ANALYSIS: Why the health sector has landed itself in ICU
Health departments are stuck between a growing wage bill, unpaid debt and a lack of sufficient funds
Trying to save money in the strained health sector is causing a “death spiral”, leading to fewer staff, more medical negligence lawsuits and unpaid suppliers, experts say.
The treasury budget review released last week revealed that R14bn was owed by provincial health departments when the financial year ended in March 2018.
Of the 57% of accruals (unpaid debt) in all provincial departments, is money owed by health departments, treasury said.
Each financial year, the provincial departments end with billions owed to medicine and technology suppliers.
Gauteng health MEC Gwen Ramakgopa revealed last week that the Gauteng health department will have R5bn in debt at the end of the financial year (March 2019), even though it has reached agreements to pay money owed to suppliers over three years. The Eastern Cape health department owed businesses almost R1bn last September.
Jane Cowley, a Democratic Alliance spokesperson in the Eastern Cape, said non-payment pushed suppliers out of business, and was an annual occurrence.
“Unfortunately, this is nothing new for the department of health, which has got into the habit of rolling funds owed to suppliers over to the new financial year.
“This has a major impact on the department’s long-term sustainability, as funds for ... the new financial year have to be diverted to service existing debt.”
Despite rolling debt, the treasury said it wouldn’t bail out provincial health departments. In the treasury document, titled “Budget Review”, it said supplier debt “partly reflects financial pressures in provinces but it also reflects poor financial management. While accruals may need to be offset it is important that provincial departments of health first demonstrate that they have controls in place to stop accrual [debt] growth”.
Daniel Maclaren, an analyst at Section 27, said it was “fairly disingenuous” to expect that improved financial controls would reduce debt.
“We need provincial financial controls and management. But poor planning is probably a [cause of a] fraction of over expenditure.
“The main reason we don’t have [sufficient] budget is that you have to pay salaries.”
Essentially, the wage bill, which rises above inflation each year, is suffocating health departments.
About 60% of the 2019 health budget of R222bn will go to salaries, according to the budget document.
Wits School of Governance adjunct professor Alex van den Heever explained: “Provincial budgets cannot keep up with the steep salary increases decided at the national level.”
Maclaren said that to meet shortfalls, health departments shifted money allocated to suppliers to pay salaries. This was evident in provincial budgets.
The treasury had explicitly said it was not funding the costs of having the 2018 public sector wage agreement in its 2019 medium-term framework guidelines, he said. But the growing wage bill, unpaid debt and lack of sufficient funds leaves health departments between a rock and a hard place. Van den Heever said the Gauteng health department was consistently under-funded.
“Gauteng has the third-lowest allocations of budget consistent with their population.
“When the budget is not adjusted for unanticipated salary increases and the population increases systematically, the department is placed in an extremely difficult position.”
In response to the shrinking budget, health departments don’t pay suppliers and refuse to fill vacant posts. But this cost-saving technique can lead to poor care and medical negligence cases, leading to more money spent, warned Van den Heever.
Health departments have had frozen posts for years as wage increases hit above inflation. In 2017, director general in the department of health Precious Matsoso said there were more than 40,000 frozen healthcare vacancies nationally.
Van den Heever warned that these posts, frozen to save money, also increased the likelihood of poor care, leading to medical negligence cases, which further depleted the budget.
Claims of medical negligence reached R80.4bn by March 2018, a third of the national health department’s annual budget.
The treasury also encourages early retirement to cut the wage bill.
Maclaren said staff cuts needed to be properly implemented.
“They are not saying okay, we are going to identify all the areas that didn’t meet performance targets or the people who didn’t do what was needed for whatever reason. Instead, retirement packages are given to whoever will take them to save enough money for next budget.”
He said random job cuts through retirement made service worse in the health department and, ironically, made it harder for the administrative staff left behind to manage finances well. Austerity was “death by a thousand cuts”.
SA Medical Association (Sama) spokesperson Dr Angelique Coetzee also warned against pushing out the most skilled doctors through early retirement or even regular retirement.
Coetzee said Sama understood “the colossal public wage bill is a growing challenge for the fiscus, and that the budget calls for a cut ... initially through voluntary retirement of older public workers”.
“We argue, however, that because the country’s health workforce is already depleted, [so] critical disciplines must be preserved.”