Health Cheque

N INTRIGUING aspect of the Budget tabled yesterday by Finance Minister Pravin Gordhan was his set of proposals for the financing of the National Health Insurance plan.

NHI is to be phased in over a 14-year period beginning in the current financial year and, although the concept has been welcomed, there has been concern in some circles about finance.

The new system, Gordhan reminded Parliament yesterday, would need funding over and above current public health allocations.

An additional R1-billion conditional grant has been allocated over the next three years to cover the cost of NHI pilot projects to be set up in “selected districts” this year and in 2013, and an additional R6bn will be needed in the 2014 financial year.

Proposals on the table for finance include an increase in the VAT rate, a payroll tax on employers, an income tax surcharge, and some combination of these. The National Treasury is also looking at user charges.

A payroll tax on employers will be seen by some as discouraging job creation at a time when job creation is supposed to be the nation’s top priority.

VAT is a quick and easily administered way to raise additional funds and, as such, is tempting for any government. But by its nature, it is a regressive tax on incomes – those with lower incomes pay a higher proportion of their income in tax on each product or service than those with higher incomes – and, as such, is something of an anomaly in what Gordhan called our “broadly progressive tax structure”.

In this respect, a surcharge on income tax is probably the most appropriate way to raise the money for NHI.

Gordhan referred yesterday to the need to achieve a balance in the funding of the NHI to ensure that the tax structure supported “economic growth, job creation and savings”.

But in the South African context, it is probably even more important to ensure that it supports redistribution.

It makes no sense to introduce a health system designed to provide “equitable health coverage for all South Africans” if it is funded in a way that does not reduce inequities.

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