Whilst the Competition Commission enquiry into high prices in the private healthcare sector is predicted to result in forceful scrutiny of the industry, the enquiry illustrates incompatible rates for healthcare professionals and dreadful bills for their p
Should the enquiry achieve its goal of ultimately benefiting the consumer, it will need to include regulatory as well as structural issues in its investigation, says Chairman of Agility Global Health Solutions [Africa], Neels Barendrecht.
“The fact that annual medical scheme tariff increases are higher than inflation is not only due to a lack of tariff setting between funders and providers, but are also driven by a range of other issues, including healthcare skills shortages and regulatory requirements,” he adds.
There are a number of factors which set the South African private healthcare system apart from other markets. Firstly, unlike developed countries, the South African private healthcare sector has a severe shortage of suppliers, in particular medical specialists and hospitals.
As a result, increases related to these services have far outstripped that of other medical professionals and, as a result, secondary and tertiary care continues to take an increasingly bigger portion of the private healthcare pie. According to the latest Council of Medical Schemes (CMS) report, hospitals and specialists accounted for 59% of the R93.2 billion total healthcare spend in 2011/2012.
Barendrecht says the issue of high prices is further exacerbated by the regulated Prescribed Minimum Benefits (PMBs) which, by law, require all medical scheme options to cover the treatment of 270 medical conditions in hospital and 26 chronic diseases defined in the Chronic Disease List (CDL), as well as emergency conditions.
“PMBs should place a stronger focus on primary care, especially on lower-cost options by ensuring that members obtain quality coverage for primary care such as visits to their GP,” Barendrecht says. “Instead, the current system is a mere funding model for curative care where members must be severely ill before being able to gain access to funding.”
The unintended consequence is that hospitals and specialists continue to take a larger proportion of total healthcare spend, while providers such as GPs, pharmacists, dentists and optometrists earn less. In reality, these providers could add substantial value by keeping members healthier and managing positive clinical outcomes at a different level of care.
“The healthcare pie is only as big as what employers and members are able to afford in terms of their monthly contributions,” says Barendrecht. “With most schemes increasing their premiums at rates far exceeding inflation, a dangerous situation is quickly developing where primary care providers are playing less of a role, when it should be the opposite.”
Barendrecht adds that it is also important to take clinical outcomes into account. “Currently, schemes pay a set tariff for a particular procedure, regardless of whether the patient is cured or made well,” he says. “Providers should assume more risk to ensure that their patients remain healthy. Subsequently, more money could be made available to fund other health services.”
One solution to the pricing conundrum that South Africa finds itself in, would be to allow price negotiations between funders and providers in a managed way that takes into account the shortage of resources - especially hospitals and specialists.
These negotiated tariffs would serve as guidelines within which individual medical schemes could negotiate separate tariffs with providers whilst being allowed to use flexible remuneration models.
However, he adds, the demand side must also be better managed.
“Historically, medical schemes have been positioned as ‘full benefit’ and members are used to freedom of choice,” says Barendrecht. “Unfortunately, funding this is simply not sustainable over the long term, especially where there is a continuous increase in medical cost that outstrips normal inflation. As a result, the management of consumer expectations becomes key.”
He explains that medical schemes in South Africa are also expected to cover a far wider variety of costs when compared to their overseas counterparts.
“In other markets, public health systems typically provide access to primary care. Only unexpected events which, in real terms, are the actual insurable events such as hospitalisation and related care, are offered by health insurers and funds,” says Barendrecht. “Meanwhile, in South Africa, schemes are expected to cover everything from the GP to the hospital and all other forms of auxiliary services. The reality is that these services could be regarded as ‘Rand swopping’ and not true insurance, making the cost of medical cover even more expensive.”
He says a first step towards making private medical cover more affordable would be for regulators to rethink the PMB concept to enable schemes to bring down costs and ensure that lower income earners are able to afford cover.
He adds that the National Health Insurance (NHI) system should increase competition amongst hospitals through upgrading of the Public hospitals, but that this could take many years.
Barendrecht says the Competition Commission enquiry may find ways to make private healthcare more affordable to more than the current 8 million members.
“We welcome a fair, transparent Competition Commission enquiry into prices in the private healthcare sector and are confident that it will result in policy decisions that will ultimate benefit consumers,” Barendrecht concludes.