Despite Gordhans illusiveness, healthcare does benefit from the Budget
19 March 2014
Jonathan Faurie
The general consensus regarding the 2014 Budget is that Finance Minister Pravin Gordhan delivered a very balanced budget. Gordhan really did the best that he could with the resources that he was given. But while National Treasury will be spending generously on infrastructure development and education, there will be less spending in other sectors which are just as important. This leaves these industries in a state of uncertainty, which is never beneficial.
One such sector is the healthcare sector. There was a lot of expectation that government would give more direction on the National Health Insurance (NHI) programme, however, this didn't materialise. The stance by government is not doing the industry any favours as it is compounding its challenges rather than resolving them.
But there are hidden gems in the budget, if one knows where to look. According to Gavin Griffin, Business Unit Head of Aon Hewitt's Healthcare division, the 2014 budget discussion was approached very conservatively, perhaps due to the election year. "I do however expect the 2015 budget discussion to be very different," says Griffin. "Health was allocated R145.7 billion, R11.4 billion more than the previous financial year."
Holding a collective breath for NHI
The non-direction by government on the NHI issue is baffling to many in the industry. "Mention was made of a white paper on NHI and a financing paper that will be tabled by Cabinet shortly. There was however no mention made on the final funding of NHI and I therefore anticipate seeing increases in 2015 to fund NHI," says Griffin. "The long awaited details of government's plans for NHI should be revealed before the election on 7 May 2014."
The NHI will be a landmark introduction into the South African market in that it will be one of the first of its kind systems in the country where every citizen will have access to the same level of healthcare. There have been a number of suggestions on how the programme will be funded. The most likely suggestion was a cross level funding model where higher income earners would subsidise lower income earners. It was further suggested that this would be done through increased taxation.
Besides concerns over the programme's funding, there is also the issue of how it will be rolled out and administrated. Will it be administered by the Department of Health? Or will it be administered in the same way as the Gautrain; a government initiative outsourced to the private sector which is responsible for its administration.
"The white paper is expected to outline a way forward," says Olabode Olajumoke, Consulting Actuary at Aon Hewitt. "The NHI is here to stay and all parties must roll up their sleeves to make it work. The private sector in particular has a wealth of valuable knowledge that can be utilised to assist in the successful roll-out of the NHI and a white paper is a good way for all to get involved. The public must always be engaged for suggestions and ideas with careful elimination of cynicism," says Olajumoke.
According to Olajumoke, the Actuarial Society of South Africa recently provided a costing model for the NHI. "The model is useful in estimating the true cost of the NHI program, which should prove to be insightful to all stakeholders. It is however expected that the NHI will be implemented in phases, and according to the Minister, a growth path will need to be established that is inclusive and rapidly promotes black economic development in the form of a wide range of initiatives that are apparently underway."
Unearthing the hidden gems
According to the budget presentation, government has spent R39 billion on 1 879 hospitals and other health facility projects, and R26 billion is allocated over the medium term expenditure period ahead.
"The budget has placed more emphasis on General Practitioner (GP) contracting and quality standards of hospitals, which is a welcome development in the assurance that public facilities are aimed to be developed at the standards of private facilities. It is a crucial prerequisite to having an honest debate about NHI viability," says Olajumoke. "The pilot NHI program seems to be in all provinces which will however require that government monitor the successes and areas of improvement, very closely."
Increasing medical costs remains a concern. In terms of medical scheme contributions, the monthly tax credits will be increased from R242 to R257 per month for the first two beneficiaries and from R162 to R172 for each additional beneficiary thereafter with effect from 1 March 2014.
"The increases of 6.2% and 6.17% respectively are less than what the average medical scheme contribution increase was for 2014 which was in the region of 9.8%. Average medical contributions have therefore increased with more than the tax credit which leaves members out of pocket," says Griffin.
Olajumoke adds that government's efforts on its HIV programme are laudable. "According to government's expenditure programme, it has spent R41 billion on HIV and Aids programmes over the past five years, and R43.5 billion is budgeted over the next three years. I do however feel that more emphasis is needed on HIV education," concludes Olajumoke.
Editor's Thoughts
While the budget didn't give clarity on all the desired areas, it is good to see its commitment to improved funding to the sector. It will be interesting to see what effects the NHI will have on the medical schemes industries. Please comment below, interact with us on Twitter at
@fanews_online or email me your thoughts
jonathan@fanews.co.za.
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