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New research by Econex shows that removing medical aid tax credits will make medical aid schemes too expensive for 22% of their recipients because it will be too costly.

The 2017 NHI White Paper calls for tax money paid to medical aid recipients as medical aid tax credits to be withdrawn and the money used to Fund NHI (National Health Insurance). The main function of the tax credit is to repay taxpayers for utilising the private healthcare sector.The research done by Econex evaluates the effect of tax credit on the cost of medical aid for existing members. 

NHI will aim at women, children, the elderly and people with disabilities will cost more than R69 billion over a four years according to Health Minister Aaron Motsoaledi. According to the research done by Econex the medical aid tax credits paid to the main members of medical aid schemes valued at R18.5 billion for the year 2014 to 2015. 

Econex’s research examines the degree of impact that tax credit has the cost of medical aid schemes for current members, in particular the recipients for whom medical aid will be too expensive if medical aid tax is removed.  If a medical aid has no dependents than then the total value of tax credit for the year will be R3 240 and if the member has 4 dependents then the annual total of tax credit value will be R12 966. By taking away the tax credits the price of medical aid immediately becomes higher. 

A table showing the impact of medical scheme tax credits on medical scheme contributions shows that medical aid tax decreases the amount of money spent per month per beneficiary  for group 1 and that 22.04% of a person’s household  would be used for medical aid with tax credit rather than 35% without tax credit.

Source: IES 2010/2011 (Statistics SA); SARS (2017); Econex calculations. 

In terms of affordability threshold, the standard of expenditure that a person will be think will be acceptable or medical aid members to pay for medical aid schemes, the monthly payments will be above the affordability threshold, if the tax credits are removed. NHI is expected to be implemented by the year 2025.