17 December 2017

South Africa: Could Free Education Cost SA the National Health Insurance?

Saturday's surprise announcement could be the latest blow to the country's bid for better healthcare.

President Jacob Zuma's decision to institute free tertiary education could leave South Africans with an uncomfortable choice: better education or better healthcare.

Those starting university in 2018 will be the first to benefit from free tertiary education.

The move is expected to cost the government at least R35-billion in currently unbudgeted-for expenditure, according to projections made by youth development organisation the Thusanani Foundation in a submission to the Heher Commission into the Feasibility of Fee-Free Higher Education and Training.

Although analysts have welcomed the move to increase access to further education, they warn that South Africans will face tough trade-offs to find the money to fund it. One of these trade-offs may be the quest for better and more equitable healthcare under the National Health Insurance (NHI).

What is the National Health Insurance?

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Can SA afford the NHI? And will you be able to keep seeing your doctor? Our Laura Lopez Gonzalez answers these and other questions.

Over the next three years, the country's health budget will grow a mere 1.7% when adjusted for inflation, revealed an analysis of the medium-term budget policy statement by the Rural Health Advocacy Project (RHAP). Already, only about 35% of provincial health budgets are dedicated to service delivery because two-thirds of budgets go to pay salaries, found a 2016 report by the nongovernmental organisation.

"The bottom line is that we don't have the money to pay for our current spending with the budget that we have. That's why transforming the way we fund healthcare is necessary," warns RHAP health systems and policy manager Russell Rensburg.

Under the NHI, healthcare funding would change to allow the government to pool private and public funding to become the single largest buyer of healthcare services. By doing this, Health Minister Aaron Motsoaledi says the government will be able to more equitably distribute healthcare funding among citizens and, for instance, negotiate better deals through buying larger quantities of commodities such as medicine.

But South Africa will have to almost double public healthcare spending by 2025 to bring the NHI to life, says a July white paper.

The introduction of free higher education may make it even more difficult to do this.

"There is a good chance that the NHI would be put on the back burner because of the lack of funds available," warns Daniel McLaren, budget analyst for public litigation organisation Section27.

"No one disagrees that this [free tertiary education] is a policy priority. The question is, is this being thought through and implemented in the right way?" he asked.

The National Education Health and Allied Workers Union has welcomed Zuma's announcement, which spokesperson Khaya Xaba described as "unexpected", but said it hoped the move would not compromise the government's commitment to the NHI.

National Treasury likely to safeguard medical aid tax credits

If the move to free higher education does bode poorly for the NHI, it's the latest setback for the move to universal healthcare this year. In October, Finance Minister Malusi Gigaba hinted that R20-billion in cuts to medical aid tax benefits that were slated to fund the NHI were unlikely to materialise, after the treasury found that it would hurt low-income earners, according to the medium-term budget.

In place of the R20-billion in potential NHI funding, the treasury offered about R700-million, says RHAP's Rensburg. In its latest budget speech, the treasury also flagged the NHI as one of several government ambitions, alongside higher education reforms, that would have to "be revisited" because of their high cost and the country's poor economic growth.

Responding to Zuma announcement late Saturday, the treasury tweeted that it had "noted" the president's decision and was reviewing proposals on higher education ahead of the 2018 budget.

The University of Johannesburg's senior lecturer in economics Seán Mfundza Muller says that some of the easiest cuts to free up resources for higher education may remain unpalatable to some.

"They are going to have to make cuts to other expenditure, and there may be resistance to cutting some 'fat' - extra ministries, ministerial perks. [Government] may feel it's easier going to look at social grants or health or even infrastructure spending ... because you only see the effects of those cuts five years down the line."

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