JOHANNESBURG - According to the Free Market Foundation, the Medium Term Budget Policy Statement that will be delivered by Finance Minister, Melusi Gigaba on October 25, is likely to deliver yet another blow to over taxed and struggling lower to middle income earners by announcing the removal of medical scheme tax credits (MTC). 

This follows the introduction of the Demarcation Regulations on 1 April this year, which ban primary health insurance products. Recent research by Econex (Research Note 46 August 2017) estimates that approximately 1.9 million people (21.8% of medical scheme beneficiaries) will lose their private medical scheme membership if medical scheme tax credits are removed. 
 
Proposing to scrap medical scheme tax credits is being seen by some analysts as a government ploy to get more money from taxpayers at the expense of the private medical care sector to fund the NHI.
 
Tax credits for medical aid contributions were introduced to encourage individuals to pay more towards their own medical expenses and not rely on publicly provided medical care. The policy that is now being reversed and is expected to negatively impact medical scheme members in all sectors, including government employees and union members. 
 
Eliminating tax credits connected to medical care will likely drive up the cost of medical scheme contributions, meaning fewer new members will join and those at the margin will drop out. Fewer people on private medical schemes and limited access to low cost insurance products will put pressure on the public sector. Removing MTC will affect all medical scheme members and effectively cap the number of citizens covered by private medical schemes if no new members join at the lower end of the market. Inevitably, the average age of members and risk profiles will rise and result in increased premiums for those who manage to remain in the market.
 
SARS documentation shows phasing out MTC could equate to medical aid members losing between R300 and over R1, 000 per month. While a single medical-aid holder would lose R303 a month, or R3,636 a year, the more significant impact for a family of four would be R1,014 a month or R12,168 pa.
 
The proposed mandatory payments into the central NHI Fund will likely crowd-out what is left of private insurance. Cash-strapped individuals may no longer be able to afford to pay both voluntary private insurance premiums and a mandatory NHI payment; those unable to pay will have little choice but to utalize public health services. 

- BUSINESS REPORT ONLINE