Medical aid for R180 a month

The Health Funders Association (HFA) has urged the government to retain medical tax credits for working households and allow medical schemes to offer benefits designed specifically for lower-income earners.

This could allow local medical schemes to offer primary care benefit options for as little as R180 per month for a family of four.

The HFA’s comments come after Finance Minister Enoch Godongwana said scrapping medical tax credits is not on the cards following his Medium-Term Budget Policy Statement on 12 November.

Despite the Health Department and Minister Aaron Motsoaledi floating the idea of phasing these credits out to fund National Health Insurance, Godongwana said no such plans are in place.

The Finance Minister said that while talks are ongoing, no decision has been made yet, and added that scrapping these credits would amount to an “attack on the middle class”.

The HFA welcomed these comments, agreeing with the minister that doing away with medical tax credits would harm the very people who pay the bulk of South Africa’s personal income taxes.

The organisation said this would disproportionately affect South Africa’s working and middle classes and place further pressure on a public health system already stretched beyond capacity.

“For millions of working households, medical tax credits are what keep monthly medical scheme contributions within reach,” the HFA said. 

It explained that South Africa’s tax credit system provides R364 per month for the main member and first dependant, and R246 for each additional dependant. Therefore, a typical family of four receives around R1,220 in monthly tax relief.

The HFA referred to an independent study from Genesis Analysis, which showed that up to 83% of employed medical scheme members earn below R37,500 per month, and 44% come from households that earn under R16,500.

In addition, medical scheme members pay 74% of all personal income tax in South Africa, contributing about R443 billion a year.

“For many middle-income households, that R1,220 a month is what keeps them within the safety net of a medical scheme,” HFA CEO Thoneshain Naidoo said. 

“Removing it would push nearly 884,000 people into the already overburdened public system.”

Naidoo explained that, because the credit is a fixed rand amount, it provides proportionally more support to lower-income earners. 

Therefore, removing it would directly reduce disposable income for working families by up to 10%, undermine affordability and trigger anti-selection, driving up contributions and destabilising the local healthcare system during the NHI transition.

An alternative

The HFA said a pragmatic solution is possible if the government retains medical tax credits for working households, caps them for higher-income earners and redirects these savings to lower-income groups.

In addition, the HFA called on the Health Minister to allow medical schemes to offer essential primary and preventative care benefits.

Specifically, the minister should allow schemes to offer affordable, regulated day-to-day primary-care cover explicitly designed for lower-income earners.

“A carved-out standardised primary healthcare package would offer a proven solution,” the HFA said. 

“Its design mirrors the first phase of NHI – primary care, prevention, chronic disease management, maternal care and mental health support – and it could be implemented immediately under existing legislation.” 

“Because this option would be delivered through medical schemes, it would fall under a regulated, not-for-profit environment that enforces community rating and social solidarity.”

The association said tax credits would make these primary care benefit options highly affordable, and used the following example –

• A family of four could pay R1,400 per month for a primary care option
• They would also receive R1,220 in medical scheme tax credits
• This would bring the net cost to just R180 per month, or about R45 per person 

The HFA said that, for a single parent with one child, the tax credit could fully offset the contribution depending on the option selected, resulting in a net cost of R0. 

“This is affordable, regulated primary care at virtually no impact on take-home pay,” it said.

The organisation claimed that this would also be easy to implement, as legal precedent for providing exemptions already exists.

This means that a standardised primary healthcare package would not require legislative amendments, only approval from the Health Minister.

“These options are a realistic, affordable step towards universal access. They keep people healthy, employed and productive while allowing public resources to be directed to the poor and vulnerable,” Naidoo said.

“Keeping tax credits in place is essential. But enabling the missing middle to have access to affordable and protected primary care is the real game-changer.”