Research by economics consultancy Econex looked at the impact of removing tax credits to medical schemes and then reallocating them to funding National Health Insurance (NHI) as suggested by the 2017 White Paper.
A report in Fin24 notes that tax credits are paid to principal members of medical schemes to “reimburse” them for making use of private healthcare. During 2014/15 the amount of tax credits paid to these principal members was approximately R18.5bn.
During 2015/16 the total annual tax rebate paid to a principal member without dependents came to R3 240. A rebate of R12 966 was paid to a principal member with as much as four dependents.
Econex focused specifically on how the removal of the medical scheme tax credits would make medical scheme membership unaffordable, if the affordability threshold is 12.85% of income.
Findings
For the poorest 20% of medical scheme members, tax credit reduces monthly contributions from R820.97 to R583.66. This reduces the proportion of household income allocated to medical aids from 35% to 22.04%.
For the wealthiest 20% of medical scheme members, the tax credit reduces the monthly contributions from R1 953.35 to R1 720.39. This reduces the proportion of household income from 6.29% to 5.50%.
For the poorest 20% of beneficiaries, the tax credit reduces the cost of medical scheme expenditure on average more than 40%. The cost reduction is an average of 13.54% for the wealthiest beneficiaries.
Almost half (49.07%) of the poorest beneficiaries will move above the affordability threshold, indicating that the poorer medical scheme beneficiaries are impacted the most by the removal of tax credits.
These findings indicate that a lot more research is required before proceeding with the NHI. It would make a lot more sense to address the deterioration in public healthcare over the last decade than proceed with a pie in the sky concept which has very little prospect of success. Surely the immediate needs of the poor must carry more weight than a badly assessed pipe dream?
