OPINION: Budget 2023 – opportunity missed to refocus public health spending?

23rd February 2023 | Russell Rensburg

The right to access healthcare services is guaranteed to everyone under Section 27 of the South African Constitution. On a population health level, South Africa has made good progress over the last 20 years. Some of the achievements include increase in overall life expectancy, decrease in the in-facility maternal mortality rates, decrease in under-5 mortality, and increased coverage in essential health services, including infectious diseases and reproductive health services. Still, substantial challenges remain – most notably in the management of non-communicable diseases.

Yet while the Constitution and the complementary laws provide the framework to guide the state in meeting its obligations, our recent experience in the response to COVID-19 suggests that much more is needed to reorient the publicly funded health system towards meeting the health needs of the population.

Budgets, while important, are not the mechanism to drive the structural change needed to improve the responsiveness of the public health system to meet the needs of the population it seeks to serve. Instead, budgets follow the dictum – funding follows function. Put differently, budgets will follow the agreed-upon institutional arrangements that are already in place rather than drive the change that is needed. This is why there is a need to refocus the publicly funded health system.

How the publicly funded health budget is structured

At the national level, budgets are allocated to support the national department to dispense its core functions. In the current financial year, around R260 billion is allocated to funding healthcare, of which 23% (about R60 billion) is allocated to the National Department of Health. Of this, 85% is transferred to provinces to fund national health system priorities in the form of grants. This includes the Health Facility Revitalisation Grant (for funding the maintenance and building of health facilities), the Tertiary Services Grant (for funding central hospitals for services rendered to provinces), the Human Resources Training Grant (funding the training of health professionals and covers the salaries of medical interns and community service health workers), and the National Health Insurance direct grants to fund the contracting of mental health practitioners and oncology services. There is also the District Health grant, formerly the HIV/AIDS, TB, and STI grant.

To access these grants, provinces are required to develop business plans, which are funded subject to provinces meeting certain conditions.

What is unclear, however, is the extent to which these conditions are managed at the national level, since this information is largely not publicly available. Instead, based on our (unpublished) review of public accountability platforms for health conducted through informant interviews, it is safe to assume that provinces are in reality given carte blanche on how these funds are allocated and spent.

Budget priorities for health

A major focus of this year’s budget should have been reprioritising maintenance and revitalising the country’s health delivery platform, particularly to limit the impact of loadshedding on the delivery of health services. Estimates from the Department of Public Works’ draft national health infrastructure plan puts the cost of performing routine maintenance at around R3.75 billion a year. Given our current fiscal position, there was an opportunity to redirect the current allocation of R7 billion per annum over the next three years in the Health Facilities Revitalisation Grant toward meeting our most immediate infrastructure priorities. This could have included, among others, improving the energy independence of health facilities by installing backup power supplies such as solar and retro-fitting health facilities with energy-efficient equipment.

Instead, as we heard this week, National Treasury is proceeding with the building of a central hospital in Limpopo along with other infrastructure projects, thus reducing the flexibility needed to redirect funding to mitigate the risks of extended loadshedding.

The Human Resources Training and Development Grant is the fastest-growing conditional grant and supports about 2 300 community service doctors (among others) every year, resulting in an increase in the number of new health professionals added to the system. However, given that the absorption of these healthcare workers after their community service remains weak, we need to consider how we can optimise the return on this investment. Part of the challenge has been the rising cost of employment of health professionals after the introduction of the occupation-specific dispensation (OSD) in 2010, which resulted in a sharp increase in salaries, which, coupled with annual above-inflation increases and static budgets, has crowded out fiscal space needed to absorb new healthcare workers. The low absorption has also contributed to a risky demographic profile, particularly among nurses with close to 50% of them approaching retirement age.

We need to address this urgently and more funding should be made available to explore how we can address this risk. While the minister did make provision for an additional R23 billion over the next three years, the funding is included in the unconditional provincial equitable share, meaning there is no guarantee it will be used for this purpose and the bulk of the allocation will be towards the yet-to-be-determined wage increases.

The Tertiary Services Grant, which principally funds publicly funded tertiary health services, requires urgent attention to better understand how funds are utilised at the facility level. Among the proposals for National Health Insurance is to establish these hospitals as semi-autonomous units with their own budgets. These budgets will be determined using diagnostic-related groups (DRGs), which categorise hospital services into case-mix categories and require the strict use of ICD 10 codes – the aim of which is to get hospitals to minimise costs. A recent report published by the Medical Research Council assessed the readiness of hospitals to implement DRGs and found that weak administrative management will be a significant constraint to implementing this approach. It does beg the question around the efficiency of our current hospital system and redirecting some funding within this grant to improve the administrative capacity of the 32 tertiary hospitals across all nine provinces could contribute to more effective use of the R14 billion per annum allocated over the next three years.

The District Health Programme Grant is the largest of the conditional grants and primarily funds the country’s response to HIV, TB, and STIs. It remains unclear why the name of the grant was changed but could signal the establishment of a district health conditional grant, which could advance the country’s journey to Universal Health Care delivered primarily through the district health system. While our coverage of HIV services is relatively high, there is an urgent need to refocus the grant to prioritise increasing ARV enrolment to 7 million people. It also presents an opportunity to increase coverage for non-communicable diseases such as diabetes by actively screening people living with HIV who are already active users of the public health system.

Good governance, also in health, is supported by ensuring that decision-making is informed by the best available evidence. While South Africa does have access to routine health information, the use of data for decision-making is under-utilised. This should be a national competence and the promulgation of the National Public Health Institute of South Africa (NAPHISA) Act in 2020 presents an opportunity to strengthen data collection, analysis, and use at all levels of the health system. No provision is, however, made for NAPHISA in this year’s budget and we have to question what is motivating the decision to stall this. The current focus is to fund a national health information system via the NHI indirect grant. However, going forward, it would contribute to increased trust if the ownership of the health management information systems sits outside the fund.

An opportunity to refocus public health spending

As previously noted, health is a shared competence of national and provincial health departments, with the bulk of health funding allocated to the provincial level, which is the main service delivery agent. Funding for healthcare services at 27% is the second largest component of the provincial equitable share. The 2023/24 budget reverses the forecasted cut to a marginal increase from the R694 billion allocated in 2022/3 to R694.6 billion for the 2023/4 financial year. While the reversal is welcomed provincial administrations will continue to shoulder significant cost pressures, most notably in the funding of human resources for health, which accounts for between 60 to 65% of provincial health budgets despite the additional funding provided by the minister for potential shortfalls as a result of a new public sector wage agreement. It is important to note that this will not allow for the recruitment of the additional staff needed but will only maintain existing staff levels.

Ultimately, budgets on their own do not address structural inefficiencies but they present an opportunity to direct health services spending. We can no longer afford to kick the health reform can down the road. We can refocus the publicly funded health system to progressively expand and provide essential health services to strengthen primary healthcare services and improve the quality and efficiency of hospital-based services as we work towards achieving universal health coverage.

*Rensburg is the director of the Rural Health Advocacy Project and a founding member of the Budget Justice Coalition.