Department of Health Annual Report 2001/02 - Performance Against Objectives

Improving Resource Mobilisation, Allocation And Management

Five-year objectives

Strengthen financial planning and management.
Align conditional grant allocations with policy imperatives, especially equity.
License public and private health facilities on the basis of rational need.
Monitor the impact of the Medical Schemes Act and amend the law where necessary.
Conduct research on Social Health
Insurance and contribute to policy development.
Improve revenue generation by public health facilities and secure revenue retention.
Develop framework for public-private partnerships to strengthen the public health system and promote equity.
Direct donor funding appropriately and manage it effectively.
Develop a rational system of purchasing, allocating and utilising health technology so that the benefits are optimised.

Accounting for MRC Budget allocation

The South African Medical Research Council functions in terms of a specific Act of Parliament (No 58 of 1991) and its purpose is to promote better health and quality of life for South Africa's people through research, development and technology transfer.

The MRC is funded by the national Treasury through a special, earmarked allocation in the Health Vote. In the 2001/2 financial year the MRC received R127,2-million. Accountability for this Budget allocation is discharged in terms of provisions set down by the MRC Act and Public Finance Management Act.

Financial reports and annual reports of the MRC must be submitted by its management to the Minister of Health through the Director-General for Health, in his capacity as Accounting Officer.

The Director-General may recommend amendments to either of these reports.

In addition to this, Treasury Regulations also establish accountability arrangements that require the Board of the MRC to:

Report quarterly to the Minister, through the Director-General, in compliance with the PFMA.
Ensure that cash management performance is reported to the Department on a regular basis at least monthly.

Apart from fulfilling the statutory requirements for accountability, there are regular management meetings between representatives of the Department and the MRC. More general management issues are discussed at such meetings.

Since the MRC is required to table a detailed report on its performance to Parliament, no attempt is made in the Department's Annual Report to give an account of the diverse activities of the MRC.

CONDITIONAL GRANTS AND EQUITY

Key objective for 2001/2

Facilitate restructuring of three conditional grants: the Central Hospitals Grant, the Health Professionals Training and Research Grant and the Redistribution of Tertiary Services Grant.

Under the Revitalisation of Hospital Services, a summary was given on the findings of research on highly specialised services (page 64). The study provided important information on how the current system of conditional grants for tertiary level care was perpetuating inequities. This impact was not confined to tertiary care, but had a knock-on effect in the areas of secondary and primary care.

TABLE 25: PROVINCIAL ALLOCATIONS FROM CONDITIONAL GRANTS FOR TERTIARY SERVICES

Province	2001/2 (R000s)	2002/3 (R000s)
EC	62 373	123 746
FS	249 813	287 424
GP	1 568 945	1 602 981
KZN	427 525	480 679
LP	44 500	44 838
MP	37 588	38 414
NC	16 700	24 062
NW	34 200	34 189
WC	1 011 436	1 030 510
Total	3 453 080	3 666 842

Three kinds of conditional grants contributed to the funding of tertiary level care:

The Central Hospitals Grant - this amounted to 75% of the funding available for tertiary care and it went to the four provinces where the 10 central hospitals were situated.
The Redistribution of Tertiary Services Grant - this went to the five provinces without central hospitals and was intended to support the development of tertiary services in these areas.

However, it was small in comparison to the other grants.

The Health Professionals Training and Research Grant - this mainly benefited provinces with medical schools.

In response to the research findings, it was decided during 2001/2 to replace the Central Hospitals and Redistribution grants with a single grant: the National Tertiary Services Grant (NTSG). The decision was adopted by the Health Minmec, the joint Health/Finance Minmec, the Budget Council and the Ministerial Council on the Budget.

The impact of the new system can be seen in Table 26.

In contrast to the old system, the NTSG will apply the principle of "like for like" funding and will be allocated for particular services not entire hospitals.

A total of 27 tertiary service units, situated in all provinces, will be funded.

The grant will cover the costs of personnel, drugs and other consumables, routine maintenance, annualised costs for equipment replacement and proportional management and administration costs.

Where the old grant for central hospitals often subsidised lower levels of care, this will no longer occur. Conversely, where provinces without central hospitals were compelled to dip into the general pool of health funding to cover the costs of tertiary services, this will no longer be necessary.

Overall, therefore the outcome will be more equitable, However, to ensure that services are not destabilised in provinces that previously received a disproportionate share of tertiary funding, the new system will be phased in.

The formula used in the Health Professionals Training and Research Grant was also inequitable, with 90% going to the provinces that have medical schools. Four of these are also the provinces with central hospitals.

This grant has been restructured and renamed as the Health Professionals Training and Development Grant (HPTD).

