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Healthcare sector inquiry welcomed to halt escalating prices

15 May 2013 Graham Anderson, Profmed
Graham Anderson, Principal Officer at Profmed.

Graham Anderson, Principal Officer at Profmed.

Confirmation that the Competition Commission is beginning its inquiry into the pricing, cost and competition of South Africa’s healthcare sector should be broadly welcomed by all stakeholders as a means of finally controlling escalating costs in the indus

This is according to Graham Anderson, Principal Officer at Profmed, the medical scheme that caters exclusively for graduate professionals, who says the long-awaited inquiry is critical for the sustainability of the healthcare industry. “Costs in the healthcare sector have been rising at a rapid rate for many years, placing medical schemes and consumers under intense financial pressure, so any development that can deal with this problem is welcome.”

In a recent medical scheme survey conducted by PricewaterhouseCoopers it showed that 65% of schemes believe that the medical insurance needs of members will differ in 2015. Furthermore, it was found that 35% of schemes were of the view that members will move away from comprehensive cover to more essential hospital and specialist cover.

According to Anderson, whilst this may not directly impact on graduate professionals, the impact it will on other scheme members will be devastating not only to their health but also financially. “As members opt to move to basic cover, they will hold out on getting the treatment they sought for day-to-day illnesses and try to remedy their body’s ailments without the help of a medical professional to save money. However, in the long run, if left untreated, they are likely to face more serious health problems and suffer more both financially and health wise.”

Economic Development Minister Ebrahim Patel confirmed this week that the Competition Commission will publish its terms of reference soon with the inquiry scheduled to begin in September.

Anderson notes that in the past there was a cap on the level of increases that role players in the healthcare industry could charge. “The fact that there are no longer tariffs in the healthcare industry means that theoretically role players can charge whatever they like for certain services. By having set tariffs in place, the industry is able to reduce the risk of possible collusion in the industry as price increases are then decided at a regulatory level.”

He notes that prices have been rising steadily over the last 10 years, since the tariff price list for healthcare services was scrapped in 2004 after the Competition Commission ruled that the Board of Healthcare Funders (BHF) had contravened the Competition Act by negotiating tariffs of doctors, specialists and hospitals on behalf of the medical scheme industry.

“Following this ruling, all schemes had to negotiate tariffs independently with the result that smaller schemes - that range in size from about 6 000 to 20 000 members - did not have the necessary clout to negotiate with an oligopoly of private hospitals, doctors and specialists,” says Anderson.

“Once the amendment comes into force, the Competition Commission will be able to launch a legally-backed inquiry into the healthcare sector to investigate any suspicion of anti-competitive behaviour,” says Anderson.

“While this market inquiry should look at the ability of all medical schemes to negotiate with other players in the healthcare industry, we also hope that it will reconsider the BHF’s ability to negotiate with industry role players as this is the most viable solution to contain the cost of healthcare pricing.”

“A further development which could also benefit the industry would be the establishment of a central bargaining council or forum between funders and providers to negotiate healthcare costs and agree on reasonable price increases that balances the needs of the providers with the sustainability of the funders,” concludes Anderson.

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