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In the Budget Review document, it said funding options will require funding over and above current budget allocations to public health – which this year amounts to R122 billion - with funding options including an increase in the rate of VAT, a payroll tax on employers, a surcharge on the taxable income of individuals, or some combination of these options.

"Achieving an appropriate balance in the funding of National Health Insurance is necessary to ensure that the tax structure remains supportive of economic growth, job creation and savings," the document said, adding that a discussion paper would be published by the end of April this year.

Meanwhile, the document said that the first five years of National Health Insurance will focus on strengthening the public health system in preparation for the new system.

During 2012/13, it said that pilot sites would be established in selected districts to lay the foundations of National Health Insurance focusing on improved facilities, skilled managers and re-engineering of primary health care.

Included in this year's Budget is a new conditional grant for these pilot projects with allocations amounting to R150 million, R350 million and R500 million  over the Medium term Economic Framework period.

It is expected that the April discussion paper will also explore the role and implications of co-payments or user charges under certain circumstances – "for example to limit overuse and risky behaviours".

Go to Budget 2012 Special Report