5th BEMF meeting: BEMF urges government to take decisive action to resolve the crisis of funding for health care.

The 5^th meeting of the Budget and Expenditure Monitoring Forum heard that funding for public health care in the Eastern Cape and Gauteng were in crisis and discussed what needs to be done to resolve many of its causes. The key points of discussion and findings of the meeting were:

The substantial overspending on both the Eastern Cape and Gauteng health budgets in 2010/11, due largely to the higher than budgeted employee costs
This overspending has contributed to large budget deficits in both provinces that have resulted in significant real decreases in the allocations for goods and services and infrastructure. This will result in further overspending and the rationing of essential basic services
There is an urgent need for the government to peruse the promised review tax incentives for members of private medical aid schemes. These incentives in their current form perpetuate inequities in funding between the public and private health care sectors.
The government must ensure the proclamation of Chapter 6 of the National Health Act (No. 61 of 2003), which deals with the functioning of health establishments such as clinics and District Health Centres (DHC). Of particular importance are those sections that deal with the establishment and functioning of clinic and DHC committees. In this regard it is essential that legislation be introduced at the provincial level that provides for the establishment and functioning of these committees. This is essential in fostering public participation in the governance of health care.
The BEMF believes that there must also be greater civil society participation in decision-making structures more generally. To this end the BEMF will be writing to the Minister of Health to find out how it can become more actively involved in national and provincial consultative health forums and observe national and provincial health council meetings.

On 1 April 2011 the Budget and Expenditure Monitoring Forum held its 5^th meeting in Johannesburg. The meeting was attended by more than 30 individuals from Community Based Organisations (CBO), Non-Governmental Organisations (NGO), labour movements, academe and government. The participation of officials from both the Eastern Cape Department of Health and the Gauteng Treasury was welcomed and showed a clear commitment by government to engage with civil society on issues of mutual concern.

The aim of this meeting was to develop an understanding of the budget crises in the Eastern Cape and Gauteng provinces. The meeting also discussed ways in which civil society could participate in the management of public health care in these provinces and ensure that the resources available to provincial departments are used in an efficient, effective and accountable manner.

The BEMF is concerned about the ongoing inability of the government to resolve issues that lead to overspending and provide appropriate support to provincial departments of health to ensure that services are not compromised by funding shortfalls. While we believe that there is an urgent need to improve provincial financial management systems, there are a number of issues that can only be resolved at a national level. The proclamation of key aspects of Chapter 6 of the National Health Act and the revision of tax incentives are two such issues, which were discussed at the meeting.

The crisis of funding for health

Over the last three years several provincial departments of health have overspent on their budget allocations. This overspending has not been managed appropriately and has resulted in the rationing of services. This was most clearly illustrated in 2008 when the Free State Department of Health placed a moratorium on initiating new patients on Antiretroviral Therapy (ART) due in part to the shortage of funding. Overspending and its consequences are not limited to the Free State though and provinces such as the Eastern Cape and Gauteng continue to face many of the same challenges.

The Eastern Cape [1]

Dr. Siva Pillay, Head of the Eastern Cape Department of Health, gave a candid presentation at the meeting. This presentation revealed a number of worrying trends in the funding of public health care in the province. Of particular concern was the department’s overspending on its budget of R1.6 billion for the 2010/11 financial year. As a result of this overspending, as well as an insufficient 2011/12 budget allocation, the department started the financial year with an estimated budget deficit of R2.4 billion.

As in previous financial years, this overspending was largely due to unfunded human resource payments relating to the Occupational Specific Dispensation (OSD) and the Human Resource Operational Project Team (HROPT). Both interventions are mandates beyond the control of the provincial department and need to be catered for through additional allocations from Treasury.

The increasing cost of employment within the department has resulted in the proportion of the budget that goes to employee remuneration increasing to more than 63%. This increase has resulted in the crowding out of funding for both goods and services and infrastructure in 2011/12 and will see allocations decreasing by 8.19% and 21.62% in real terms respectively. These decreases will once again seriously compromise the department’s ability to develop and maintain infrastructure and provide medicines and medical supplies to health facilities.

Dr. Pillay revealed that these budgetary pressures are compounded further by a number of other systemic challenges. These challenges include:

Inadequate budget and expenditure management due to often inaccessible and complex financial management systems;
Per capita allocations from Treasury that do not take into account the actual cost of service delivery;
Poor provincial infrastructure relating to the provision of roads, water and electricity has meant that the ECDoH has had to supply generators and tanked water in order to sustain service delivery, which has dramatically increased the cost of service delivery.
High vacancy rates in critical posts; and
Rampant fraud and corruption, with financial losses currently totalling an estimated R800 million

Dr. Pillay presented a number of interventions that are aimed at managing these challenges over the medium to long term, which will involve extensive restructuring of the health system in the province. These interventions will, however, only be effective if the department receives appropriate support from both the National Department of Health and Treasury.

