‘Private healthcare not affordable, even for people who are supposedly rich’

Part of South Africa’s increase in claims cost could be attributed to in-hospital rather than out-of-hospital care. Picture: iStock
Part of South Africa’s increase in claims cost could be attributed to in-hospital rather than out-of-hospital care. Picture: iStock

The findings of the Competition Commission’s Health Market Inquiry released today reveal what Health Minister Aaron Motsoaledi says he already knew – that private healthcare has become so exorbitantly expensive, even those on medical aid can’t afford it.

Moreover, the commission found – during its more than four-year-long investigation – that the market was characterised by high and rising costs of healthcare and medical scheme cover, disempowered and uninformed consumers, and a general absence of value-based purchasing.

“That private healthcare has become costlier and costlier has been proven today, some of us knew it long ago back in 2009 that private healthcare no longer affordable, even for people who are supposedly rich who are on medical aid can’t afford it,” Motsoaledi said at the briefing held in Sandton to announce the release of the much anticipated provisional report.

According to the inquiry’s chairperson, former Chief Justice, Sandile Ngcobo – who presented the executive summary of the report – the private healthcare sector market displayed consistently rising medical scheme premiums accompanied by increasing out-of-pocket payments for the insured, almost stagnant growth in covered lives and a progressively decreasingly range and depth of services covered by scheme options.

“It is generally believed that the private healthcare sector provides better quality care when compared to the public sector. However, this is difficult to assess objectively as the South African private market does not have any standardised means of measuring and comparing quality of healthcare services or outcomes. There is no measure of cost-effectiveness in the private healthcare sector,” the inquiry’s report noted.

Although there were 22 open schemes, two medical schemes constitute 70% of the total open scheme market and Discovery Health Medical Scheme comprised 55% of the open scheme market. The Government Employees Medical Scheme (GEMS) was the second largest restricted scheme.

There were 16 medical scheme administrators and Discovery Health and Medscheme accounted for 76% of the market based on gross contribution income.

“While significant marketing takes place in the schemes market, consumers are not able to compare what schemes offer. With about 270 plans on offer, consumers cannot compare these nor can they choose scheme and plan options on the basis of value-for-money,” the report noted.

This, the inquiry criticised, was because of the deliberate manner in which the offerings were bundled, packaged and priced which allowed medical schemes to weaken, even avoid, outright price competition.

The inquiry collected claims data for the period 2010 to 2014. Over this period, the average expenditure per 10 private medical scheme member increased by 9.2% per annum.

“After adjusting for factors such as inflation, age, members’ plan type, gender, disease profile and membership movement, the unexplained increase in spending per member was still greater than 2% per annum in real terms. To put this in context, 2% of spending amounts to about R3 billion in 2014 terms, that is R330 a beneficiary per annum that could not be explained by factors rationally expected to drive expenditure,” Justice Ngcobo said.

He added that most of this unexplained increase in claims cost could be attributed to in-hospital rather than out-of-hospital care.

The inquiry evaluated the effect of increased utilisation and the possible presence of supplier-induced demand in the private sector, and the investigation showed strong evidence that supplier-induced demand indeed was a cost driver.

“In perfect conditions, the doctor would only prescribe treatment that is absolutely medically necessary. If this relationship breaks down and the doctor recommends or encourages a patient to consume more care than is required for their medical problem, this is called supplier-induced demand. This happens, for example if a doctor orders more tests than are absolutely necessary, conducts a caesarean section when it is not absolutely necessary to do so, or admits patients to hospitals when their condition can be treated out of hospital,” Ngcobo explained.

Ngcobo said the utilisation rates were “worrying”.

The inquiry also found that there was a failure by practitioners to explore multidisciplinary models of care and that the fee-for-service model of remuneration only stimulated oversupply, and incentivised practitioners to provide more services than needed.

The inquiry also raised the issue of an overall incomplete regulatory regime in the private healthcare sector, as medical facilities were not regulated beyond the requirement to have a licence to operate and practitioners were licensed to practice by the Health Professions Council of SA but little more.

The report stated: “This can be attributed to a failure in implementation on the part of regulators and inadequate stewardship by the department of health over the years. Many of the recommendations we have considered are already provided for in current legislation but have not been implemented.”

Motsoaledi defended the government’s inability to not successfully regulate the sector, saying its own stakeholders resisted regulation and the department had been met with threats of litigation when trying to enforce regulation.

The report is open for comments until September 7 this year and the final report is expected to be released on November 30.

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