BRIEFING TO THE PORTFOLIO COMMITTEE OFHEALTH

For an Equitable Sharing of National Revenue

Financial and Fiscal CommissionWednesday, 10 October 2018

OUTLINE• Role and Function of FFC• Health outcomes• Provincial and national budget analysis

– Consolidated health budget – Provincial budget analysis – Provincial budget oversight issues – Conditional grants spending and output performance

• Comprehensive HIV & AIDS Grant• Health Facility Revitalisation Grant • Health Professionals Training and Development Grant• National Tertiary Services Grant • NHI Grant

• FFC recommendations on health • Concluding Remarks

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ROLE AND FUNCTION OF THE FFC• The Financial and Fiscal Commission (FFC)

– Is an independent, permanent, statutory institution established in terms of Section 220 of Constitution

– Must function in terms of the FFC Act• Mandate of Commission

– To make recommendations, envisaged in Chapter 13 of the Constitution or in national legislation to Parliament, Provincial Legislatures, and any other organ of state determined by national legislation

• The Commission’s focus is primarily on the equitable division of nationally collected revenue among the three spheres of government and any other financial and fiscal matters– Legislative provisions or executive decisions that affect either provincial or local government

from a financial and/or fiscal perspective– Includes regulations associated with legislation that may amend or extend such legislation– Commission must be consulted in terms of the FFC Act

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HEALTH OUTCOMES AND NATIONALHEALTH BUDGET

NATIONAL HEALTH OUTCOMES

• Key health outcomes show notable improvements –– Roll out of ARVs– Prevention of mother to child transmission – Introduction of new child vaccines

• The rate of improvement is not sufficient to meet current MTSF targets

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Indicator MTSF Target 2019 Baseline2014

2015 2016

Life expectancy at birth: Total 70 years 62.9 63.3 63.8

Under-5mortality rate (U5MR)

per 1 000 live births

33 under 5 deaths per 1000live-births-by March 2019

40 37 34

Infantmortality rate (IMR) per

1 000 live births

Lessthan20deathsper1000livebirths

28 27 25

Neonatal mortality rate (<28 days) per

1 000 live births

8 neonatal deaths per 1000live births

12 12 12

NATIONAL HEALTH OUTCOMES

• The burden of Non-Communicable Diseases (NCD) is on the rise – death rate has surpassed those related to HIV and TB since 2009

• The Strategic Plan for Prevention and Control of NCD sets out targets for reducing the diseases

• Progress monitoring of NCD outcomes is poor due lack of (reliable) information

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Indicator TargetIncrease treatment for mental disorder 30%

Increase treatment for hypertension, diabetes 30%

Reduce tobacco use 20%

Reduce per capita alcohol usage 20%

OUTCOMES ON SELECTEDPERFORMANCE TARGETS 2017/18

• The department shows mixed results in respect of meeting planned delivery targets

• Performance also varies between the different sub-programmes• The AG raises a number of concerns in relation to programme 4 • There is general lack of evidence to support reported performance achievements

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Indicator Target ReportedAchievement

AGfindings

%food testcompletedwithin30days 100% 20.85% Supporting evidencesuggest21%

%backlogeliminatedfortoxicologytests 40% 27.7% Supportingevidence indicate23%

Backlogeliminated forbloodalcoholtests 100% 78% Supportingevidence shows116%

Hospitalsachieving75%compliancewithcorestandards

43 43 Nosupportingevidence

Clinics constructedorrevitalised 42 27 Supporting evidenceindicate21

Facilities compliancewithinfrastructurenormsandstandards

50 52 Unable toconfirmduetoworkscope

NATIONAL AND PROVINCIAL BUDGETANALYSIS

CONSOLIDATED HEALTH BUDGET

• Spending on public health has been sustained at an average rate of 13,6% and 3,8% of total budget and GDP respectively

• Total health budget amounted to R191 billion in 2017/18 of which 3% is allocated to the national department (excluding conditional grants) and 94% is allocated to provinces

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13,4 13,5 13,414,1 13,8 13,6 13,4

