Health Minister Aaron Motsolaedi recently announced that medical scheme members are likely to lose their tax credits to help pay for the first set of benefits to be rolled out under National Health Insurance. The recently gazetted white paper outlines the following funding scenarios as detailed in the table below:
Alternative tax scenarios in 2025/26 to fund a R71.9 billion (2010 prices) NHI funding shortfall
The most preferred option for revenue generation for NHI will be through Scenario B which is predominantly funded through general revenue allocations, supplemented by: (1) a payroll tax payable by employers and employees, and (2) a surcharge on individuals’ taxable income.
As the NHI evolves, the tax treatment of medical expenses and medical scheme contributions will be reviewed. It is also expected that there will be a reduction in the need for medical scheme contributions and/or the level of coverage required. The resulting saving in tax expenditure could help to reduce proposed tax increases. With the implementation of NHI, the role of medical schemes in the health system must change. A key step in leading to this change is that the State will have to identify all the funding for medical scheme contribution subsidies and tax credits paid to various medical schemes and reallocate these funds towards the funding required for NHI.
What this essentially means is that the current tax deductions, which have a current annual tax saving of approximately R20 billion per annum, will be forfeited once the NHI is implemented to fund its implementation.
We will keep you informed as this policy evolves.