South Africa’s two main industry associations for medical schemes have called on finance minister Enoch Godongwana to keep medical tax credits in play and increase their value in the upcoming budget, saying they are a vital mechanism for ensuring scheme membership remains affordable for working families.
The department is pushing for medical tax credits to be phased out to help fund National Health Insurance (NHI), which faces legal challenges from a growing number of organisations, including the Board of Healthcare Funders (BHF,) and the Health Funders Association (HFA), which each represent about half the medical scheme market.
In 2025 the department briefed parliament on its plans to scrap the credits, starting with high-income earners and suggested the process could begin as early as April.
Medical tax credits are designed to ensure all eligible beneficiaries receive the same tax relief regardless of their income. They include a tax credit for medical scheme contributions, presently set at R364 a month for the first two members and R246 a month for each additional dependant, and a medical expenses tax credit for qualifying out-of-pocket healthcare expenditure.
The tax credits have remained at these values since the government’s 2022/23 financial year, which means they have shrunk in real terms.
“Medical tax credits are not a subsidy for the wealthy, they are a lifeline for ordinary South Africans to keep quality healthcare within reach,” said BHF MD Katlego Mothudi.
“When their value quietly declines year after year it is working households who feel the squeeze. If the government is serious about attaining universal health coverage, it cannot allow the stealth reduction in these credits to continue,” he said in a statement on Monday.
The BHF estimated that two-thirds of South Africa’s 9-million medical scheme beneficiaries belonged to low- and middle-income households, for which the tax credits offered critical financial support.
Eliminating the tax credits prematurely risked pushing 430,00-690,000 medical scheme members out of cover, said the BHF.
“It would be fiscally and socially counterproductive to dismantle existing funding mechanisms long before a fully operational alternative is in place,” said Mothudi. “At a minimum, medical tax credits should be adjusted annually in line with inflation to preserve their real value and protect affordability.”
The HFA said medical tax credits were designed to encourage people who could afford private healthcare to fund their own cover.
“This reduces pressure on the public health system and frees up capacity and resources for the vulnerable population. Similar policy mechanisms are used in countries such as Australia, Canada, Ireland and the US, where governments support private health coverage to maintain balanced and sustainable health financing systems,” it said in a statement.
The HFA estimated that removing the medical tax credits could force up to 884,000 individuals and their families to relinquish their cover, placing additional strain on an already stretched public health sector.
“This risk has been publicly acknowledged by the finance minister,” said the HFA, referring to Godongwana’s comment in 2025 that scrapping the medical tax credits would amount to an “attack on the middle class”.
He made his remarks at a press conference shortly before tabling the medium-term budget policy statement in parliament last November.
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