3,7 3,7 3,9 3,9 3,9 3,8 3,7

0

2

4

6

8

10

12

14

16

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Perc

enta

ge

Health as % of total spending Health as % of GDP

CONSOLIDATED HEALTH BUDGET

• Health budget remains under pressure notwithstanding the 13.6% average budget allocation – Growing number of medically uninsured population – Exchange rate depreciation is driving up costs (supplies) – Salary increases are crowding out other important health inputs

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63%

28%

4%3%2%

National health Spending by economic classification

Compensationofemployees GoodsandServices Transfersandsubsidies Buidings MacheneryandEquipment

NATIONAL DEPARTMENT BUDGET

• The NDoH received a total budget allocation of R42.6 billion in 2017/18 increasing from R38.5 billion in 2016/17

• The Department achieved a 99.5% spending performance in 2017/18

• Much of spending comprises conditional grants transfers to provinces through programmes 3 and 5

• Programme 2 (NHI health planning & systems) shows underspending of 10% in 2017/18 11

1%2%

43%

1%

49%

4%

Administration

NHI,healthplanningandsystems

HIV&AIDS,TB

PrimaryHealthCare

Hospitals,tertiaryservicesandworkforce

Healthregulationaandcompliance

PROVINCIAL HEALTH BUDGETS• Provinces account for a larger share of the national health budget • Salary spending constitute 67.9 % of total current payments in 2017/18 declining

from 68.6 in 2015/16 • Non-negotiable budget line items (Laboratory services and medicines) show the

highest budget growth

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2015/16 2016/17 2017/18Nominal annual average

growth rate Current payments 140 771 152 659 165 430 8%Compensation of employees 96 707 106 025 112 362 8%Goods and Services 44 050 47 613 53 053 10%

Laboratory services 4 838 4 986 6 513 16%Inventory: Food and food supplies 733 779 896 11%Inventory: Fuel, oil and gas 473 557 379 -10%Inventory: Medical supplies 6 751 7 440 8 066 9%Inventory: medicine 11 387 13 393 15 551 17%

Interest and rent on land 14 218 20 14 Transfers and subsidies 5 431 5 826 6 849 12%Provinces and municipalities 1 399 1 331 1 513 4%Departmental agencies 151 212 166 5%Non profit institutions 1 908 1 759 2 075 4%Households 1 933 2 476 3 058 26%

Payments for capital assets 7 741 7 392 8 423 4%Buildings 5 289 4 824 5 263 0%Machinery 2 444 2 556 3 142 13%

Payment for financial assets 129 183 132 Total economic classification 154 073 166 061 180 836 8%

PROVINCIAL HEALTH BUDGETS2017/18

• Gauteng and KZN have the highest health allocation • Limpopo, Eastern Cape and Free State have higher than average COE

as share of current payments • Payments for capital assets are low and out of sync with NHI goals

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EC FS GT KZN LP MP NC NW WCAdministration 589 556 289 150 1 069 525 898 139 294 650 341 328 230 180 303 554 725 600 District Health Services 11 298 134 4 165 051 13 668 772 19 450 403 11 984 248 7 187 823 2 065 763 5 335 205 8 700 473 Emergency Medical Services 1 270 788 789 707 1 219 145 1 377 568 731 172 371 272 301 926 296 433 994 860 Provincial Hospital Services 3 497 135 1 278 523 7 906 057 10 611 981 2 390 027 1 291 834 339 252 1 561 312 3 377 427 Central Hospital Services 3 471 787 2 316 210 15 316 414 4 849 321 1 727 015 1 158 498 999 748 1 547 285 6 129 118 Health Sciences And Training 727 740 283 105 918 903 1 246 190 563 283 359 616 103 913 393 237 305 235 Health Care Support Services 99 998 151 145 289 762 -138 440 124 496 177 034 -4 270 237 242 435 447 Health Facilities Management 1 278 689 535 569 1 599 490 1 606 908 554 514 532 976 632 755 776 102