TABLE 26: PROVINCIAL ALLOCATIONS FOR HEALTH PROFESSIONAL TRAINING AND DEVELOPMENT

Province	2001/2 (R000s)	2002/3 (R000s)
EC	55 865	70 270
FS	88 367	88 164
GP	529 186	527 969
KZN	154 388	160 499
LP	24 377	34 186
MP	24 377	30 389
NC	24 377	27 592
NW	24 377	32 114
WC	1 234 090	308 066
Total	1 234 090	1 279 248

To achieve more equitable allocation, it was decided to split the original fundingthree ways:

A portion goes into the NTSG (which covers the costs of trainee doctors and specialists).
A portion is designated as "development funding" and this goes to six provinces (five without medical schools plus KwaZulu-Natal) to fund principal specialist and trainee specialist posts. The idea is to develop a pool of specialist expertise outside major cities and boost quality of care at regional hospitals.
The remaining amount is allocated to provinces in the proportions that the old grant was.

The comparative figures for 2001/2 and 2002/3 indicate the impact.

REVENUE GENERATION AND RETENTION

It has been recognised that revenue generation by hospitals would be boosted by more efficient billing, a revised scale of tariffs and an initial focus on patients who have third party funding - medical aid, Road Accident Fund or Workmen's Compensation.

Key objectives for 2001/2

Promote the rollout of the Uniform Patient Fee Schedule (UPFS).
Review and develop UPFS.
Develop a revenue retention policy as a resource for provinces.

The following progress was made in 2001/2:

The Uniform Patient Fee Schedule (UPFS) for the year was approved by Minmec in March.
Implementation in provinces progressed as follows: North West (April 2001), Mpumalanga (April 2001), Western Cape (phased in from June 2001), Free State (full implementation July 2001) and the South African Military Health Service (November 2001).

Social health insurance: Would it fly?

If every individual who could afford to contribute to the cost of health care did so, the State would be better placed to improve the public health system for all who depend on it.

While private medical schemes will surely remain beyond the reach of many workers, social health insurance seems a viable option. But how would prospective members - and their employers respond to reaching regularly into their pockets to secure health services that they presently get at little or no cost?

The Department commissioned a study to test the water. This combined individual interviews, focus groups and a survey among health service providers and workers and employers in both public and private sectors. Not large enough to be conclusive, it still provided lots of food for thought.

There was a fairly high willingness among prospective members to use the public health system.
However, this willingness to pay for public sector care was "powerfully dependent" on the improvement of public hospitals.
Aspects pinpointed as most needing attention were: Waiting times; hygiene; staff attitudes and provision of medicines.
Respondents rejected the idea of better public health services only for those who were insured. They wanted improvements for all.
There was fair support for a contributory health fund for those without medical scheme cover.

Most workers indicated they could afford to contribute.

Employers were noticeably more sceptical than workers about the using the public sector as the service provider for social health insurance.

The study concludes "there is potential support for a programme of social health insurance . . .

(but) it is clear that support is dependent on visible improvements in public hospitals . . .

prior to implementation".

Various consultants were contracted to provide support to institutions implementing the UPFS through training on the fees schedule and on the use of the computerised Patient Administration and Billing System that most provinces rely on to record patient information and generate invoices.

Where the system was fully implemented relatively early in the financial year - as in the Free State - a good increase in revenue was recorded.

Towards the end of 2001/2, the tariffs were revised for the following year and negotiated with the Board of Healthcare Funders (BHF) that represents the collective interests of medical schemes.

Through the BHF, the UPFS coded database was disseminated to all medical schemes.

A tender was awarded to develop an electronic data exchange between the public hospitals' Patient Administration and Billing System and medical schemes and other funding organisations. This will facilitate electronic billing.

INCREASING THE "INSURED POPULATION"

A strategic direction pursued by the Department, in view of the distribution of income and wealth in our country, is to encourage those who can afford to pay for their own medical care or make a contribution towards its costs to do so.

Pre-payment, through a range of insurances that suit different social groups, is seen as an instrument to achieve this objective.

Key objectives for 2001/2

Facilitate completion of draft report on social health insurance.
Review legislation on medical schemes.

Fine-tuning the Medical Schemes Act

The Medical Schemes Act of 1998 was amended at the end of 2001 in a manner designed to further promote some of the key objectives of the legislation. These included ensuring the accountability of schemes to the Registrar and to their members; creating conditions to safeguard members' contributions; and guarding against discrimination in terms of membership.

The amendments were a direct response to challenges encountered during the period since the law was passed. They included:

Greater transparency in relation to reinsurance of the risks of schemes, with an obligation to inform the Registrar in advance of new contracts and a duty placed on the trustees of schemes to consider all new reinsurance contracts. This was to counter a trend where excessive proportions of members' contributions were simply flowing out of funds to insurance companies, thus reducing the reserves of schemes.
More frequent reporting to the Registrar by schemes so that problems in the management and financial stability of schemes can be detected early and steps taken to avoid serious problems.
An explicit prohibition on discrimination based on the age of a prospective scheme member.