Gauteng [2]

SECTION27’s analysis of the Gauteng health budget showed that that department faces many of the same challenges as the Eastern Cape. Their analysis revealed that the Gauteng Department of health has overspent on its budget for 2010/11 by approximately R1 billion. As with the Eastern Cape, this is largely due to the higher than budgeted cost of employment caused primarily by the OSD.

Again, the increasing cost of employment, without appropriate increases to the allocations for this purpose, has resulted in significant decreases in funding for goods and services (e.g. medicines and medical supplies) and infrastructure such as buildings. When inflation is taken into account, these allocations will decrease by 2.69% and 25.72% respectively.

It is especially troubling that these decreases will reduce, by more than 22%, the amount allocated to the purchase of medicines and medical supplies at tertiary hospitals, such as the Charlotte Maxeke and Helen Joseph hospitals. In the past, such budgetary reductions have been directly implicated in the unnecessary deaths of patients at these facilities. Based on SECTION27’s assessment, it appears likely that these facilities will again have to ration services should the department not receive additional funding for the purchase of goods and services at these facilities. This will undoubtedly compromise the quality of care these facilities are able to provide.

It was made clear in both the presentation and the analysis that, in the current funding environment, it is unlikely that either department will receive significant increases in their allocations in the near future. It is therefore necessary that these departments, as well as government departments more generally, find ways to maximise their available resources.

Essential to the maximisation of available resources is the costing of health care and primary health care in particular. Not only does this need to be done to ensure the efficient and effective use of resources, but also to ensure their equitable distribution between urban and rural areas.

There is also an urgent need for departments to clamp down on rampant corruption and financial mismanagement. Those found to be involved in illegal activities must be criminally charged. Without the proper management of available resources, provincial departments can never hope to make best use of what is available to them.

Tax Incentives for members of private medical aid schemes

The forum discussed the urgent need for the government to pursue its promised review tax incentives for members of private medical aid schemes. While we understand that these incentives are intended to encourage individuals to join private medical schemes in order to decrease the burden on the public health system, we believe that these incentives in their current form actually promote inequity.

Each year the government returns approximately R15 billion to taxpayers in the form of tax deductions for medical aid contributions. This means that in essence the government is subsidising nearly 20% of the cost of private health care, which is estimated at a little over R80 billion each year

It is unconscionable that tax revenue should be used to subsidise the private sector at current levels. If we accept that more than 50% of all funding for health care in South Africa is currently consumed by the private sector which only provides services to about 15% of the country’s population, then the current model makes no sense.

Calls for review are not new though and as far back as 2002 the Taylor Committee Report on social security reform recommended the revision of tax incentives for the purchase of private medical aid as it runs counter to South Africa’s health policy objectives and enhances inequity.

The government has finally committed to reassessing the current system and has stated that this process will start over the next year. During the tabling of the national budget in February this year, Finance Minister, Parvin Gordhan, announced that the government would be reviewing the current system and proposed the introduction of a flat tax credit for both high and low income earners, rather than the current system of tax deductions for medical aid contributions. The minister argues that this will be a more equitable as it provided equal benefit to all taxpayers regardless of their income.

The BEMF welcomes the proposed review of tax incentives, but the government must ensure that any revision of the system must promote equity in the system on the whole and not only for taxpayers and the users of private health care. Any amendment must result in the equitable distribution of financial resources for health care.

The Minister stated that a discussion document on the revision of tax incentives would be released by the end of February. This has not happened and there is no indication of when it will be available. The BEMF will be writing to the minister in the next few days to find out when the discussion document will be released and what provision is being made to ensure public participation in the process.

Realising the promise of the National Health Act

The Forum heard that Chapter 6 of the National Health Act (No. 61 of 2003) has yet to be proclaimed and that there are currently no regulations that provide for its implementation. This chapter is key to the functioning of health facilities. Of particular importance in this regard are the sections that deal with the establishment of hospital boards and clinic and community health centre committees.

The forum raised concerns around the government’s failure to ensure that provincial legislation, which governs the establishment and functioning of clinic and district health centre committees, is formulated and promulgated. This legislation is a requirement of the National Health Act (Chapter 6, S. 42). Without this legislation, clinic and district health centre committees cannot make a meaningful contribution to the management of healthcare at their facilities and they will continue to only provide the illusion of public participation in the health system. Moreover, in the absence of legislation and regulations that give effect to these aspects of the National Health Act, true public participation in the management of the health system will not be realised.

The BEMF believes that there must also be greater civil society participation in decision-making structures more generally. To this end the BEMF will be writing to the Minister of Health to find out how it can become more actively involved in national and provincial consultative health forums and observe national and provincial health council meetings.

For more information on this statement or with regard to the BEMF please contact Daygan Eagar at eagar@section27.org.za or (011) 356-4108

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