Delivery of Health Services: FFC briefing

Standing Committee on Appropriations

24 March 2017
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

A delegation from the Financial and Fiscal Commission (FFC) presented on the effective coordination and alignment of the national and provincial spheres of government in the delivery of health services in order to ensure value for money, efficient planning and resource allocation. The presentation discussed the relationship between health care performance and the economy, health and inter-governmental fiscal reviews (IGFR), and a Departmental budget analysis. The delegation identified the main challenges in the health sector as the sub-optimal quality of care, the heavy disease burden, input cost pressures, the growing uninsured population, the fact that the private sector served only 17% of the population, and imbalances in spending had skewed the distribution of services. There was also wasteful expenditure and inefficiencies in the system, like long average waiting times.

Although the Department of Health through its programmes had taken steps to address many of these challenges, there was still uneven implementation at the provincial level, and this required further attention. The major finding by the FFC was that five out of the nine provincial departments of health had overspent their budgets in 2015/16. The Commission found that for provinces like Kwa-Zulu Natal and North West, overspending had been a persistent problem in the past few years. It had been found that the major cost pressures on provincial health budgets were goods and services in the main, and personnel expenditure. Provinces had reported a significant increase in contingent liabilities over the period concerned which had arisen from legal action taken due to negligence by health professionals.

One of the significant findings was that the Department of Health (DoH) was receiving a noticeable increase to its baseline budget over the 2017 medium term expenditure framework (MTEF). These increases were targeting the expanded rollout of HIV/AIDS and TB treatment and prevention, revitalising primary health care facilities and expanding the NHI roll-out. It was acknowledged that while the allocation of resources was targeting key areas of intervention in line with the NDP, a major concern was addressing the financial and implementation performance of provinces, given the significant service delivery role they played in the sector. Conclusively, it was stated that the NHI reforms had to address the coordination challenges in the sector, especially when it came to fostering joint planning and increasing health facility budget autonomy. 

Meeting report

Financial and Fiscal Commission: Presentation
Professor Daniel Plaaitjies, Acting Chairperson and Commissioner of the Financial and Fiscal Commission (FFC) introduced himself and his colleagues: Mr Eddie Rakabe, Research Manager, and Mr Ghalib Dawood, Researcher. He gave an outline the presentation, which included the relationship between health care and performance and the economy, health and the Inter-Governmental Fiscal Review (IGFR), and the Departmental budget analysis. He spoke about the issue of life expectancy and said that it had improved. According to the Millennium Development Goals (MDG), this included life expectancy at birth, the mortality rate of infants and child mortality for children under the age of five.

He said the main challenges identified in the recent study on the efficiency of primary health care provision in the health sector were the suboptimal quality of care, heavy disease burden, input cost pressures, a growing uninsured population, the fact that private sector served only 17% of the population, and imbalances in spending had skewed distribution of services. There was wasteful expenditure and inefficiencies in the system -- for example, long average waiting times. There were also issues of inequitable distribution among provinces.

He said the Department of Health (DoH) had taken steps to address many of these challenges through its programmes, but further attention was required because of uneven implementation at the provincial level. When things went wrong in the provinces or municipalities, the blame went to the government, not to the provinces or municipalities. In light of this issue, he asked: “How do we organise the health care system going forward?” He then handed over to Mr Rakabe.

Mr Rakabe said that health was a concurrent function between the three spheres of government. The national government was responsible for policy-making and oversight, while the provinces and municipalities implemented in an inter-governmental relations (IGR) setting. The National Health Act defined the roles and responsibilities allocated to each sphere. The concurrency in some instances presented challenges for effective health service delivery. The placement of health facilities in various spheres often created coordination problems. Some of the problems included the decentralisation of funding, indicative health facility budgets not being guaranteed, and reimbursement for services offered.

