Picture: ISTOCK
Picture: ISTOCK

The Treasury has delayed plans to set up a National Health Insurance (NHI) fund, saying it wants advice from the Davis tax committee on the feasibility of proposals to adjust the medical tax credits to finance it.

Former finance minister Pravin Gordhan said in the February budget policy statement that an NHI fund would be established to support priority health programmes, and that more details would be provided in the medium-term budget policy statement (MTBPS), delivered by Finance Minister Malusi Gigaba on Wednesday.

At the time, Gordhan said it might be partially funded by a reduction in the tax credits provided to medical scheme members.

The Treasury now says more work needs to be done, and has published an analysis of the medical tax credit scheme, which shows more than half (56%) the total credits claimed in 2014-15 accrued to 1.9-million taxpayers with a taxable income below R300,000, many of whom were workers who belonged to medical schemes.

“Tax data indicates that the programme is well-targeted to lower-and middle-income tax payers,” it says in the MTBPS.

Although the Treasury does not directly say so, the data indicate that scrapping or sharply reducing the medical tax credits will hit people with lower incomes particularly hard, and potentially make their medical scheme cover unaffordable.

The National Treasury and the Department of Health are working on proposals to expand NHI services in a progressive and affordable manner,
Malusi Gigaba

Medical tax credits are primarily given for medical scheme membership, but people can also claim a tax credit for additional medical expenses that they pay out of pocket. The Treasury’s analysis shows that in 2014-15, 3-million tax payers claimed a credit on behalf of 8-million medical scheme members, resulting in a tax expenditure of R18.5bn.

The Treasury’s deputy director-general for intergovernmental relations, Malijeng Ngqaleni, said the government was still working on an NHI bill, and an interim mechanism to establish financing for specific health programmes.

The Treasury said in February that the NHI fund would initially support priority programmes identified by Health Minister Aaron Motsoaledi, which included maternal health services, improved psychiatric care and services for the elderly and disabled. It would also provide hearing aids and glasses through the school health programme.

“The National Treasury and the Department of Health are working on proposals to expand NHI services in a progressive and affordable manner,” Gigaba said in the MTBPS.

Consolidated health expenditure is set to rise 7.5% over the medium term, with provision made for the anticipated increase in the number of state patients on HIV/AIDS medication, as the government implements its new “test and treat” policy. That policy aims to start HIV/AIDS patients on treatment as soon as they are diagnosed. The government’s treatment programme has grown by about 400,000 patients a year.

Health expenditure will grow from R189.6bn in 2017-18 to R204.5bn in 2018-19, and will then rise to R220bn in 2019-20 and to R235.5bn in the outer year.

The Treasury says it is planning several changes to health conditional grants over the medium term. This includes the creation of a ring-fenced fund for maintenance, which will be funded by a portion of the health facility revitalisation grant and the infrastructure component of the NHI grant.

It also says it plans to introduce a new component to the comprehensive HIV/AIDS and TB grant to standardise the community health worker programme.


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