2014 BUDGET ALLOCATIONS – WILL THERE BE MONEY FOR NHI?

Monday, February 17, 2014
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Briefly, the 2012 budget speech noted that total health spending for 2012 was projected at R113 billion, which included an increase of R53 billion in spending on national health services since the fiscal year of 2007/2008. A R1 billion conditional grant was allocated to cover the costs of NHI pilot projects, which are currently in full swing, serving as an interim funding mechanism likely to last over the next five years until a permanent stream for funding is established.

The 2012 budget projected that R6 billion extra was needed to fund NHI in 2014/2015 and that there would be “substantial cost implications”, including a possible payroll tax, an increase in the VAT rate or a surcharge on individuals’ taxable income. “The fiscal and financial implications of health system reform, and alternative revenue sources, will be examined in the year ahead.” This left questions about where the government intended to raise the funds needed, and the implications of introducing or increasing various taxes.

When Minister Gordhan addressed Parliament in February 2013 even less was said about funding NHI, except that a new conditional grant would be introduced to enable the Department of Health and provinces to play a greater role in co-ordinating NHI reforms by contracting general practitioners and managing hospital revenue. It had been anticipated that a dedicated NHI tax of between 3.5% and 5% would be levied on salaries from 2012,  with the Minister stating that NHI development “will not place new revenue demands on the fiscus” in the medium term. He said that in the long-term the Department of Health and the Treasury anticipated tax increases to facilitate funding of NHI. This is currently being investigated, but the long awaited discussion paper, due in April 2012, has not yet been published.

The 2013 Budget Review reflected an increase in money allocated to health infrastructure, illustrating the government’s focus on improving public health care, health infrastructure and the training and development of health practitioners. It said that “medium-term priorities in health include infrastructure, the comprehensive HIV and AIDS treatment and prevention programme, and hospital revitalisation” and further that “progress in these areas will strengthen the public system, paving the way for the introduction of NHI.”  In furtherance of hospital revitalisation and in preparation for the rollout of NHI, the government combined several grants into the health facility revitalisation grant so that funds can be moved easily to where they are needed. Employment in public health has increased by 50 000 in the past five years and there is a strong focus on the development of primary health care.

As part of the major infrastructure projects underway, the government has allocated R450 million to 30 nursing colleges and R426 million for the upgrade of two district hospitals and three regional hospitals. Each provincial department was allocated R5 billion for primary health care spending of which R3.2 billion was earmarked to support clinics. In addition, a new indirect grant was set to enable the Department of Health to improve health care management and delivery of health infrastructure, also funding a portion of the NHI pilot projects which were launched in early 2012.
Strengthening equal access to healthcare is a goal which is only achievable with a properly functioning public health care infrastructure, and thus an initial focus on improving health infrastructure and management should be welcomed. At the launch of the pilot sites, the Department of Health stated that the 10 pilot sites would influence “how the service benefits will be designed, how the population will be covered and how the services will be delivered.”

Minister Gordhan had indicated that the Treasury had hoped to get a better idea of the costs involved in rolling out the NHI initiative from the pilot sites; however the Financial and Fiscal Commission reported to Parliament last year on a chronic under-spending of grants and a lack of auditing on the financial performance of those grants.

In April 2013 the Department of Health published a paper entitled “The First Eighteen Months”. The paper explained the integrated consultation process undertaken by the Department of Health since the launch of the Green Paper which will inform the White Paper which was set to be published in 2013 but which was also not published.

2013 has come and gone and South Africa is still awaiting the publication of the discussion paper on funding NHI as well as the publication of the White Paper on NHI. It is against this background that the country awaits the government’s plans for health spending in 2014.

It is unlikely that the 2014 budget speech will contain any dramatic announcements on NHI given the studiously incremental approach Treasury and government seem at pains to preserve. Equally though, in an election year government will not want to disappoint and NHI was somewhat of a “cause célèbre” at both Polokwane and Mangaung. Government may be tempted to say very little at all.