IGFR issues in the health system included the decentralisation of funding to hospitals which had been successful in the education sector, the alignment of health facility allocations to health needs, plans and priorities, the multiple grant funding streams for the same budget line item, the spill-over effects which affected mostly the central hospitals, and the skewed distribution of health facilities across provinces and within districts. These issues had implications for the health system, such as the referral challenges arising on provincial health budgets, the funding of municipal health services and the effect of function shift reforms on the Provincial Equitable Share (PES).

Challenges of vertical and horizontal coordinated health planning persisted. Provinces were occasionally held liable for undermining national policies, and this in turn raised concerns about the imposition of national policies. Coordination problems were also evident in the implementation of the National Health Insurance (NHI) pilots/grant, because provinces were unaware of what to use the grants for.

He spoke about grant reforms and said the health sector had some of the oldest conditional grants in the system. He said conditional grants were only meant to be temporary in the sense that they ought to address specific priorities.  He said the NHI grant had undergone many changes in a short period of time which means it changed from being direct into an indirect grant with an indirect component.  He said the faster growth in the indirect NHI grant allocation must be accompanied by capacity building at health district offices.

Mr Rakabe went on to speak about grant performance and IGFR issues. He said conditional grants underperformed due to poor planning and poor consultation during introduction. The Department needed to adhere to guidelines for introducing conditional grants, which included providing for a three-year lead period and making provision for capacity building.

Mr Dawood presented on the departmental budget analysis. The Department had six programmes --  Administration; National Health Insurance (NHI), Health Planning and Systems Enablement; HIV and AIDS, Tuberculosis and Maternal Child Health; Primary Health Care Services; Hospitals and Tertiary Health Services and Human Resources Development and Health Regulation and Compliance Management. The Department had restructured in 2012 to align its organogram with the strategic priorities in the health sector. The strategic goals and objectives of the Department were well aligned to the nine National Development Plan (NDP) goals and the sustainable development goals adopted by the United Nations (UN) in 2015.

He said critical new priorities that had been enhanced in the Department’s strategic plan to address NDP goals included the re-engineering of primary health care, the NHI rollout, improving health information systems, monitoring national norms and standards, preventing disease and reducing its burden.

Referring to the spending and the Medium Term Expenditure Framework (MTEF) budget by programmes, he said the DoH had been allocated a budget of R42.6 billion in 2017/18, which increased to R50.38 billion in 2019/20. This represented a real annual average growth of 3.4% per annum, compared to 2.9% for the period 2013/14 to 2016/17. The higher growth in the budget allocation was as a result of funding the expansion of HIV/AIDS and TB treatment and prevention, and revitalising public health care facilities.

He said over the two periods, HIV/AIDS, TB and maternal health and hospitals had consumed the bulk of the DoH’s budget. Over the 2017 MTEF period, the proportion of budget allocated to HIV/AIDS, TB and maternal health highlighted the priority attached to achieving the UN AIDS target for 2020 in order to curb the HIV epidemic and reduce TB infections. The increased priority attached to these funding areas was likely to have a positive impact on health outcomes, especially mortality rates and life expectancy.

Concerning the spending and MTEF budget, he said most budget line items were increasing above inflation over the 2017 MTEF period, with the exception of the compensation of employees (CoE) budget, which was declining by 4.1%. This meant a total of 209 employees would be redeployed to work for the newly established South African Health Products Regulatory Authority. Payments for capital assets increased in real terms by 12.3%, and goods and services by 5.7% per annum, which was significantly above the departmental average of 3.4%. These increases most likely reflected the roll-out of the NHI and the revitalising of public health care facilities.

The bulk of the Department’s resources were allocated to transfers and subsidies in the form of conditional grants distributed to provincial departments of health, and transfers to public entities. This meant the share of total allocations to transfers declined over the 2017 MTEF period from 94% to 92%, while the share of total allocations to goods and services and capital assets showed marginal increases over the MTEF period. The spending performance of the DoH had improved from 97.7% in 2014/15 to 99.3% in 2015/16. The DoH was set to report against 142 performance indicators for 2016/17, which was an increase of 40% against the number of indicators reported on in 2014/15, yet the budget for the DoH was increasing in real terms by only 1%.