An Appeal Board was set up in terms of section 50 of the Medical Schemes Act towards the end of the financial year.

Principles and PPIs

Partnerships work because they serve some interests of each party. And health care is basically no different. The Department of health has, however, adopted principles to guide publicprivate interactions (PPIs) and these may impact on the balance of interests in any joint venture.

The bottom line is that PPIs should contribute to the overall sustainability of the national health care system. Ways of achieving this include:

Containing costs in the private sector, particularly in relation to medicines and technology.
Developing more cost-effective health technologies than those presently available.
Configuring service provision more efficiently and equitably, especially at tertiary level.
Improving public health care management – and retaining good managers in the public sector.

In addition, any PPI should help to promote the following:

Equity of access to primary health care.

For example:

Striving to ensure access for all to a defined package of services.
Strengthening the quality of priority interventions (like the management of STIs) in private and public sectors
Equity of access to hospital care and a stronger public hospital system.

For example:

Using fees from differential facilities in public hospitals to upgrade the service for all.
Enhancing secondary and tertiary services in underserved areas.
Equity in financing of health care.
Promoting cross-subsidisation – between health, younger and relatively affluent groups and older, sicker and poorer groups — in the overall scheme of health financing.
Financial sustainability in the public sector.

For example:

Improving the efficiency of public sector services.
Limiting the burden of care placed upon the public purse.
Utilising under-used public sector capacity before creating new health facilities.

Social Health Insurance

The Department participated in the Health Sub-Committee of the Committee of Inquiry into a Comprehensive Social Security System.

The sub-committee, appointed to provide independent expert input on social health insurance, developed a proposal centred on the national health insurance model. It also identified key policy areas that would have to be addressed within the health sector in order to make such a system of insurance feasible.

The overall report of the Committee of Inquiry was completed by the end of the financial year and ready for discussion by Cabinet.

A study on the public's Willingness and Ability to Pay for Social Health Insurance was completed during the year. The results were incorporated into the work of the sub-committee.

Insuring public servants

Government is the biggest employer in the country and currently accounts for 12% of total contributions to medical schemes. However, only 40% of public servants are insured and those who earn the least are not covered.

A more affordable option to increase cover for public servants is a common objective of the unions, government in general and the Health Department, in particular, in terms of policy perspectives.

The Department is represented on the Public Sector Bargaining Council's task team on medical aid restructuring. Work progressed during the year on government's side towards a concrete proposal on a more rational approach to health insurance for public servants, with the potential to benefit all public servants.

PUBLIC-PRIVATE INTERACTIONS

The Department produced a policy on PPIs during the course of the year and this was endorsed by the Health Minmec.

Of particular importance were the principles or "ground rules" that it set for engagement with the private sector.

The November Health Summit (described on page 90) afforded an opportunity for the broadest engagement to date between private and public sector interests on the framework for joint ventures. The points of departure were often quite different and the debate was the most robust of any of the groups at the Summit.

The group produced recommendations for further action and these included:

Further initiatives to build trust between the sectors and create an enabling climate for partnership, including the holding of a national PPI lekgotla within a few months.
The creation of appropriate structures for co-operation, notably PPI forums at national and provincial levels.
The development of capacity in Department of Health - a PPI Unit was proposed - to interact effectively with the private sector and maximise the opportunities that exist for joint ventures.
The involvement of organised labour in the planning of PPIs.
The fast-tracking of "social responsibility" type PPIs in which the private sector could offer free services to reduce treatment backlogs and contribute free specialist care in under-served areas. Such activities yield quick and visible success and build confidence in PPIs.

There was a modest expansion of PPIs during the year:

At a national level the Diflucan Partnership with Pfizer Inc moved into action (see page 40) and the preparatory work was done for the Biovac investment in the State Vaccine Institute (see page 70).
At provincial level, partnerships occurred mainly in hospital services with the provision of differential amenities for private patients in hospitals in the Western Cape, Free State, Gauteng and Northern Cape.
The newly built Nkosi Albert Luthuli Hospital in KwaZulu-Natal has entered into an agreement with a private consortium for information technology information management and facility management. Benefits include lower capital outlay, regular replacement of technology and delivery to agreed standards.

The objectives relating to rational planning and effective management of health technology have been dealt with under Hospital Revitalisation (page 66), as have some aspects of strengthening management skills and systems. The planning and licensing of health facilities according to objective need is an objective that overlaps with Legislative Reform and is dealt with under that heading (page 87).