By Russell Rensburg, RHAP Programme Manager: Health Systems and Policy
In his inaugural state of the nation address, President Ramaphosa outlined a broad set of initiatives that focussed primarily on addressing the lapses in trust between the government and the people. The focus was on improving the credibility of the state and more specifically the profile of the governing party. It was lofty and contained few substantive plans to address our most immediate challenges. The true intent of the governing party’s agenda will be found in this week’s budget speech and if the last year’s medium policy statement is anything to go by, the Finance Minister faces a difficult task in balancing the growing demands on government to provide basic services with the ever-decreasing fiscal space. In this piece, we move beyond rhetoric and outline key areas that require immediate attention in this year’s budget.
In the 2017 Medium Term Budget Policy Statement (MTBPS) the Minister of Finance provided a stark overview of the South African economy. This overview, often referred to as the fiscal framework, summarises the various inputs and outputs that determine government’s ability to plan in a given context. Central to government’s work is its ability to raise sufficient revenue. This includes all taxes collected by the government, and interest income from cash balances which is deposited into the National Revenue Fund. Before monies can be distributed to the various government departments and provinces, debt servicing costs need to be deducted. The balance after interest is then distributed between national departments which make up approximately 47% of revenue. 43% of the total budget after interest is distributed to provinces by way of the provincial equitable share formula and the balance to local government by way of the local government equitable share. The equitable share in respect of provinces is calculated using a composite index consisting of six components that capture the relative demand for services amongst provinces. These components include Education (48%); Health (27%); Basic (16%); Poverty (3%); Economic (1%) and an institutional component, which makes up the remaining 5%. A particular challenge with the formula is that it is largely based on a population measure at a specific time, for instance, school enrolments in the case of education, and more concerning health care services utilization in the case of health. This is a problematic measure in the case of people living in rural communities who face significant unmet health needs due to the challenges gaining access to health care, and whom therefore under current funding are not accounted for in health budgets.
So, without getting too technical, it is clear that any movement in revenue collection has a significant impact on the state’s ability to deliver on its mandate. It is therefore alarming that in the tabling of the MTBPS the then Minister announced a downward revision in economic growth from a mere 1,5% per annum to a dismal 1% resulting in an under collection of just over R70 billion. The situation is exacerbated by the country’s declining sovereign credit rating which has the potential to increase debt servicing – already the fastest growing item in the national accounts.
Thus, as we start navigating towards a better future, it is important for the Minister and his advisers to note that despite the renewed optimism permeating our country, many challenges remain. More specifically, the successful implementation of the National Health Insurance will require at the very least a functioning health system that could go some way towards addressing the drivers of ill health. That being said, the right to health is much more than health care; instead, the right to health is an essential component to human dignity and development. In the recently released District Health Barometer, the difference in health attainment between rural and urban populations is particularly stark. For example, a young woman giving birth in the OR Tambo district in the Eastern Cape is twice as likely to die from complications during pregnancy than a woman giving birth in the Western Cape. Similarly, children in the Eastern Cape are more likely to die due to diarrhoeal diseases than are those living elsewhere in the country.
In considering the context of rural health, it is important to understand that pre-existing deprivation and vulnerability affects the impact of policy implementation. Former homeland areas, all rural, are the most deprived in South Africa in terms of the social determinants of health. This broader context affects the ability of people to access healthcare and attain good health. Historical neglect of the rural areas, poor roads and access to facilities, high unemployment, food insecurity, and school drop-out rates are examples of the broader context affecting health outcomes. A socially just response to healthcare would take cognizance of these factors and would seek to avoid further blows to people’s capabilities to live healthy lives. Failing this will result in a continued underinvestment in rural health which in turn will result in the widening of poverty and inequality. So, while there is a general recognition of the need to finance the overall shortfall in the budget through increased taxes, we hope the Minister considers the socio-economic impact of any increases in Value Added Tax. As noted by the Davis Commission on Tax, any increases in VAT due to its regressive nature is likely to have a greater impact on poor communities. For instance, the introduction of VAT on fuel is likely to increase transport costs for rural communities seeking health, deepening inequality of access.
That being said, adding additional resources to an increasingly inefficient system does not increase efficiency. Greater investment is needed in order to address inefficiencies within government as well as the management of resource allocation.