Mr Rakabe raised a concern which was expressed in the question: “Will the sector be able to achieve all the additional targets with the available resources?” With the addition of many new indicators, the Department would need to find a way to assess the level of importance of each indicator and how to prioritise for reporting purposes those that were more important than others, so that critical indicators were not obscured by all the information that was being reported. The Auditor General (AG) had raised a concern about the lack of audit information that supported the performance indicators that provinces reported on in the DoH’s 2014/15 annual report. However, the Department’s strategic plan did not seem to have any explicit intervention in place to address this issue.

Health audit outcomes had been predominantly poor, with only three provinces receiving unqualified audit outcomes in 2015/16. The situation had remained relatively unchanged over the past few years, with a few exceptions. Over the 2017 MTEF period, allocations to the comprehensive HIV/AIDS, National Tertiary Services and Health Facility Revitalisation conditional grants had received the bulk of the transfers from the DoH. The Commission had previously stated that any baseline reductions to grants should be preceded by an expenditure review to determine the extent to which the objectives of the grants were affected.

The Commission had found that five out of the nine provinces had overspent their budgets in the 2015/16 financial yea,r and this had been a persistent problem in the past few years for provinces like KwaZulu-Natal (KZN) and North West (NW). The major pressures on provincial health budgets were goods and services in the main, and personnel expenditure. Provinces had reported a significant increase in contingent liabilities over the period concerned, which had arisen from legal action taken due to negligence by health professionals.

Prof Plaaitjies concluded the presentation by saying that the Department of Health (DoH) was receiving significant increases to its baseline budget over the 2017 MTEF. These increases were targeting the expanded roll-out of HIV/AIDS and TB treatment and prevention, revitalising primary health care facilities and expanding the NHI roll-out. While the allocation of resources was targeting key areas of intervention in line with the NDP, a major concern was addressing the financial and implementation performance of provinces, given the significant service delivery role they played in the sector. He said the NHI reforms must address the coordination challenges in the sector, especially when it came to fostering joint planning and increasing health facility budget autonomy.


Mr D Khosa (ANC) said he applauded the Department for improving on its spending, and said he would deal with two issues. The first dealt with spillover effects. People believed that there was life in Gauteng, and in many instances people did not merely go to Gauteng but were usually referred to Gauteng and received help there when the hospitals in their home province had no capacity to assist them. They did not necessarily go to Gauteng, but received the help they needed in Gauteng. Because of that, they should be allowed to do so, because they had a right to life. The second issue was that he heard that provinces were crying with regard to the imposition of policies by the national government. There was a need to clarify whether provinces had their own policies to implement, and to establish why they were crying that policies were being imposed on them.

Mr A Shaik Emam (NFP) said he would like some guidance from the FFC. A lot of what they were being told by the FFC was very important and pertinent. It seemed as if the districts were the ones experiencing more problems when it came to the implementation of government policies, and he suggested that maybe the Department could do a much better job if it put more emphasis on districts instead of on municipalities, because districts were much smaller areas to govern.

In the discussions, the emphasis had been mostly on money, audits and the key challenges, but he believed that the emphasis should be on what was happening on the ground. There must be emphasis on improvement of people’s lives, creation of healthy environments and the betterment of people’s lives. This was clearly not happening. It would be hypocrisy for him to say there was no good service because there clearly was, but he found that the government was not getting value for the money it was putting in. It was noticeable that South Africa was “a very sick nation”, with every other disease going up and up, and the emphasis was on treating these diseases instead of preventing them. He asked how one could emphasise creating a healthy nation, instead of using money for curing.

