The Competition Commission has released its much-anticipated findings into the reasons behind the high cost of private healthcare, which inquiry commenced in 2013.
As part of its investigation, the Commission examined the funders’ market, which is largely dominated by medical schemes operating in a highly regulated market, having all its affairs governed by the Medical Schemes Act and Council for Medical Schemes.
The Commission criticised the industry for the variety of plans on offer and commented that added complexity does not necessarily translate into innovation.
We fully agree with this Commission and have pointed this out on several occasions in the past. Our 2018 Medical Aid Survey, which will be released later this month, confirms yet again how complex the market has become for members to navigate.
If the industry fails to standardise and simplify their multitude of offerings, regulators will likely step in and force change on the industry – which is not an optimal outcome for medical schemes.
Unfortunately the number of choices, where every medical aid uses its own method of differentiation, only serves to confuse members - who end up making a choice of option based on price and not necessarily on their healthcare needs.
We also agree with the Commission that more should be done to hold medical scheme trustees to account. Medical aid members would do well to become more involved in the governance of their scheme by attending AGMs.
The trustees, in turn, should negotiate more stringently with the administrators, on behalf of the members they represent.
The Commission’s report has been quite scathing on medical practitioners for the practice of supply-induced demand, which simply means that doctors apparently order too many tests, expensive procedures or hospitalisation - when these may not really be necessary - because these options are available, which in turn drives up costs.
Doctors often go to these measures to be completely sure of their recommendations. While additional tests are sometimes necessary, it is concerning that costs in South Africa seem to be significantly higher than our international peers’.
For example, the report found that if intensive care admissions were halved, and this cost were invested into better general ward care, the medical schemes could save R2.7 billion annually, which would aid members significantly.
We agree with commentators who addressed questions raised at the press conference, that practitioners would perhaps require more focused training to ensure that they are aware of demographic exposure groups, and this could help in containing seemingly unnecessary additional testing.
National Health Act
The Commission was further quite scathing on the Department of Health for not implementing many of the provisions which are already included in the Act (of 2003), but not enforced. The Commission’s confirmation of recommendations makes one wonder whether we would have these challenges with the private healthcare market, had the recommendations raised in the Act been implemented timeously.
Co-payments within medical aids
The Commission disagreed with the Minister of Health on the need for co-payments (in his comments upon the release of the Amendments to the Medical Schemes Bill) and expressed the view that the presence of co-payments discouraged unnecessary testing, by imposing a fee on members.
Therefore, more careful consideration regarding the need for testing or choice of procedure would happen initially.
The Commission did not lay the blame for the high cost of private healthcare at one table, but pointed out a combination of factors - amounting to fingers pointed at almost every player in the provider chain.
Jill Larkan is Head - Healthcare at wealth and financial advisory firm GTC
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