WHAT IS THE FINANCIAL IMPACT TO ORDINARY SOUTH AFRICANS?

For employees enrolled in a registered medical aid as per the Medical Schemes Act, the medical credits play a crucial role in reducing the monthly PAYE amount, a standard practice in most payrolls. This, in turn, leads to an increase in the employee's net take-home pay.

Following the February 2023 Budget Speech, it was announced that the monthly medical aid credits applicable for the 2024 year of assessment (March 1, 2023, to February 29, 2024) are as follows:

- Principal member: 364

- First dependent: 364

- Each additional dependent: 246

The elimination of these credits would result in a significant reduction in disposable income for households. For a family of four, the loss would be R1,220 per month or R14,640 annually. 

IMPACT ON LOWER-INCOME EARNERS

The medical aid credit system aimed to provide fair tax reductions across all income levels and tax brackets. Lower-income earners, often able to afford only basic medical aid or hospital plans, would be most affected. The removal of credits might force them to reconsider membership due to higher monthly PAYE amounts, resulting in less disposable income.

LARGE INCREASES IN COST OF MEDICAL AIDS

Steep annual increases in medical aid costs, typically implemented at the start of each fiscal year, could further burden individuals. Members may contemplate downgrading plans or even canceling memberships due to financial constraints, particularly with these annual increases not keeping pace with inflation and the additional tax burden.

IS NHI TO BLAME?

The proposed change in medical tax credits was motivated by the belief that these credits primarily benefit those with medical scheme coverage or out-of-pocket payments, excluding the economically disadvantaged. The intention is to consolidate the funds to benefit all, especially with the role of medical schemes and out-of-pocket payments diminishing under the National Health Insurance (NHI). The implementation of this change raises questions about its effectiveness in funding the NHI program from an already financially burdened individual tax base.

IMPACT ON MEDICAL AIDS?

Considering the financial challenges faced by many South Africans, will medical aid be the next luxury to be sacrificed?