Ms D Senokoanyane (ANC) said that the issue of coordination and joint planning was very key if they ever thought that the implementation programme could be successful. It was not uncommon to find that at the provincial level, there were a lot of projects which were labelled national projects. One found that sometimes these projects could not be completed, and the provinces would say they were waiting on the national government for funds, and these projects would go unfinished for long periods of time. There was also the issue of spillovers in the provinces. This was very challenging, because provinces that flooded Gauteng did not have adequate health facilities. As a result, people were being transferred to health facilities in other provinces like Gauteng, and were being brought in ambulances and buses. This caused problems when those provinces had to reimburse, because some bills ran into hundreds of thousands of rands, yet they were never paid. She asked what mechanism could be used to try and address this matter, because there was no system in place to say that if they did not pay, one should not accept their patients.

Ms C Madlopha (ANC) referred her question to slide number 10 on the NHI pilot grants. She said there was an indication that provinces were unaware of what to spend the grant on. She asked if there were guidelines from national departments on how to spend the grants. She also spoke about the increases in performance indicators, and thought maybe the Committee would have to request intervention on the lack of audit information on the performance indicators. She said this was critical for when they did oversight visits.

Mr P Maesela (ANC) said that the presentation was good because it had pointed out the weaknesses. However, it had not offered solutions. There were a lot of problems regarding coordination, wasteful expenditure, inefficiencies and a lack of capacity. In spite of this, the presentation did not suggest solutions on how to solve the problems. He asked if it would not be proper if the DoH took charge of the NHI until it was done, while other things were happening on the side. He said things had to change, and could not be expected or merely hoped to change. HIV/AIDS and TB were drivers of costs in the DoH, and were also the major causes of fatalities. It was obvious that the prevention methods were not working in this regard, and he asked why  other ways of prevention could not be found. Just being proud that the government was spending more on the problem was not good enough without finding a solution. Instead, it was pouring more money into the problem.

Ms S Shope-Sithole (ANC) expressed her gratitude to the Chairpersons for having brought the oversight meeting together, because it had opened Members’ eyes to a lot of things, and her view was that the FFC had highlighted a lot of weaknesses. She would like to hear from the Director General whether the Department agreed with the findings of the FFC and what they were going to do about the findings.

Ms L James (DA) said one of the biggest problems they had was that the departments worked in silence during the planning stages. Social Development should work together with the DoH because most of their patients belonged to each other. To sort this mess out, they should be working together on how they could share their resources to ensure they delivered quality services. One could not continue to cure and cure, and at some point one would have to teach the people how to live healthy lives. Thus, people needed education so that they could take responsibility for their health. She also asked whether the clinics in the provinces were going to continue working by themselves, or if the department was going to fund them directly, because some of them were doing great work while some were not.

Mr A McLoughlin (DA) referred to the presentation and asked whether “in your opinion, account was not taken of the fact that the population was growing?” He remarked that “it seems as if we were looking only at the problem instead of the solutions also”. It seemed that there were problems with compliance issues and compliance issues did not add any value. It was not right that four times more was spent on compliance services than on health services, and asked for the FFC’s opinion or comments on that.

The Co–Chairperson, Ms M Dunjwa (ANC) said that the FFC reminded them that in whatever work they were doing, they would have to ensure that they addressed the challenges they had in the sector. She thought that the NHI was important more than before, and they would have to ensure that at a district level things were happening because they got frustrated when they did oversights and found issues. She also spoke about the spillover effects, and said that she would have appreciated it if that FFC had not mentioned only Baragwanath hospital, because there was also the Red Cross hospital. She said how health was structured had created these problems, and asked what their area of focus should be, and what were the key issues.

The Chairperson thanked the Members for their contributions and asked Prof Plaaitjies and his delegation to respond.

Ms Malebona Matsoso, Director General (DG), DoH, asked the Chairperson to give her the opportunity to respond, particularly to the issue which Ms Shope-Sithole had raised. She said that there were gaps, incorrect assumptions and other things which she would like to correct. She spoke on the information regarding life expectancy, and said that according to StatsSA, life expectancy was actually 62 years and not 57, as the FFC had stated in its presentation. This was one thing that South Africa was applauded for, and to say that it was 57 was actually taking the country back because for women it was 65 while for men it was 59.5, which made the average 62.

