Close Menu
Money 101
  • Business
  • Lifestyle
  • News
  • Wealth Creation

Newsletter

Get the financial tips, offers and more

What's Hot

Critical Questions About Funeral Cover

September 19, 2024

Mortality Benefits

September 19, 2024

How do You choose a Medical Plan?

October 2, 2023

3 increases in medical rates in 17 months = 27%!

Sponsor: Ubuntu CapitalUbuntu CapitalOctober 2, 2023
Friday, June 13
Facebook X (Twitter) Instagram
Money 101
  • Business
  • Lifestyle
  • News
  • Wealth Creation
Money 101
Home»Lifestyle»Medical Aid or a Home?
Lifestyle

Medical Aid or a Home?

EditorBy EditorSeptember 5, 2017Updated:September 5, 2017No Comments4 Mins Read
Facebook Twitter Pinterest LinkedIn Tumblr WhatsApp VKontakte Email
Share
Facebook Twitter LinkedIn Pinterest Email

The cost of a medical aid plan has always been expensive, but it has now reached the absurd where the monthly premium for a family medical aid plan is more than the monthly cost of an average home bond, but there’s more bad news on the horizon. Government already is under pressure to collect more taxes from a rapidly dwindling tax producing base and this new form of stealth tax is going to be a shocker 

 

Government’s plan to ditch medical aid tax credits is expected to force nearly 2-million people into the already overcrowded state health system.

If the tax credit is removed‚ 20% of medical aid users will no longer be able to afford it‚ a leading economics consultancy warned in a study published on Friday.

It would mean 1.9-million of the 8-million medical aid members‚ including children‚ will drop out of the private healthcare system.

This is according to an analysis by Econex‚ a Stellenbosch-based economics consultancy.

When the new National Health Insurance policy document was released in July by Health Minister Aaron Motsoaledi‚ he said he wanted to remove the tax credit to users‚ which amounts to R20bn.

People on medical aids get a tax reduction of R3‚636 a year — or R303 a month. A person with a dependent on the medical aid would pay R606 less tax a month.

At the time Motsoaledi said the tax credit was unfair.

Author of the Econex analysis‚ economist Dr Paula Armstrong‚ explained the rebate: “The thinking was you have alleviated some pressure on the state [system] so this is your reimbursement.”

Using detailed data from the Income and Expenditure Survey‚ which asks people about spending on health‚ she worked out that the richest 20% of South Africans spend a maximum of 12.85%% on medical aid premiums and additional health costs such as visits to doctors‚ physiotherapists and dentists that are not paid for by medical aid.

The lowest 20% of medical aid users pay 22% of their salaries just on medical aid premiums.

The removal of the tax credit would push the poorest medical aid owners into spending 35% of their salary on the medical aid premium alone. This would be unaffordable as premiums would then “become excessively expensive”, said Armstrong.

The NHI’s aim is to improve health services and access to everyone‚ especially the poor.

“The removal of the tax credit affects the poorest [medical aid user] and that is the opposite of what NHI intends to achieve.… This perpetuates inequality‚” Armstrong said.

Frans Cronje‚ CEO of the South African Institute of Race Relations‚ said the plan to remove medical aid tax credits was secondary taxation‚ with the government finding a way to get another R20bn in taxes.

But he warned this was a short-term solution to a weakening economy and lower growth and lower tax revenues.

“Instead of structural reform in order to position SA’s economy as competitive and improve growth and tax revenues‚ government is delaying the inevitable by finding extra taxes‚” Cronje said.

“This is unsustainable and it is going to end badly.”

The middle class had seen sharp drops in living standards and could not afford to lose the tax credit‚ he said.

The first 75% of a salary goes to debt before all income earned after tax‚ he said.

Motsoaledi said in June that medical aids would not exist when the NHI was complete: “Once the NHI is up and running‚ what reason will you have to still keep medical schemes? It’s what they call a mandatory prepayment of care‚ that NHI. This means once the law is passed‚ it affects all citizens in the country; they have to belong to it‚ they don’t have a choice.”

Armstrong warned that eliminating the private sector would not improve the health system.

“You need to leverage what the private sector offers to achieve the NHI.”

 

Should I save or invest? What is the difference, which one is right for me?

Share. Facebook Twitter Pinterest LinkedIn Tumblr WhatsApp Email
Previous ArticleStressed Out to the Max
Next Article 5 Essential Skills to Help you Sell More
Editor

Related Posts

19 Clever Ways to Eat Healthy on a Tight Budget

October 31, 2019

Pros and Cons of Buying and Renting a Home

October 31, 2019

How to save 4 a car

October 31, 2019

Medical Aid Increases 2020

September 29, 2019
Our Picks

How am I able to be Tax Compliant?

May 23, 2021

Who may and how do you apply for business rescue?

May 31, 2021

What is the Difference Between Compulsory and Discretionary Savings?

June 8, 2021

Momentum Health Increases 2022

October 28, 2021

Subscribe to Updates

Get the financial tips, offers and more

Don't Miss
About Us
About Us

Money 101 is your source of Personal, Financial, Business and Lifestyle educational articles which is brought to you by Adarna.

Visit Adarna: Adarna.co.za
Privacy Policy: Click to View

Our Picks

How am I able to be Tax Compliant?

May 23, 2021

What is the Difference Between Compulsory and Discretionary Savings?

June 8, 2021

How to apply for a social grant

May 31, 2021
© 2025 Brought to you by Adarna.

Type above and press Enter to search. Press Esc to cancel.