Rising medical costs in the spotlight

This week the competition commission announced that it would start an investigation into the costs of the healthcare sector. Healthcare costs in South Africa have been rising rapidly, making the accessibility of decent healthcare beyond the reach of many households.

Graham Anderson, principal officer at Profmed, says such an inquiry should be conducted as soon as possible. “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 alleviate this problem is welcome.”

The question the commission will be faced with is whether there is active collusion in the healthcare industry or whether, due to skills shortages, medical professionals are able to charge what they choose as there is naturally limited competition.

Anderson says prices have been rising steadily over the past 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 with 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 – which 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.

Blum Khan, CEO of Metropolitan, says that one could argue that healthcare is a public benefit and therefore the schemes should be allowed to cooperate on negotiating fees for the various services.

“This is exactly what was happening about five years ago, which is when the competition commission stepped in and stopped this, and fined the BHF.

“This change resulted in the market we now have: a few large providers of healthcare services, a few large hospital groups, and a few large medical schemes that can negotiate and many small schemes that are forced into price-taking,” says Khan, who adds that the reality in South Africa is that we just have too little competition on the supply side, exacerbated by shortage of skills, and a cumbersome and onerous licensing environment, which further increases the barriers for new competitors to enter the market.

“We need more competition on the supply side. If this is not going to happen, we will probably see regulated pricing, or maybe the National Health Insurance will overtake these issues because it will then be a national procurer of healthcare services,” says Khan.

How exactly these rates will be determined and by whom is a very serious issue. If medical professionals feel that they are undercompensated, they may withdraw their skills, so there needs to be buy-in from all parties.

Both Anderson and Khan argue that as an interim measure, government should reinstate the ability of the BHF to set tariffs through consultation and negotiation with the industry on behalf of its members.

Anderson says an alternative option would be to create a central bargaining council or forum between funders and providers to negotiate healthcare costs, and agree on reasonable price increases that balance the needs of the providers with the sustainability of the funders.

A return to a recommended price list would greatly assist consumers to make informed decisions about the price of their healthcare.

While theoretically one could ask for price lists from various healthcare providers and make a comparison, it would be far easier to ask if they charge within the recommended tariffs.

Fraud costs medical schemes R22bn a year

Fraud committed by those in the healthcare industry is reported to be costing medical schemes a massive R22?billion a year. This means scheme members are paying an estimated R2?500 more for their medical insurance than they should.

Blum Khan, CEO of Metropolitan, says: “Fraud is simply the largest risk to sustainability that medical schemes now face and will be the biggest risk that the National Health Insurance will face too. Fraud is rife in the sector and needs a serious intervention at all levels.”

The extent of fraud was released at a conference hosted by the Board of Healthcare Funders last week and, according to Graham Anderson, principal officer at Profmed, while many people assume that fraud is most common among consumers (that is the medical scheme members), the reality is that the majority of fraud is in fact committed by service providers.

“Examples presented at the conference include doctors billing medical schemes for more than 100 appointments in a single day, or colluding with patients with the result that male patients claimed for hysterectomies, and some specialists billed medical schemes three times for the same procedure,” says Anderson.

“It is often easiest for those working within the industry to commit such crimes as they have access to all of the relevant information and understand the systems better. Accounts charged to medical schemes on the members’ behalf can easily be inflated without the member’s knowledge to include procedures that weren’t carried out, a higher price charged for equipment or medication that was used, or even charging for items that were not used.”

He says very often members don’t check the accounts charged to their medical scheme. Firstly, it appears too complex to decipher and, secondly, the payment is being settled by the scheme itself.

“However, the fact is that if a provider is fraudulently overcharging, this can have a severe impact on the level of benefits that a member has available for the rest of the year, potentially depleting their benefits far sooner than would otherwise occur,” he says.

Anderson says it is crucial that members check what is being claimed from their scheme by the service provider and determine whether this matches up with the treatment they have received.

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