The Board of Healthcare Funders (BHF) has written to Treasury director-general Duncan Pieterse asking for “urgent clarity” on the government’s plans to phase out medical tax credits to finance National Health Insurance (NHI).
The BHF is a medical scheme industry association and is one of the eight parties that have separately taken legal action against the NHI Act.
Its appeal to Treasury 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.
The initial target would be people earning more than R750,000 a year, according to the department’s deputy director-general for NHI, Nicholas Crisp.
His presentation shows scaling back medical tax credits in 2026/27 is expected to free up R11.3bn for NHI. The figure rises to R34bn the following year, suggesting the credits would be eliminated for all income groups by then, despite the stated plan to implement NHI over a 10-15 year period, said the BHF.
Rapidly scrapping the tax credits could leave millions of people without financial protection for medical expenses long before a viable alternative to medical scheme cover is in place, said the BHF.
“The removal of medical tax credits is not a technical adjustment. It is a policy decision with profound public interest implications,” said BHF MD Katlego Mothudi.
“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,” he said.
Medical tax credits are designed to ensure all eligible beneficiaries receive the same tax relief regardless of their income. They apply to medical scheme premiums and out-of-pocket healthcare expenditure. Medical scheme tax credits currently stand at R364 a month for the first two members and R246 a month for each additional dependant.
South Africans claimed R29.6bn in tax credits in 2023/24, of which only R5.4bn was claimed by people earning above R750,000 a year, according to Treasury documents.
It is not clear where Treasury stands on phasing out medical scheme tax credits, as it has not recently commented on the issue. It was not immediately available to answer Business Day’s questions.
The BHF said Crisp’s presentation to parliament was puzzling, as it was at odds with a recent affidavit he filed in legal proceedings over the NHI Act in which he said there was no intention of reducing the ability of lower-income medical scheme beneficiaries to retain membership before section 33 of the NHI Act comes into operation, which is projected to be 10 to 15 years away.
The only category at risk of losing tax credits are high-income earners, with a threshold of over R1m annual income, he said in papers.
Section 33 sharply reduces the role of medical schemes, limiting them to providing cover only for benefits that are not provided by NHI.
“This inconsistency is deeply concerning, particularly given the BHF’s and others’ legal challenges to the constitutionality of the NHI Act and the critical importance of transparency in decisions that affect millions of citizens,” said the BHF.
Medical scheme contributions already exceed reasonable affordability thresholds at lower income levels, said the BHF, citing analysis it commissioned from FTI Consulting.
“Removing the credit could make medical scheme membership unaffordable for between 430,000 and 690,000 members, forcing many to downgrade their cover, remove dependants or exit the system entirely.”
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