Commentary by Jill Larkan‚ head of healthcare consulting at financial advisory business GTC‚ on the medical aid tax credit announcement by the Finance Ministry's 2018 Budget Speech.

Following Health Minister Aaron Motsoaledi’s comments last year regarding the proposed removal of medical expense tax credits in order to fund the National Health Insurance (NHI)‚ medical aid members will have found some relief in Wednesday’s Budget Speech‚ which still accommodates this measure.

Medical expense tax credits are effectively used as a reduction of the tax payable by a household that contributes to a medical aid. In an effort to find funding for the government’s long proposed NHI‚ the Minister has alluded to redirecting this credit towards the government’s health budget.

As the President referred to in his State of the Nation Address‚ the Budget Speech provided more clarity on the funding of the NHI. An additional R4.2 billion was allocated to this initiative‚ funded by an amendment to the medical expense tax subsidy.

The amount of credits receivable by an average – two adults and two children – family for the 2018 tax year is R12‚168. This has been increased by 2.3% to R12‚456.

On the face of it‚ this might seem like an insignificant increase‚ given the level of medical inflation‚ as well as the average increases in this tax credit in previous years which has fluctuated between 5% - 6%. However‚ considering the overall size of the budget shortfall and the subsequent pursuit of revenue from various sources‚ medical aid members should be relieved that this credit was not removed completely.

This allows for the redistribution of some portion of the tax credit towards the funding of the NHI and other identified significant expenditure items‚ such as fee-free higher education.

This should give medical aid members some time to become accustomed to a complete phasing out of this tax credit‚ even though it may seem painful at the moment.

We look forward to receiving more clarity and detail on the implementation and funding of the NHI in the foreseeable future‚ particularly on how this is going to fit into the existing medical care landscape.