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The influence of economics on health

Many South Africans had hoped that the 2020 Budget Speech on 20 February would provide greater clarity on plans for the National Health Insurance (NHI) plan. However, Finance Minister Tito Mboweni mentioned the NHI only once, in passing. Shrikant Peters observes that despite the moral duty to grant quality healthcare to all sectors of the South Africa population, the feasibility of NHI is at the mercy of economic performance. An improved economy, he says, will result in a healthier population and increased taxpayer funding for the NHI.

A key factor in any study of economics is the concept of scarcity – unlimited needs and wants in the context of limited resources; applicable both to the microeconomics of households and individuals, and the macroeconomics of countries, corporations and international money flows.

The concept of scarcity featured front and centre in the finance minister’s budget speech this year. A scarcity of funds has resulted in decreased budgets for the financial year 2020/2021 to many government departments. However, this is not the largest threat to the health of the population – that dishonour belongs to our lack of economic growth, which perpetuates wide-spread unemployment, chronic poverty and the inequalities we inherited from our apartheid past.

Lack of economic growth, which perpetuates wide-spread unemployment, chronic poverty and inequality are the greatest threat to the health of the population.

During his budget speech, the minister sketched our recent growth trajectory, noting that following a period of pre-democracy recession in the early 1990s, we experienced economic growth until the end of the first decade of the 2000s, at which point our economic performance faded following the global recession precipitated by the US subprime mortgage crisis of 2008.

Although the minister’s economic strategy included “focused spending on education, health and social development”, he spent far more time laying out the need for an efficient and capable state. As opposed to the tax increases, which we know will be required to fund NHI, it was announced that we would in fact have some personal income tax relief. Social grants are being increased only marginally. And optimistically, decreases in the public sector wage bill and reallocation of funding is earmarked to free R261 billion.

 These measures are being put in place because, over the next three years, our growth rate is predicted to be under 1%, hampered by a lack of reliable energy supply. R60 billion of this money is being earmarked to stabilise South African Airways (SAA) and Eskom. Our debt is set to increase to 65.6% of our gross domestic product (GDP) by the end of the 2020/2021 financial year. And with a focus on efficiency and saving, where does this leave the health of the country’s citizens?

Wage bill cut to hamper national health strategy

All government departments have been asked to cut expenditure in line with these reallocations. Interestingly, however, due to the federal nature of the country, this reallocation of funds will affect different provincial health departments differently, as it is up to the provinces themselves to decide how to allocate their budgets and budget cuts.

A new Human Resources for Health strategy is being developed for the country. Although it is not yet finalised, it is guaranteed that the final strategy will call for more healthcare workers to be employed by the state. Clearly, however, this cannot and will not happen in the short term.

Although government has promised to have NHI fully implemented by 2026, the fine print indicates that only certain services will have been rolled out, beginning with essential services such as those related to maternal and child health. Across the globe, countries that have been relatively successful in implementing universal health coverage have taken decades to implement it. Thailand, which is often held up as exemplary, took 80 years. The United Kingdom, whose NHS came into being after World War II, still faces long waiting times and staffing crises.

Across the globe, countries that have been relatively successful in implementing universal health coverage have taken decades to implement it.

The United States is busy rolling back laws related to the Affordable Care Act, having chosen to adopt a medical insurance system that caters only to the employed; only the elderly and war veterans will receive government assistance. This may seem callous, but we should remember that the USA has an unemployment rate of only 3% as opposed to our almost 30%. The USA expends almost $10 000 per person on health per year, whereas in South Africa we only manage approximately $500. Life expectancies also differ vastly – although our unitary South African health system covers all primary health care needs, with subsidised district, regional and tertiary care, our life expectancy of 62 years trails far behind the USA’s 78 years of age.

We spend a relatively high proportion of our GDP (8%) on health, yet it has long been established that South Africa has a poor return on investment for what the country (and by extension, taxpayers) pay for healthcare in the country, both due to poor quality outcomes in the public sector, as well as unnecessarily high costs in the private sector (which each consume R4 billion per year). Only 16% of the country has access to private healthcare.

Impact of a dwindling economy on the health of the population

Of course, underlying the numbers, with a far greater impact on health measures, are the social determinants of health – the conditions in which people live, including the following: access to proper housing, water and sanitation, nutrition, safe families and communities, access to good education and employment opportunities, and functional government services including policing and judicial services.

The reward of economic growth is a population that undergoes an increase in life expectancy, a decrease in early mortality, and improvements in quality of life.

It is fundamentally a lack of opportunity, within a constrained and exclusionary economic environment, that conspires to lock the majority of the South African population out of leading healthy, rewarding, fulfilling lives as economically active persons.

It is thus in everyone’s best interests that we focus on growing the economy, albeit in an inclusive manner. If done properly, when a healthy population is attained in this manner, it enables further economic development to occur. The reward of economic growth is a population that undergoes an increase in life expectancy, a decrease in early mortality, and improvements in quality of life. However, for the time being, concerningly, it would appear that we are heading in the wrong direction on both the economy and the health of our country’s citizens as a whole.

* The opinions expressed here by Spotlight.Africa contributors and editors are their own and not official statements of the Society of Jesus in South Africa or of the Catholic Church unless explicitly stated.


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Shrikant Peters
Shrikant Peters is a medical doctor and lecturer, specialising in Public Health Medicine at the Western Cape Department of Health and the University of Cape Town. He holds a BA in Politics, Philosophy & Economics from the University of South Africa. He has worked at Addington, Mahatma Gandhi, Eerste River and Hillbrow Hospitals. He has a special interest in the improvement of quality in the public healthcare sector and writes in his personal capacity. He is a practicing Catholic (but could always use some more practice).

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