limitation will increase the tax burden on medical scheme members and make private medical scheme membership unaffordable for many.
According to department of health deputy director-general for NHI Nicholas Crisp, medical aid 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.
Crisp answered questions by MPs on the roll out of NHI during a briefing on Friday by officials to parliament’s health portfolio committee on the department’s annual report for 2024/25.
“There have been discussions with the National Treasury. There have been lots of correspondence forwarded to the minister [and there were various exchanges of papers that have taken place between bodies outside government with government about the implications of the tax credits.
“The bottom line is that the state currently 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 the tax authorities to allow that money to be paid back to members of the public when that money is actually being spent for the delivery of their health services through the services of the NHI fund.
“Now that clearly cannot all happen at once (and 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 [namely] where would various thresholds be 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 in which he states that the government is not considering the removal of medical tax credits in the short or medium term and his recent statement in parliament confirming discussions with the Treasury are under way to systematically phase out these credits to fund NHI.
“Such inconsistency raises legitimate questions about transparency and policy coherence, given that the NHI’s financial framework is being challenged in court. The narrative that medical 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.
The introduction of NHI is hugely controversial and its introduction is facing numerous court challenges on constitutional and other grounds. In terms of the act the system will be introduced in two phases, between 2023 and end-2026 and 2026-28.
“We are on track for the five targets set out in section 57 which are the transitional arrangements for the NHI. Some of them have been fully implemented and others are in progress,” Crisp told MPs. “In terms of phase one as outlined in the act we can be fairly confident that we are not behind schedule.”
We are on track for the five targets set out in section 57 which are the transitional arrangements for the NHI. Some of them have been fully implemented and others are in progress.
— Nicholas Crisp
department of health deputy director-general for NHI
The second phase would involve getting the machinery of the implementation of the NHI starting 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 could not be awarded a budget by parliament.
Crisp also addressed the question of the digitisation of all medical records of the population as required by the NHI Act which would make the records accessible to all medical practitioners consulted. This complicated process was under implementation to ensure the interoperability of the systems of all medical facilities around the country.
“We are confident that the health patient registration system is now fully functional and we now need people to start using it as it is designed,” Crisp said. Very rapid implementation of hospital information systems was also taking place.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.