Extra money for health workers, but sector’s budget shrinks in real terms

The National Treasury has made good on Health Minister Joe Phaahla’s promise that the government would find the money to hire more doctors, but the sector will remain under pressure as the health budget shrinks in real terms over the next three years. 

Under growing pressure to reverse the deep cuts announced in the medium-term budget policy statement in November, the Treasury has allocated an extra R11.6bn to help cover last year’s higher-than-anticipated wage settlement. The Western Cape has been vocal about the impact of the centrally agreed wage deal that wasn’t fully funded by the Treasury and left provincial health departments unable to fill essential posts.   

Treasury’s chief director for health and social development, Mark Blecher, said the extra money would not be sufficient to hire all the recently qualified doctors who have been unable to secure jobs with the state, and provincial health departments would need to determine which posts should be prioritised.

“There will be less downsizing, and more posts will be filled, but it is unlikely they all will be,” he said. Trade union Samatu estimates 800 recently qualified doctors who expected to work for the state have been unable to find jobs.

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 budget shrinks in real terms.

Treasury has set aside a revised estimate of R267.3bn for consolidated health expenditure this year, rising to R271.9bn in 2024/25. The consolidated health budget then increases to R281.1bn in 2025/26 and R295.2bn in the outer year. This represents baseline reductions of R23.7bn over the medium term, Treasury said in the Budget Review.

While the budget makes no new provisions for National Health Insurance (NHI), Finance Minister Enoch Godongwana said in his speech to parliament the government remained committed to the policy. The first piece of enabling legislation was passed by parliament in December but has yet to be signed into law by President Cyril Ramaphosa.

Major public sector reforms will be required to shift funds currently allocated to provincial health departments to NHI, said Blecher. Programmes designed to lay the groundwork for NHI are largely funded through the NHI indirect grant which has been allocated R6.9bn over the next three years.

“A lot of preparatory work still needs to be done. We won’t see tax proposals in the short term for NHI,” said Blecher referring to potential mechanisms for raising additional money for the NHI Fund, which is expected to purchase services for patients from accredited public and private providers. The health department has previously said about R200bn will need to be raised via measures such as a surcharge on personal income tax and a payroll tax to supplement public sector funding sources.

The HIV/Aids component of the district health service grant has been cut by R1.3bn a year over the medium term, due to the number of people on treatment running “significantly below target” and cheaper than anticipated medicines, Treasury said in its Estimates of National Expenditure. Only 5.5-million of the estimated 7.8-million people living with HIV in 2022/23 were on treatment.

The Health Facility Infrastructure Grant has been reduced by R3.6bn over the next three years due to historic underspending while an extra R1.1bn has been added to the national tertiary services grant to accommodate the restructuring of oncology services.

Medical scheme tax credits remain unchanged with no provision made for inflation, a measure that is expected to raise about R6bn in revenue over the medium term. The medical scheme tax credit remains at R364 per person a month for the first two members, and R246 per member a month for additional members.

kahnt@businesslive.co.za