Fiscal policy limit frustrates universal healthcare

For the second time the world is celebrating Universal Health Coverage Day. It comes as the South African government releases its universal health coverage policy to ensure equitable, accessible and affordable healthcare for all: the National Health Insurance White Paper.

Jane Doherty & Di McIntyre: Business Day, 17 December 2015

SA's macroeconomic policy means spending on health is tight and fulfilling the goal of free universal healthcare will require a concerted effort from the Health Ministry and Department. Although the goal of universal health coverage has been a feature for the past two-and-a-half decades, implementation has not been effective.

On taking office, former president Nelson Mandela launched his flagship project: free health services for pregnant women and for children aged under six. This was followed by free primary healthcare services. Mandela recognised access to healthcare as an essential human right.

But he also realised it was an important contribution to the nation-building project, along with other elements of the African National Congress's Reconstruction and Development Programme. Yet, in 2015, the picture is far from perfect.

About 8-million South Africans have expensive private healthcare, while 42-million people rely on an under-resourced public sector. Inadequate access to healthcare perpetuates inequalities. In addition, SA has a "missing middle".

These are people who are insufficiently poor to be exempted from paying user fees for public hospital services, but are often too poor to afford them. Many eligible for "free" healthcare face insurmountable indirect costs, especially for transport. At the same time, for many who belong to medical schemes, monthly contributions and associated out-of-pocket payments consume an unsustainable proportion of their incomes. How can this be, given the early aspirations of the country's first democratic government?

The first decade of the post-apartheid era saw a surprising decline in per capita government expenditure on health, after taking inflation into account. This happened despite increasing per capita gross domestic product (GDP).

The share of the government budget allocated to health also declined and stagnated at about 11.7 percent for much of this decade. It has never returned to its 1996 high of 14.1 percent. This was linked to the implementation of a macro-economic policy called the Growth, Employment and Redistribution strategy (Gear), which was launched in 1996.

The strategy reined in public expenditure and resulted in a squeeze on spending for health and education. At the same time, the Department of Health was struggling to remedy severe backlogs in healthcare infrastructure and human resource production inherited from the apartheid era.

The HIV/AIDS epidemic was also escalating into the biggest in the world. If SA is to achieve equitable access to the full range of health services - not only primary healthcare services, but also to hospitals - the fiscal policy limit on government revenue as a percentage of GDP needs to be lifted.

The limit of 25 percent, applied since Gear was introduced, is well below the average in other middle-income countries. Latin America sits at more than 32 percent, while Central and Eastern Europe sit at 37 percent. The average for countries in the Organisation for Economic Co-operation and Development in 2013 was 34 percent.
Increasing this limit is critical, given the huge income inequality in SA. It will be important to focus on progressive revenue sources including taxing the wealthiest more effectively, as well as multinational corporations.

This would be in line with the global agreement reached for funding the sustainable development goals. But new government revenue will not flow easily to the health sector. National and provincial health leaders have generally battled to make the case for health in the relevant government decision-making bodies.

At some points, this has been due to weak health leaders combined with insufficient technical and analytical capacity to support bids, especially in costing programmes. Successive Finance Ministers have also, at times, resisted requests for increased funding from the department, especially when they distrusted the public health sector's ability to deliver.

These are some of the political and administrative challenges that characterise the struggle policymakers and health advocates face on a daily basis to protect state spending on healthcare. These challenges will intensify with the struggle to implement the national health insurance.

To preserve the impetus towards universal health coverage in the country, Health Minister Aaron Motsoaledi and others need to engage with debates within the Cabinet and the Treasury on appropriate macroeconomic and fiscal policy choices.

The Department of Health will strengthen these arguments, and win the trust of colleagues from the Cabinet and the Treasury, if it is able to demonstrate achievements in service delivery and combat corruption in the sector.

