Health Minister Aaron Motsoaledi says that there is no section in the National Health Insurance Act that forces medical aid members to drop their schemes, adding that the removal of medical aid tax credits is written into the NHI laws approved by Parliament.
Responding to parliamentary questions around the NHI and the plans to remove medical aid tax credits for about a third of medical scheme members, Motsoaledi attempted to shrug off concerns.
In October, the health department revealed that it was in talks with the National Treasury to start removing the medical aid rebate and funnel the ‘savings’ towards the NHI.
Deputy Director-General Nicholas Crisp said that the department was in conversation with the Treasury to phase out the rebate.
The department believes that R33 billion can be directed to the NHI through the cutting of the tax credit, which it says serves those who are “well off” at the expense of the poor.
While no strict timelines were given, talk of cutting what little taxpayers get back from the government sparked deep concerns in the healthcare industry.
The Board of Healthcare Funders (BHF) warned that removing medical aid tax credits would harm low-earning medical aid members in particular, making membership unaffordable for them.
Its own research showed that axing the rebate could force between 430,000 and 690,000 members off their medical aids.
It would also force many others to downgrade their cover, remove dependants or exit the system entirely, which would place an extra burden on an already overstretched public healthcare sector.
Motsoaledi was asked by DA MP Dr Karl Le Roux whether the department performed its own assessment of the situation.
Specifically, he was asked if the department knew the “total number of South Africans who would be forced to abandon their medical aids and access medical care through the public health sector following the removal of such subsidies and tax credits”.
However, the minister skirted the issue by saying that the NHI is not forcing anyone to leave their medical aid, and the removal of the tax credit does not force anyone to use public healthcare.
“The NHI Act has no section stating that people would be ‘forced to abandon their medical aids’,” he said.
“Nobody without a medical tax credit will be forced to ‘access medical care through the public health sector’. Scheme members and their beneficiaries will continue to choose between accessing private or public providers as they do now.”
The minister’s response appears to miss the crux of the question, which was whether or not the department had conducted any study or assessment on the removal of medical aid tax credits and the resultant impact on medical aid scheme members.
The minister also neglected to draw focus to the highly controversial and contested Section 33 of the NHI Act, which prevents medical aids from covering the same services that the NHI covers.
As has been the ongoing theme around the NHI, there is no indication of what the scheme will actually cover, but the section will effectively bar medical aids from operating as they do and pave the way for their potential removal.
Attack on the middle class
On the removal of the medical aid tax credits, Motsoaledi said that this wasn’t necessarily the minister’s position, but rather written into the NHI Act itself, which was passed by Parliament.
He referred to Section 49 of the Act, which deals with the source of funding for the scheme.
Under this section, the Act states that the NHI Fund will be funded through money appropriated annually by Parliament, sourced from general tax revenue, reallocation of funding for medical scheme tax credits and other taxes like payroll taxes and surcharges.
The removal of medical aid tax credits “will be done through a Money Bill to be published by the Minister of Finance, where all the relevant factors will be determined and taken into consideration,” he said.
For now, there is some solace for those who are on medical aid and still enjoying the small rebate they get.
Presenting the medium-term budget policy statement in November, Finance Minister Enoch Godongwana said there is currently no plan to cut the rebate.
Godongwana stressed that the people currently benefiting from medical tax credits form the core of the country’s personal income tax base—largely middle-class earners who already shoulder a significant portion of the tax burden.
Eliminating the credits, he warned, would effectively penalise this group at a time when households are already under severe financial pressure.
“The people who are currently receiving medical tax credits are the bulk of those contributing to personal income tax. Removing the tax credit will effectively be an attack on the middle class,” Godongwana said.
He added that while Treasury is in discussions with the Department of Health about possible funding options for the NHI, there is no alternative mechanism in place yet.