She also referred to the spillover effects, and said that it should not be referred to as spillover because the people seeking healthcare were South Africans, and they had a right to this health care. When people were moving from one province to another, this should not be called a spillover because there were only ten central hospitals, which should also be considered national assets. She remarked that “we need to treat our people with sensitivity, and can not call the inter-provincial migrations as spillovers because it was their right to access such health care facilities”. Concerning the NHI grants she requested that the Committee should read both the green paper and the white paper. She remarked that for the NHI to be funded, a proper funding vehicle was needed – and it must be a fund, not a grant. The grant was not intended to be a funding vehicle, thus a fund was needed.

The Chairperson asked: “What were your proposals to the sector in dealing with fiscal consolidation with respect to these cost drivers, without disrupting services?” She commented that one needed to emerge with proposals and solutions to these problems. She also said that the provinces had indicated that there was possibly a need to establish a state owned pharmaceutical company. She then asked their view on this and what was possible in the short term, should this be feasible.

Prof Plaatjies said that the DG’s explanation actually strengthened their presentation. He wondered if the DG actually realised that, because in no way were they saying something different. He was a member of the StatsSA Council and that as a member he should have looked into the life expectancy ages. However, the figures which were reflected in their presentation were from 2013 and the DG’s figures were from 2016. Thus, the FFC was not wrong, but he was thankful to the DG for the correction.

Concerning the issue of educating people about the importance of their health and taking responsibility for it, he said the people in the health sector knew far better than the FFC on how to create a healthier society, making sure that this began right from early childhood. However, there was a disconnection between the different levels of education in terms of inputs and outcomes. He also stated that he agreed with the DG that policies should be costed, and said if a policy, for example, costs R50 billion, it did not necessarily mean that the fiscal framework would follow through on what had been costed and priced in terms of the policy.

He said there was a trade-off going on in the provinces’ different departments, because the provinces decided for themselves what their priorities were and spent their budgets according to this, and this might be different from the objectives of the national government. There was therefore a disjunction between the provinces and national government. He used to work in the National Treasury, which had more information on how budgets should be spent and what the priorities were, than the provinces did. The point he wanted to make was that “we need to be careful if we have done the costing and pricing of a policy in a department and it gets adopted by parliament, that cost has an impact on the division of revenue” He remarked it did not work like that, and added that it was a critical matter because it got adopted into the fiscal framework.

Concerning improving health services at a district level, he thought the DoH could help far better in that regard. He referred to the spillover issue, and said that conditional grants were a financing transfer measure to deal with spillovers. Spillovers were not the people, as the DG thought, but was rather a facility located in Gauteng where everybody went because it was a national priority financed by government through a conditional grant. The spillover had nothing to do with people, but had to do with the fiscal system. Spillover was a fiscal theorem. If one attended Chris Hani Baragwanath and came from another province, that service was already covered through the grant. However, the spillover effect was that the people who received health care in that facility went back to their provinces. Thus, better health services in their home province needed to be financed. The issue was not people spilling over into another province, but rather how that health care facility was financed. Because of this, the spillover was a finance and fiscal issue.

In terms of the question the Chairperson asked about proposals that could be made to the health sector, he said that reprioritisation was needed and remarked: “You need to cut your suit according to the length of your cloth”. This included reviewing strategic plans and annual performance plans because when they were done correctly, they determined the cost drivers. Thus, one needed to look at where the inefficiencies were.

On the issue of the coordination of provinces, he said there had been a question on whether there was a need for provinces, which was a political issue. Some saw provinces as standing in the way of national policy. There was a need to ask the question of whether one still needed provinces, or how one could deliver services more quickly without having certain administrations in place. However, these were all political decisions.

The Chairperson thanked everyone for their contributions and remarked that the meeting had indeed been characterised by robust debate.            

The meeting was adjourned

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