Doherty is a senior researcher in health policy and systems and part-time lecturer at the University of the Witwatersrand. McIntyre is professor in the Health Economics Unit, School of Public Health and Family Medicine at the University of the Witwatersrand

For the second time the world is celebrating Universal Health Coverage Day. It comes as the South African government releases its universal health coverage policy to ensure equitable, accessible and affordable healthcare for all: the National Health Insurance White Paper.
Jane Doherty & Di McIntyre: Business Day, 17 December 2015

SA's macroeconomic policy means spending on health is tight and fulfilling the goal of free universal healthcare will require a concerted effort from the Health Ministry and Department. Although the goal of universal health coverage has been a feature for the past two-and-a-half decades, implementation has not been effective.

On taking office, former president Nelson Mandela launched his flagship project: free health services for pregnant women and for children aged under six. This was followed by free primary healthcare services. Mandela recognised access to healthcare as an essential human right.

But he also realised it was an important contribution to the nation-building project, along with other elements of the African National Congress's Reconstruction and Development Programme. Yet, in 2015, the picture is far from perfect.

About 8-million South Africans have expensive private healthcare, while 42-million people rely on an under-resourced public sector. Inadequate access to healthcare perpetuates inequalities. In addition, SA has a "missing middle".

These are people who are insufficiently poor to be exempted from paying user fees for public hospital services, but are often too poor to afford them. Many eligible for "free" healthcare face insurmountable indirect costs, especially for transport. At the same time, for many who belong to medical schemes, monthly contributions and associated out-of-pocket payments consume an unsustainable proportion of their incomes. How can this be, given the early aspirations of the country's first democratic government?

The first decade of the post-apartheid era saw a surprising decline in per capita government expenditure on health, after taking inflation into account. This happened despite increasing per capita gross domestic product (GDP).

The share of the government budget allocated to health also declined and stagnated at about 11.7 percent for much of this decade. It has never returned to its 1996 high of 14.1 percent. This was linked to the implementation of a macro-economic policy called the Growth, Employment and Redistribution strategy (Gear), which was launched in 1996.

The strategy reined in public expenditure and resulted in a squeeze on spending for health and education. At the same time, the Department of Health was struggling to remedy severe backlogs in healthcare infrastructure and human resource production inherited from the apartheid era.

The HIV/AIDS epidemic was also escalating into the biggest in the world. If SA is to achieve equitable access to the full range of health services - not only primary healthcare services, but also to hospitals - the fiscal policy limit on government revenue as a percentage of GDP needs to be lifted.

The limit of 25 percent, applied since Gear was introduced, is well below the average in other middle-income countries. Latin America sits at more than 32 percent, while Central and Eastern Europe sit at 37 percent. The average for countries in the Organisation for Economic Co-operation and Development in 2013 was 34 percent.
Increasing this limit is critical, given the huge income inequality in SA. It will be important to focus on progressive revenue sources including taxing the wealthiest more effectively, as well as multinational corporations.

This would be in line with the global agreement reached for funding the sustainable development goals. But new government revenue will not flow easily to the health sector. National and provincial health leaders have generally battled to make the case for health in the relevant government decision-making bodies.

At some points, this has been due to weak health leaders combined with insufficient technical and analytical capacity to support bids, especially in costing programmes. Successive Finance Ministers have also, at times, resisted requests for increased funding from the department, especially when they distrusted the public health sector's ability to deliver.

These are some of the political and administrative challenges that characterise the struggle policymakers and health advocates face on a daily basis to protect state spending on healthcare. These challenges will intensify with the struggle to implement the national health insurance.

To preserve the impetus towards universal health coverage in the country, Health Minister Aaron Motsoaledi and others need to engage with debates within the Cabinet and the Treasury on appropriate macroeconomic and fiscal policy choices.

The Department of Health will strengthen these arguments, and win the trust of colleagues from the Cabinet and the Treasury, if it is able to demonstrate achievements in service delivery and combat corruption in the sector.

Doherty is a senior researcher in health policy and systems and part-time lecturer at the University of the Witwatersrand. McIntyre is professor in the Health Economics Unit, School of Public Health and Family Medicine at the University of the Witwatersrand.