Will unionised workers fund NHI?

Paragraph 12 of the policy paper on National Health Insurance says SA has a "two-tier healthcare system, which is unsustainable, destructive, very costly and highly curative or hospi-centric".

With executive medical aid costing over R3000 per member per month, I can buy that.

Paragraph 122 indicates that the cost of NHI (in real 2010 terms) will increase from R125-billion in 2012 to R214-billion in 2020 and R255-billion in 2025.

Paragraph 123 places the national health budget at R110-billion in 2012/13 (2010 prices) and medical scheme contributions at about R92-billion. This is more than R220-billion being spent on health services in SA, or 8.5% of GDP.

The logic behind the policy paper seems to be if we can swipe the medical aid spend and put everyone on NHI, then all will be winners. But hang on ...

Paragraph 26 states that 8.2million South Africans are reliant on medical aid at an average spend of R11150 per dependant. The remaining 42million South Africans are dependent on the healthcare system at R2766 per annum. The logic is, if SA can amalgamate the contributions and dependants, 50million South Africans will receive an average medical spend of R4400.

Let's be positive and assume that NHI will match the service level of medical aids. But an R11150 medical aid contribution only buys the most basic cover.

The national budget shows the health budget steadily growing at 12% per annum with no provision for the additional R103-billion implementation costs of NHI in 2012.

The national deficit for 2012 is forecast at R159-billion or 5.5% of GDP. In the current world economy that's some ask. And SA cannot just stiff NHI costs on top of that.

So, the suggestion from the national health lot is to increase VAT. In 2012 VAT is budgeted to collect R227-billion, or R16-billion per percentage point. So even if we increased VAT 2.5 percentage points, we would only get R40-billion extra. Not even 20% of the total cost of NHI.

We have already lost medical expense tax deductions with effect from next year, replaced by a rebate. Even if all 8.2million medical aid beneficiaries sacrificed the full rebate, that would only be R22-billion.

So, it all has to come from me and you. But how much will we pay? There are fewer than four million individual taxpayers already paying 35% of SA's tax. They cannot take the full cost of NHI as well. So they are going to have to look for contributions from the nine million or so who are employed but are below the tax threshold. Many of them are unionised. And that's where the proverbial is going to hit the fan.

• Lester is a professor at the Rhodes University Business School, Grahamstown.