There was much speculation in the run-up to yesterday’s Budget about what the Minister of Finance might announce regarding National Health Insurance (NHI).
Considering that President Cyril Ramaphosa is apparently poised to sign the enabling legislation into law (once he has found a pen), it was not unreasonable to expect some indication of how the state plans to fund its “mandatory national medical scheme”.
The Department of Health stated in December 2022 that it will need to raise an additional R200 billion a year to fund NHI. The department, in its 2017 White Paper on NHI, flagged sources such as value-added tax, personal income tax, and a payroll tax for raising the additional funding.
The speculation notwithstanding, Finance Minister Enoch Godongwana announced an allocation of only R1.389bn in direct conditional grants for NHI over the next three fiscal years.
Conditional grants are allocations of money from one sphere of government to another, conditional on certain services being delivered or on compliance with specified requirements.
Furthermore, he provided no indication that the medical tax credits will be phased out. This is despite proponents of NHI pushing for these credits to be discontinued, so the money can be directed towards NHI. If the credits were removed, about R21bn would not paid be back to taxpayers, and it could be available for NHI.
In his Budget speech, Godongwana said the allocation for NHI “is a demonstration of the government’s commitment to this policy”. But the Budget did not make any new provisions for NHI.
The R1.4bn NHI grant should be seen in the context of the R848bn allocated to healthcare expenditure over the same three-year medium-term period.
Treasury’s revised estimate for consolidated health expenditure in 2024/25 is R271.9bn. This will increase to R281.1bn in 2025/26 and to R295.2bn in 2026/27. The health budget is anticipated to grow more slowly than inflation over the Medium-Term Expenditure Framework (MTEF) period because of R23.7bn in baseline reductions, the Budget Review said.
Furthermore, the R1.4bn allocation over the MTEF period announced on Wednesday is R772 million lower than the R2.161bn the 2023 Budget Review recorded as allocated to NHI over the 2023/24, 2024/25, and 2025/26 fiscal years.
It should be noted that the programmes designed to lay the groundwork for NHI are largely funded through the NHI indirect grant, which has been allocated a total of R6.924bn over the next three years.
Godongwana said “a range of system-strengthening activities” that are “key enablers” of an improved public healthcare system remain to be undertaken. These activities include:
- building a national health information system and digital patient records;
- upgrading health facilities and improving the quality of care to ensure they meet the minimum criteria to be certified and accredited for contracting under NHI;
- strengthening facility and district management in preparation for contracting;
- granting semi-autonomous status for central (and potentially other) hospitals; and
- developing reference prices and provider payment methods for hospitals.
“Many of these activities are already under way but require further development before the NHI can be rolled out at scale,” he said.
Ronald King, the head of public policy and regulatory affairs at PSG, said he does not think that any of the five goals mentioned by Godongwana will be achieved soon. Therefore, it will be another decade “at least” before NHI is rolled out, King told an FPI webinar on Thursday.
Under pressure to reverse the cuts announced in the Medium-term Budget Policy Statement in November, Treasury has allocated an extra R11.6bn to help cover last year’s higher-than-expected wage settlement.
Treasury’s chief director for health and social development, Mark Blecher, told Business Live that the extra money will not be sufficient to hire all the recently qualified doctors who have been unable to secure jobs with the state, and provincial health departments will need to determine which posts should be prioritised.
Provincial health departments will remain under financial pressure as consolidated health expenditure grows by a nominal 3.4 % over the medium term, said Blecher. Treasury estimates inflation will average 4.7% over the next three years, which means the health budget will shrink in real terms.
Major public sector reforms will be required to shift the funds currently allocated to provincial health departments to NHI.
“A lot of preparatory work still needs to be done. We won’t see tax proposals in the short term for NHI,” Business Live quoted Blecher as saying.
