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VOTE : HEALTH 2017/18

Standing Committee on Appropriations. VOTE : HEALTH 2017/18. Content. Strategic Goal Department . Slide 03 2017/18 MTEF Voted Funds / Conditional Grant Slide 04 2017/18 MTEF Per Programme Slide 08 2017/18 MTEF Economic Classification Slide 13

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VOTE : HEALTH 2017/18

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  1. Standing Committee on Appropriations VOTE : HEALTH 2017/18

  2. Content • Strategic Goal Department . Slide 03 • 2017/18 MTEF Voted Funds / Conditional Grant Slide 04 • 2017/18 MTEF Per Programme Slide 08 • 2017/18 MTEF Economic Classification Slide 13 • 2017/18 MTEF IYM February 2017 , etc. Slide 18 • 2017/18 MTEF Non-Negotiables Slide 28 • Revenue 2

  3. The strategic goals for 2015-2019 & for 2017/18 • Strengthen health system effectiveness. • Reduce and manage the burden of disease. • Universal health coverage. • Strengthen human resources for health. • Improved quality of health care. • Presentation of how funding support these priorities. 3

  4. 2017/18 MTEF Voted Funds / Conditional Grant 4

  5. Voted & Grant Department of Health Kwazulu-Natal 2017/18 Exp. Estimates R 39,548,473 Billion Funding Source in table below % voted funds 2017/18: R 19,7% and declining over the MTEF 5

  6. Grant / Voted Funds Exp. Estimates over the years • A review of percentage growth in payments and estimates from 2013 – 2019 • There is evidence of diminishing growth in equitable share allocation (voted funds) • Significant growth under grant funding is mainly from the HIV/AIDS grant, but low in 2016/17 6

  7. Conditional Grant Department of Health Kwazulu-Natal 2017/18 Exp. Estimates Conditional Grants Conditional Grant details table below % annual growth 10.6% 2017/18 financial year HIV/Aids share increasing over MTEF 7

  8. 2017/18 MTEF Programs 8

  9. Programme Graph 2017/18 Department of Health Kwazulu-Natal Budget 2017/18 MTEF 9

  10. Programme Department of Health Kwazulu-Natal Budget 2017/18 MTEF Funding per Program Program 2 increased funding over the MTEF period (%) alignment APP priorities R 107,607 m is first charge - incl. under Program 1 (period 2015/16 -2017/18 ) 10

  11. % change per Programme Change per Programme MTEF (%) Green highlight above average (alignment APP priorities) • P1 change 2017/18-2018/19 - last year of the first charge (R 107m ) • P7 and P8 increases 2017/18 – cost containment 2016/17 fin year 11

  12. Core Service Delivery Programs Budgets over the MTEF display prioritization towards Core Service Delivery Programs Program 2,3,4 & 5 : R 35,465,137 Billion  90% Total : R 39,548,473 Billion Core Service delivery Programs (P2,P3,P4,P5) and % increase over the MTEF 12

  13. 2017/18 MTEF Economic Classification 13

  14. Economic Classification Graph 2017/18 Department of Health Kwazulu-Natal Budget 2017/18 MTEF 14

  15. Economic Classification Department of Health Kwazulu-Natal Budget 2017/18 MTEF Funding per Economic Classification Compensation of Employees 63,8% 2017/18 and decline 2019/20 Goods and Services increasing to 30,7% in 2019/20 Capital funding 3,6% 2017/18 15

  16. Economic Classification Exp. Estimates over the years • Overview : Compensation of Employees and Goods & Service proportional split and % change over the years : • Progressive decline in COE growth over the MTEF period (63,7% to 63,5%) • Target for COE is below 63% • COE growth below target last 4 years • Significant reduction in G&S growth 2016/17 (2.9%) • In Year budget changes will be required for 2017/18 with additional funds towards Goods and services (from COE, Major Assets) 16

  17. Goods and Services • Cost Drivers Goods and Services (part of Non-Negotiable Items) • Medicine • NHLS • Medical Supplies • Property Payments • Medicine % continue to grow over MTEF and mainly due to ARV medicines • NHLS expenditure for HIV/Aids will continue to grow (increase in patients) • Table provides information medicine is underfunded (estimated R 500m for 2017/18) 17

  18. IYM February 2017 (revised estimates) Year to Year Growth 18

  19. Revised Estimates 2016/17 IYM data : February 2017 and % change per Programme and Economic Classification 2017/18 Financial Year 19

  20. Notes IYM Feb 2017 IYM February 2017 Balanced outcome 2016/17 as result of Cash Blocking Accruals above R 1 Billion (payments on hold due to lack of available funds, and a concern) • Pressure HIV/Aids with projected R 329m overspend (not all payments processed) • Pressure Medico-legal claims with projected R 243m overspend • Both put pressure on other Programs / Subprogram, Economic classification • All Conditional Grants will be spend 2016/17 and no request for roll over will be required as per revised estimates Percentage increase 2017/18 budget based on revised estimates (Feb 2017): • 8,0% for COE below the target of 8,5% (NDOH) • 2,9% for GS and far below the medical inflation 8,8% (target NDOH) • 38,2% for Capital Assets and a result of very low spending 2016/17 -> low spending a result of addressing pressure GS and COE 20

  21. Notes IYM Feb 2017 and challenges 2017/18 Concerns for 2017/18 financial year • Cash Flow  Available Budget 8,3% per month (same for each month; restricted, and part of Treasury reforms) • The Department will not be able to pay within the prescribed 30 day period • HIV/Aids is R 500m underfunded for 2017/18 (cost drivers : ARV medication and NHLS (core test and test to monitor whilst on treatment)  impacts on the available budget per month (R 45m monthly pressure) • Underfunding for 2017/18: • COE R 112m (target 8,5%) versus allocated 8,0% revised estimates • GS R 674m (target 8,8% ) versus allocated 2,9% -revised estimates • > R 1 Billion (accruals 2016/17 financial year) 21