22 233 827 9 808 460 41 988 068 39 902 070 18 369 405 10 887 405 4 569 488 10 307 023 21 444 262 Economic classificationCurrent payments 92% 91% 91% 93% 94% 98% 88% 91% 91%Compensation of employees 71% 70% 65% 67% 75% 68% 64% 68% 65%Goods and services 29% 30% 35% 33% 25% 32% 36% 32% 35%Interest on rent and land 0% 0% 0% 0% 0% 0% 0% 0% 0%Transfers and subsidies 3% 2% 5% 3% 4% 3% 4% 2% 5%Payments for capital assets 5% 7% 4% 4% 3% 10% 8% 6% 4%Payments for financial assets 0% 0% 0%

PROVINCIAL BUDGET OVERSIGHTISSUES (COE)

• Controlling of COE expenditure should remain a key oversight focus area in the foreseeable future

• This is especially pertinent given the current limitations on filling posts and shortage of healthcare professionals

• COE expenditure amounted to R112 billion in 2017/18 increasing from R92 billion in 2015/16

• During the same period personnel headcount declined from 309 000 to 302 000

140

50000

100000

150000

200000

250000

300000

350000

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Provincial personnel headcount

PROVINCIAL BUDGET OVERSIGHTISSUES (COE)

• Health COE spending is likely to experience additional pressure arising from minimum wage agreement to Community Health Workers and absorption of the current cohort of doctor interns from the Cuban medical program

• The CHW needs to be standardised across all provinces in terms of training and operational systems

• COE budget pressure from the doctor internship program must also be weighed against shortage of Doctors– The Cuban medical programme has been halted – Provinces are increasingly unable to absorb doctor graduates and

nursing professionals

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PROVINCIAL BUDGET OVERSIGHTISSUE (COE)

• Control of COE spend must be accompanied by efforts to balance the distribution of health care professional within and across provinces

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Provinces Specialist Doctors ProfessionalNurses2016 2017 2018 2016 2017 2018 2016 2017 2018

EasternCape 164 173 177 1691 1732 1885 10273 10362 10822FreeState 302 281 293 622 589 654 2225 2177 2288Gauteng 2003 1972 1938 3423 3565 3636 12976 14079 14365KwaZuluNatal 742 761 743 3738 3386 3384 16713 16889 17017Mpumalanga 76 78 78 1020 1048 1073 5233 5369 5444NorthernCape 26 19 21 463 452 462 1453 1436 1511Limpopo 70 72 63 1302 1295 1289 9654 9520 9259NorthWest 109 107 114 758 838 935 4314 4268 4494WesternCape 1492 1425 1324 1632 1527 1675 5200 5171 5298RSA 7000 6905 4751 14649 14432 14993 68041 69271 70498Per100kpopulationEasternCape 2 3 3 25 26 29 153 154 167FreeState 11 10 10 23 21 23 81 79 80Gauteng 15 15 14 26 26 25 98 104 101KwaZuluNatal 7 7 7 35 31 31 156 156 154Mpumalanga 2 2 2 24 24 24 124 125 123NorthernCape 2 2 2 39 38 38 123 120 124Limpopo 1 1 1 23 23 22 171 166 160NorthWest 3 3 3 20 22 24 117 114 117WesternCape 24 22 20 26 24 26 83 81 81GrandTotal:RSA 9 9 8 26 25 26 121 121 120

PROVINCIAL BUDGET OVERSIGHT ISSUES(ACCRUALS AND LEGAL CLAIMS)

• Accruals and Medico legal claims remain a greatest risk to provincial fiscal health

• In 2016/17 accruals and Medico legal claims amounted to R14 and R56 billion respectively

• Legal claims are increasing exponentially in the Eastern Cape –and the provinces which have established medico legal units (Western Cape, Mpumalanga and KZN)– The State Liability Amendment Bill will reduce state exposure to excessive

liability

• An FFC study found that while accruals are a justifiable results of budget pressure – they are mainly caused by poor financial governance

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PROVINCIAL BUDGET OVERSIGHTISSUES

• Budget allocations for the National Health Laboratory Services (NHLS) are growing but provinces still fail to honour their laboratory services payments

• Non-payment places sustainability of NHLS at risk since provinces contribute 90% to its revenue

• There is need to address operational inefficiencies between health facilities and NHLS – so as to avoid debt disputes