FIX THE WAY WE FUND HEALTH CARE
The implementation of the National Health Insurance has the potential to shape the much-needed transformation of the health care system which would ensure that quality healthcare is available to all, regardless of socio-economic status or geographical location. However, as with most things, the success of this project is reliant on an efficient public health system. Without healthcare workers, a health system cannot function. In a report commissioned by the Minister of Health investigating service delivery in public hospitals across the country, key findings included the on-going freezing of critical health posts, underinvestment in the maintenance of key infrastructure, including medical equipment, all of which has led to a deterioration in the quality of care delivered.
A key driver informing the underinvestment in health is the under-allocation of resources through the ongoing use of outdated utilisation data in the development of health budgets. To this end the Rural Health Advocacy Project (RHAP) has long argued for the reform of the provincial equitable share formula, and specifically for the inclusion of rural adjusters that would mitigate the increased cost of service delivery in rural provinces. These added rural costs are the result of the varied implementation context which is influenced by lower population densities, large distances between facilities and resulting diseconomies of scale. When adding the considerable cost incurred by rural communities in accessing health care, most notably transport costs, it is clear that non-consideration of rural cost drivers limits access to quality health services. Moreover, while the provincial equitable share formula is a useful distribution mechanism during times of plenty, it becomes less so when budgets are constrained. Linking the resourcing of health care to economic performance is tantamount to a deterioration of the provision of health care services when budget is adjusted downward as may well be the case in our current cycle.
In a joint sitting of the portfolio committees of health and finance investigating the coordination between the national and provincial departments, a number of provincial departments most notably the Eastern Cape, Kwazulu Natal and Limpopo provinces reported unfunded commitments in excess of R20 billion and growing. This suggests that despite nominal increases in health budgets, when adjusted for medical inflation, wage increases and expanding HIV/AIDS coverage, current provincial allocations for health are insufficient. Urgent reform is needed with regard to the allocation of resources for health, but more immediately, we need to protect the health service delivery platform. There is evidence that points towards high levels of unmet need and regression in access to health in some parts of the country.
We therefore call on the Minister to consider the provision of additional funding to protect health care spending to mitigate against any reductions in the health budgets as result of reductions to the equitable share. We further call on the Minister to address the burgeoning solvency crisis in provincial departments of health by availing emergency funding to clear close to R20 billion in accrued expenditure.
ADDRESS THE HRH CRISIS
RHAP has long advocated for rational and equitable approaches to the implementation of austerity measures. In our 2015 working paper on the causes and implications of the implementation of staffing moratoria, we argued that the causes behind the freezing of posts were primarily budget-related and due to the lack of clear guidance for the protection of critical frontline health posts. While this warning resulted in guidance from national treasury to protect critical posts, recent admissions from the Minister of health and evidence reported by the different provinces demonstrate that health departments did freeze and cut critical frontline health posts. With budget constraints cited as the causes, this has certainly led to mounting pressures on the health service delivery platform. Currently, there are over 40 000 vacancies in the health system. Little evidence is available as the distribution of these vacancies, and in the absence of fully costed HRH plans it is difficult to assess the impact of these vacancies on health system performance.
The Preamble of the Constitution of South Africa commits us to “Improve the quality of life of all citizens and free the potential of each person.” The purpose of this commitment is surely that a central goal of government shall be to use the levers available to advance this cause. The national budget is an opportunity to translate this goal into a program of action that uses the redistributive power of government spending to enable that. Unfortunately, when we consider the lives of ordinary people living in South Africa, the evidence suggests that while we have made some progress, the vast majority of our people continue to be trapped in a vicious cycle of underdevelopment driven by widening inequality. So, as we celebrate the centenary of Nelson Mandela, we have an opportunity to redirect our efforts towards the realisation of socio-economic rights for everyone, including for the marginalized populations of rural and underserved communities.
For comments, contact:
 National Department of Health. Health Ministerial Task Team Hospital Mismanagement and Poor Service Delivery Closure Report. 2017.
 National Treasury. Presentation to the Joint Sitting of Portfolio Committees on Finance and Health. 2017.
 National Department of Health. Presentation to the Joint Sitting Portfolio Committee on Finance and Health. 2017.