14 June 2021
This is the fourth and final brief in a series on health expenditure in the public and private sectors. It is a simpler, edited version of this article published on the GroundUp and the Helen Suzman Foundation websites.
Given the fiscally constrained medium term projections in the 2021 Budget, this brief explores the financing of health care expenditure and its implication for service delivery up until the 2023/24 financial year. The technical version of this article includes a table with detailed estimates of expenditure.
In a nutshell our best estimate is that government’s health budget will increase from R209.7 billion in the 2018/19 financial year to R245 billion in 2023/24. Add onto this another R10 billion in 2023/24 for the Compensation Fund and Road Accident Fund. Private health expenditure, including medical aid, out-of-pocket, insurance, workplace and other forms of expenditure will rise from R222.6 billion to R285 billion. Health expenditure will remain approximately 9% of GDP. (For analysis of inflation factors see the technical version of the article.)
The health system will hold together, but it will be under increased strain. In the public sector, it will not be possible to increase the size of the provision to compensate for a rising population, and if value for money in procurement is not improved, services will have to be cut.
In the private sector, continuing rises in medical aid premiums above the inflation rate will press against modest rises in household consumption expenditure, prompting some to trade down in options provided by medical aid, or even to cancel it altogether.
The main risk is that health worker wages, due to union pressure, may punch a hole in the government’s wage restraint policy, leading to inflation of medical costs. But it may also be possible for government to accommodate increased employee compensation.
A second risk is that economic growth comes in below or above the projection in the 2021 Budget. We must hope that the latter is the case. If the former happens, the health sector is in for a very difficult time.