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ProvincesOutstandingdebt

2017/18Outstandingdebt

2017/18TotalOutstanding

debtEasternCape 344946 3205 348150FreeState 75411 9010 84421Gauteng 621976 973516 1595491KZN 247152 2705669 2952822Limpopo 97470 1061 98532Mpumalanga 113639 -43 113596NorthWest 142129 3989 146118NorthernCape 42581 5370 47951WesternCape 34991 0 34991Total 1720294 3701778 5422071

HEALTH CONDITIONAL GRANTS

SPENDING AND OUTPUT PERFORMANCE

COMPREHENSIVE HIV& AIDS GRANT

• The Comprehensive HIV&AIDS grant was allocated R15.3 billion in 2017/18 and achieved a 100% spending performance– Achievements include:– 834 000 new patients on ARVs– 3.8 million maintained on ARV program– 14 million HIV tests– 917 and 26 million male and female condoms distributed

• Grant performance may likely be diluted by the introduction a new HIV/AIDS: community outreach services component – stipend for CHW

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HEALTH FACILITY REVITALISATIONGRANT

• The Health Facility Revitalisation Grant achieved 97% spending from the allocated R5.4 billion in 2017/18– Grant outputs include:– planning of 33 new facilities – Equipping 33 facilities – Constructing 12 facilities –Maintaining 31 facilities

• The Auditor General highlighted concerns regarding availability of reliable data to verify deliverables associated with this grant

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HEALTH PROFESSIONS TRAININGGRANT

• The Health Professionals and Training Development (HPTD) Grant spent 100% of the allocated R2.5 billion in 2017/18– The grant has funded:– 285 post graduate students – 1771 registrars – 413 graduates – 327 clinical specialists

• The HPTD is earmarked for review in 2018

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NATIONAL TERTIARY SERVICES GRANT

• The National Tertiary Services Grant achieved 100% spending of the allocated R10.9 billion in 2017/18– Outputs achieved include:– 359 000 day patient separations – 3.8 million in-patient days – 619 000 inpatient separations

• Performance of NTSG is often affected adversely by lack of medical specialist, equipment and reduction of service at facility level

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NATIONAL HEALTH INSURANCE GRANT

• The NHI grant has undergone numerous iterations since inception in 2011

• The grant is currently divided into five indirect sub-components

• Continuous underspending of NHI grant is worrying given the imminent introduction of NHI fund

• Constant iteration of the grant create implementation uncertainties – Priorities unrelated to NHI are funded through the grant

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Component (Indirect) Allocation spending % spending

Ideal clinic R30 million R26 million 86%

Human papilloma virus R200 million R199 million 99%

Information systems R166 million R83 million 50%

Health professionals contracting R518 million R549 million 105%

Health facility infrastructure R718 Million R657 million 91%

FFC RECOMMENDATIONS ON HEALTH2019/20

• National and provincial treasuries should develop a framework or criteria for determining serious financial strain with clear measurable financial and non-financial factors that can be monitored, reported and used to trigger automatic fiscal adjustment

• National Treasury and the Department of Health should allocate part of the 2018/19 MTEF health infrastructure allocations to gradually set-off expenditure accruals which have arisen from unavoidable demands for which allocated budgets were depleted

• The National Treasury should ensure that the framework for health infrastructure conditional grants accommodate flexibility during periods of protracted fiscal constraint so that provinces can be allowed to re-orientate their package of available capital allocations towards maintenance

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CONCLUSION

• The NDoH needs to improve its performance monitoring tools and system and especially ensure that the Health Information System is rolled out nationally

• Provincial health department must improve capacity for planning and managing COE, especially its composition.

• Spending on the NHI grant should be focused on activities that forms the core of health system for NHI delivery on the ground

• Encroaching on conditional grants by new unrelated priorities must be minimised – as is likely to affect overall health outcomes

• Parliament should focus its oversight efforts on under achieved performance targets where has been 100% expenditure against the budget

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FFC MTBPS Training for SCoA_September 2014Introduction to the Financial and Fiscal Commission 2014

FFC’S WEBSITE: WWW.FFC.CO.ZA

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