A national health insurance scheme funded by dedicated new taxes will be implemented for all South Africans from 2012.

Announcing the latest version of a plan that has been in the works for more than a decade, KwaZulu-Natal premier Zweli Mkhize yesterday released estimates showing the health department would need an additional R11-billion in the first year.

The scheme - to be implemented over 14 years - would guarantee a full range of healthcare services to everyone, regardless of their ability to pay, and is intended to make some private-sector facilities available to people currently denied access to private hospitals.

"Given the financing resources that South Africa commands, NHI is affordable," Mkhize, who is chairman of the ANC's sub-committee on the issue, said at the party's national general council meeting.

The forecast initial increase in the government health budget of R117-billion for 2012 is nearly four times the amount the government said it could not afford to pay public servants to end the recent strike. It is seven times the cost of the eventual settlement, which the government said would necessitate cuts in other spending.

Health's share of government spending would have to increase by a fifth from 12% to 14.5% for NHI.

Economists have warned South Africans to brace for significant tax increases to fund the new plan.

Olive Shisana, chairman of a ministerial advisory committee on NHI, said all South Africans would have to be members of the scheme and everyone with an income would have to contribute. No one would be obliged to use its services.

Private hospitals would be encouraged to join the system, but would not be obliged to do so, she said.

Individuals would be free to buy private medical insurance and to go to hospitals that did not participate in the scheme.

NHI members will be free to decide which participating clinic or doctor in their area to register with, but will not have any choice about the specialists or hospitals they will be referred to if the clinic could not deal with their illness.

Medical treatment will be free at the point of treatment.

"Given the state of healthcare in South Africa, we cannot afford not to have a national health insurance scheme," Mkhize said.

Shisana, a former director-general in the department and currently president and CEO of the Human Sciences Research Council, said Finance Minister Pravin Gordhan had given the scheme the green light and was working with planners on a funding plan.

The biggest portion of the cost of NHI would come out of the existing health budget, she said. The rest would be paid for by one or more of the following: a ring-fenced VAT increase, a surcharge on income tax, a special payroll levy and the abolition of tax exemptions for medical costs.

"We know exactly what it will cost to operate the NHI, but we have not run the numbers on what it would mean to taxpayers," Shisana said.

She added, however, that the NHI contributions would be lower than current medical aid contributions for most people.

Mkhize and Shisana said South Africa had been massively set back by consistent underspending on health infrastructure between 1997 and 2007.

Mkhize said existing facilities would need significant and expensive upgrading over the next year to 18 months.

Efficient Group chief economist Dawie Roodt said a total tax increase of about 10% might be effected.

"That's a lot of money. We can't afford this; R128-billion is a massive amount and our social expenditure bill is already far too large," he said.

"Our middle-class is already over-taxed."

Investment Solutions econ-omist Chris Hart said South Africa could see a decline in the availability and quality of skills in the health profession.

"The country may be in danger of losing a skilled set of health professionals who may not want to work under this insurance," he said. - Additional reporting by Zandile Mbabela