The Board of Healthcare Funders (BHF) has written to National Treasury seeking clarity on statements that the medical scheme tax credits may be phased out to fund National Health Insurance (NHI).
Dr Nicholas Crisp, the deputy director-general responsible for NHI in the Department of Health (DOH), confirmed in a briefing to Parliament that discussions with Treasury are under way gradually to withdraw medical scheme tax credits. This was reiterated in a DOH presentation to the National Assembly’s Standing Committee on Appropriations on Tuesday. According to the BHF’s statement released today, the DOH also confirmed that the phasing-out process will begin in the 2026/27 financial year, starting with wealthiest members.
The BHF said the same presentation indicates that the phasing-out will take place over three years, ending in 2028/29, which means that the medical tax credits will be eliminated for all income groups by the beginning of 2029, although the NHI itself is expected to be fully implemented over 10 to 15 years.
This disconnect, the BHF said, could leave millions of South Africans without meaningful financial protection long before there is a functioning alternative available.
The BHF, represents about 40 schemes and medical scheme administrators that serve some 4.5 million beneficiaries, said it has written to Treasury Director-General Dr Duncan Pieterse seeking urgent clarity on these statements.
It said the plan also appears to contradict Crisp’s affidavit to the High Court just weeks ago, in which he asserted there was “no intention, in the short or medium term, to remove the tax credits of low- and middle-income taxpayers”. This inconsistency is concerning, particularly given the BHF’s and others’ legal challenges to the constitutionality of the NHI Act, and the critical importance of transparency in decisions that affect millions of citizens.
Dr Katlego Mothudi, the BHF’s managing director, said: “The removal of medical tax credits is not a technical adjustment. It is a policy decision with profound public interest implications. Nearly 67% of medical scheme members come from previously disadvantaged communities. These are not the wealthy elite, they are teachers, nurses, security guards, and office workers doing their best to fund their own healthcare.”
The medical tax credits operate as a direct reduction in an individual taxpayer’s liability. The current allowances are R364 a month for the principal member, R364 for the first dependant, and R246 for each additional dependant.
Starting to phase out the tax credits for higher earners is also not without risks, the BHF said. Affordability constraints among this group may lead to benefit downgrades, reducing the income cross-subsidies that underpin medical scheme risk pools. Over time, this could raise contribution costs for all members and prompt some low- and middle-income beneficiaries to leave the system altogether, exacerbating inequities and undermining financial sustainability.
The BHF said its letter to Treasury warns that eliminating the credit will eventually hit lower-income members hardest because the credit represents a far larger share of income and contribution affordability at the lower end of the income spectrum, particularly for those with dependants.
The BHF said an independent analysis it commissioned showed that medical scheme contributions already exceed reasonable affordability thresholds among lower-income earners. Removing the credit could make medical scheme membership unaffordable for between 430 000 and 690 000 members, forcing many to downgrade their cover, remove dependants, or leave the system.
Additionally, recent household survey data from Statistics South Africa shows that nearly 30% of uninsured South Africans use private healthcare providers as their first point of care. This means that for many who lose their cover, the shift will not only burden the overstretched public sector but also increase their own out-of-pocket costs, the BHF said.
The BHF reiterated its commitment to universal health coverage but said this goal must be achieved through policies that protect, rather than erode, access to quality care for all South Africans.
‘Illustrative’ funding plan
In its briefing to the Standing Committee on Appropriations, the Department of Health (DOH) outlined an “illustrative” 15-year transition plan for implementing the National Health Insurance (NHI).
The plan would phase out medical scheme tax credits, redirect employer health subsidies, and pool other existing health-related funds into the NHI Fund before introducing new taxes in the early-to-mid 2030s. If fully realised, these measures could channel about R458 billion into the Fund by 2037/38.
The first funding phase would consolidate existing budget allocations, followed by the gradual removal of medical tax credits—beginning with higher-income members from year four—and the inclusion of government employer contributions and medical costs currently covered by the RAF and Compensation Fund. New tax-based revenue would be added later in the transition.
Crisp said the DOH and National Treasury are modelling various funding scenarios to assess impacts across income groups. The plan also depends on legislative changes and the creation of administrative and digital systems to support fund transfers.
As NHI services expand, medical schemes will no longer reimburse members for benefits available under the NHI, gradually narrowing their role. The DOH also cited potential savings from reducing private-sector administrative costs and fraud, estimated at more than R50 billion annually, as a further source of funding efficiency.
