Budget 2013: Gordhan may raise taxes to fund NHI – but not yet

In his budget speech on Wednesday, Finance Minister Pravin Gordhan suggested a tax increase may be an option.

  • Read the full speech here

"The initial phase of NHI [national health insurance] development will not place new revenue demands on the fiscus. Over the longer term, however, it is anticipated that a tax increase will be needed," Gordhan said.

In fact reductions have been made to the NHI grant due to slow spending.

"The national treasury is working with the department of health to examine the funding arrangements and system reforms required for NHI. A discussion paper inviting public comment on various options will be published," the finance minister said.

It is expected that the National Health Insurance Bill will be tabled in Parliament in the next financial year and that relevant regulations will be developed and implemented in the coming years.

"Alongside social assistance, access to health care is a vital element in the social wage," said Gordhan who pointed out examples of progress the health sector. "Pilot national health insurance projects have been initiated this year in ten districts, and will include improvements to health facilities, contracting with general practitioners and financial management reforms.

"A new conditional grant is introduced this year to enable the national Department of Health to play a greater role in coordinating these reforms."

Health spending
Spending on health will be R133-billion over the medium term and account for 4.5% of the budget. It has grown by 6.8%. Health financing and national health insurance will account for 44% of health spending over this period.

According to the department's budget vote, one of the strategic objectives over the medium term is to improve healthcare financing through the implementation of the national health insurance. But due to slow spending on the national health insurance conditional grant, Cabinet has approved reductions.

"Reductions of R26-million (R11-million, R10-million and R5.2-million) over the MTEF [Medium term expenditure framework] period have been made to the national health insurance grant, due to slow expenditure," the department said in its vote.

The budget vote shows expenditure on NHI will jump from R161-million in 2011/12 to R315-million in 2012/13. If the following financial year it will increase to R491-million and climb to R672-million by 2015/16.

Despite the cut, the department said the most significant increases in expenditure over the medium term are still in the health financing and national health insurance subprogramme, as a result of the piloting of new interventions in 10 pilot districts in preparation for the rollout of national health insurance.

"The spending focus over the medium term will be on preparing for the implementation of the national health insurance, and providing for the prevention and treatment of HIV and Aids and tuberculosis," the department said.

The department said health financing and the national health insurance undertakes health economics research; develops policy for medical schemes and public private partnerships; provides technical oversight over the Council for Medical Schemes; develops and implements policies, legislation and frameworks for national health insurance; oversees the coordination of research into alternative health care financing mechanisms for achieving universal health coverage; and oversees the national health insurance conditional grant as well as district pilot activities.

Over the medium term, the initiatives implemented through the pilot districts will be expanded to improve the access to and quality of health care.

Major reforms
Two major reforms to conditional grants have been effected, the department of Health said in its budget vote. First, the three health infrastructure grants – hospital revitalisation, health infrastructure and nursing colleges and schools – have been consolidated into a single direct grant, the health facility revitalisation grant.

"It is envisaged that the new configuration will allow for more flexibility for funds to be shifted

between the three windows and thus ensure the timely delivery of health infrastructure," the department said.

The second is the establishment of a new indirect schedule 6A grant, known as the national health grant. This grant will have two components, one for national health insurance and one for health facility revitalisation.

The new grant has moved a major portion of NHI money from provinces back into the national health department's budget.

The department said this measure has been introduced to deal with underspending and weaknesses in the performance on these grants.

"The introduction of the national health grant results in large increases in payments for capital assets for infrastructure projects and goods and services for contractors, namely for general practitioners contracted to work in clinics and community health centres in pilot districts."

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