  22. Pressures, concerns 2017/18 financial year (2) • The Department could identify areas of expenditure pressure • Shortfall for : • Housing allowance (2015/16 ) : R 200m • NHLS migration flat fee to per invoice (2015/16): +: R 300m • Total : R 500m • Other factors : medical inflation above CPIX (medical inflation), inefficiencies in Supply Chain Management, Inventory Management, price increase non – medical items like outsourced cleaning & security services, above budget wage agreement, inflationary pressures, etc. • 0.4% increase above wage agreement was not fully funded , and once off budget was provided with no carry through cost (R 100m)  increase shortfall MTEF 22

  23. Pressures, concerns 2017/18 financial year (3) Concerns for 2017/18 financial year • Cash Flow  Available Budget 8,3% per month (same for each month; restricted, and part of Treasury reforms) • The Department will not be able to pay within the prescribed 30 day period • HIV/Aids is R 500m underfunded for 2017/18 (cost drivers : ARV medication and NHLS (core test and test to monitor whilst on treatment)  impacts on the available budget per month (R 45m monthly pressure) • Underfunding for 2017/18: • COE R 112m (target 8,5%) versus allocated 8,0% revised estimates • GS R 674m (target 8,8% ) versus allocated 2,9% -revised estimates • > R 1 Billion (accruals 2016/17 financial year) • Will it be possible to find savings in 2017/18 to reduce total amount of accruals? 23

  24. Pressures, concerns 2017/18 financial year (4) • The challenge (concerns) • The weakening rand, increasing food prices, increasing water and electricity, increasing cleaning and security contract costs remain a challenge and therefore could not be fully budgeted for • Medical Inflation is above the CPI index ( weighted average 8,3%) • Accruals 2016/17 exceed available monthly budget and the Department will not be in position to pay within 30 days • Additional funds will be required to continue acceleration HIV/Aids Grant (R 500m) and to ensure payments within 30 days (accruals >R 1,1 Billion) • Investment in electronic inventory, medicine, NHLS, Medical Record system remains a priority, but require additional funds 24

  25. Special projects / issues • Jozini CHC: Provision was made for Phase 1 commissioning of Jozini CHC within the allocated baseline ( R 30m voted funds) • MTEF Budgets for medico legal • (expenditure 2016/17 R 243m no budget) • 2017/18 : R 120m (shortfall at least R 100m) • 2018/19 : R 100m • 2019/20 : R 100m • PPP (IALCH) budgets MTEF (extension of contract) • 2017/18 : R 650m • 2018/19 : R 710m • 2019/20 : R 737m • IT Budget for 2017/18 : R 190m • Medicine Trading account : Department budget allocation 2017/18 for PPSD 25

  26. Notes : Capital Assets • Payments for capital assets • Machinery and Equipment increased is attributable to clear the backlog in medical equipment, and to accommodate accruals. Allocated budget is R622,178 million of which • Transport equipment: R147 million • R 43m is set aside for replacement of ambulances • R 104m is available for other vehicles, mainly mobile clinics replacement as well as the outreach team vehicles. • Other Machinery and equipment : R475million • R254 m for Health Technology services (Medical Equipment) • R66m for Infrastructure related equipment • R57 million NTSG • R32m emergency medical services medical equipment • R180 million is for replacement of essential non medical equipment 26

  27. Notes : General • In formulating the 2017/18 Revised baseline figures, reprioritization of 2017/18 indicative baseline, the department took the following into consideration: • The alignment with the 2016/17 projected outcome. • Sustain current level of services and strengthening of primary health care services through savings to be realized savings from optimizing hospital services. • Inflationary adjustment within the baseline where possible. • Reprioritization within economic classification to provide for overall growth in Compensation of Employees budget of 7.5%. • The 15 per cent growth in HIV/AIDS Grant hides the budget shortfall at high level . • The 2017/18 baseline shows an annual growth rate of 5.8 % from the 2016/17 Revised estimates, below the 6.2 projected CPI. • Additional funding will be required to sustain services. 27

  28. 2017/18 MTEF Non-Negotiables 28

  29. Non – Negotiables (1) Non-Negotiables over the MTEF period • Revised Estimates February 2017 • Red highlights  under funding • Overall % growth 16% from 2014/15 to 2015/16 & 19% from 2015/16 to 2016/17 • Underfunding could be above R 700m for non-negotiables (8,8% increase on revised estimates (Feb) 29

  30. Non – Negotiables (2) Percentage growth Non-Negotiables over the MTEF period • Revised Estimates February 2017 • Red highlights  under funding (% growth) -> reprioritization 2017/18? • Additional funds will be required (HIV/Aids CG) and Voted Funds 30

  31. Non – Negotiables (3) Non-Negotiables comments • The Department must ensure sufficient budget allocation to the Non-Negotiable item and budget for other items must be reduced. Reprioritization within Good and Services is impossible to close the gap • Main shortfall in funding is for HIV/Aids Grant (Medicine, NHLS, Medical Supplies) • Non – Negotiable expenditure is accrued in 2016/17 (NHLS, Medical Supplies, etc) due to lack of funds (Cash Blocking). • Inventory Management and efficiency gains to transversal contracts should result in reduced pressure (shortfall). 31

  32. Revenue DOH KZN Department receipts collection (revenue) • Percentage beneficiaries accessing free services, increasing over MTEF • Growth in revenue less than growth in expenditure. 32

  33. THANK YOU

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