MEDICAL AID TAX CREDITS MAY GO

Plan mooted to direct this money to National Health Insurance Fund

AS CONSUMERS face increases in medical aid rates in the coming year, they also face the prospect of losing the tax credits they currently enjoy for paying for private health care.

This is according to the National Health Insurance (NHI) presentation made by the National Department of Health to the National Council of Province’s standing committee on health and social services this week. The department said the funds used to reimburse medical aid scheme members every year would instead be fed into the NHI Fund.

Explaining the matter on TV news channel eNCA, Nicholas Crisp, the deputy director-general for the NHI at the Health Department, said the idea of shifting funds from the wealthy to the public system had been an ongoing discussion for years.

“Neither of these systems is efficient, it’s not effective, and we spend a lot of money considering the poor outcomes that we get. We need to be far more organised and operate in a far more cohesive way if we are going to achieve outcomes for everyone in the community.

“The tax credits are just one method and this was mooted, in fact discussed, several years ago that instead of giving a couple of hundred rand a month to wealthier people, middle-class and upper-class people, if that money were to move, instead of giving it as a credit, into the public system, we would have additional money to enable the public sector to fix some of the things that are broken at the moment,” he said.

South African Institute of Taxation CEO Professor Keith Engel said it was clear that the Department of Health was moving ahead with the NHI despite opposition on all fronts. Engel said there had been repeated discussions on eliminating the tax credits for medical aid.

“They have been having that on the table for more than 10 years. No surprises there, they will continue to push,” he said.

Engel said while it remained to be seen if the Treasury would follow through with the move, “what will fund NHI is a heavy load of new taxes, none of which we can afford, a battle for another day”.

Economist Dawie Roodt said he doesn’t have a problem with taking away the tax break on medical contributions in theory, but that should be offset by a general lowering of taxes.

“Theoretically the taxpayer should not get a tax break for medical contributions. There should not have been a tax break for your medical contribution in any event or your medical expenses. A tax system is supposed to be neutral and this is an example of non-neutrality.

“The issue here is that the typical middle-income taxpayer is hugely overtaxed already and the minister of finance has indicated that he will increase taxes again and it will obviously be on the same people.”

Roodt expressed concerns about NHI, saying it would be another money pit and a disaster.

Professor Irrshad Kaseeram, from the University of Zululand’s economics department, said given high medical costs, rising inflation and high living expenses, many South Africans would be affected.

“That means much less spending in the economy by the middle class, that through the multiplier effect means less consumption, employment and GDP growth.

“This does not augur well for South Africans’ well-being over the medium term, especially the poor.”

When approached for comment regarding the issue of tax credits, Bonitas Medical Fund said it was still deliberating on the issue.

Discovery Health Medical Scheme had not responded by the time of publication.