Health Minister Dr Aaron Motsoaledi says the rising cost of private healthcare is an “uncontrollable expenditure” that impacts the entire South African economy.
Motsoaledi, alongside Minister of Trade, Industry, and Competition Parks Tau, held a joint press briefing on Monday to give updates on the progress made in the recommendations of the Health Market Inquiry into the private sector.
He says the department will implement some of the inquiry’s recommendations as a temporary stopgap measure.
“We are doing this because the phased-in implementation of the National Health Insurance (NHI) is going to take longer. In the interim we need to relieve the pressure people experience when seeking healthcare services,” he says.
The inquiry, led by former Chief Justice Sandile Ngcobo, was launched in January 2014 following a request from the Department of Health to the Competition Commission. It was set up to investigate price-setting practices and competition within the private health sector, aiming to address factors that hinder competition and contribute to rising costs.
The findings of the inquiry were released in 2019 and show that the private health sector is characterised by high and increasing expenditure, and excessive utilisation of health resources without any credible corresponding measure of improved health outcomes.
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Motsoaledi explains that the high cost of private healthcare is directly responsible for the increases in medical aid premiums which often become a key point in salary negotiations, especially between the government and state employees.
Motsoaledi highlights that medical price inflation is far from general inflation, with estimates ranging from 7.5% to 9.5%, compared to the Consumer Price Index (CPI) of around 4.5%.
“Whichever way you look at it, medical price inflation is significantly higher than the general cost of living,” he says.
The inquiry reviewed three key aspects of the private healthcare sector: the facility market, the funder market, and the practitioner market. It found that the facilities market is highly concentrated, with limited competition or innovation among major hospital groups. The funder market (medical schemes) was found to prioritise the interests of financial backers over the needs of the consumer, while the practitioner market often fails to prioritise patient welfare.
Recommendations
To remedy the situation, the inquiry made several recommendations. These include the creation of an independent supply-side regulator for healthcare to oversee facility planning, licensing, and practice codes. It further suggested that private hospital licensing be more coordinated and standardised under the proposed regulator.
The inquiry also recommended that the current model of cash payments for healthcare services, which drives cost inflation, be phased out in favour of alternative reimbursement mechanisms.
Other recommendations include the formation of a multilateral negotiation forum to facilitate price negotiations in the private sector and the establishment of a national data repository to collect and disseminate reliable health information. According to Motsoaledi, this national health information dataset will be incorporated into the NHI’s digital infrastructure, a centralised system that will monitor and evaluate the health system’s performance.
Additionally, health technology assessment which provides evidence-based insights that guide policy, regulation, and resource allocation in the healthcare system, aiming to improve access, affordability, and outcomes for South Africans has already begun. A technical working group is already in place and will soon be upgraded to a ministerial advisory committee.
He says discussions are also underway regarding the standardisation of the benefits of medical aid packages with the Council for Medical Schemes (CMS) and relevant practitioners.
Setting tariffs
Motsoaledi says the Competition Commission has received several requests from private sector stakeholders seeking individualised exemptions from the Competition Act to allow for price regulation among funders.
According to the Competition Act, healthcare tariff negotiations currently take place on a bilateral basis between healthcare funders and providers, with no framework for collectively determining tariffs. This has resulted in high healthcare costs, price disparities, and a lack of pricing transparency.
Trade, industry, and competition minister Parks Tau, gazetted draft block exemption regulations last week for public comment. The draft regulations are designed to establish a multi-stakeholder framework for tariff determination within the healthcare services sector.
“The goal is to contribute to the progressive realisation of the right to access healthcare services. There is significant concern about access to private healthcare in South Africa, given the high levels of market concentration as a result of lack of formal tariff determination and the escalating costs of medical aids,” he says.
The draft block exemption exempts the following three categories of agreements or practices concerning both prescribed and non-prescribed minimum benefits in the healthcare sector:
- the collective determination of healthcare service tariffs;
- the collective determination of standardised diagnosis, procedure, medical device, and treatment codes;
- the collective determination of quality measurements/metrics, medicines formularies, and treatment protocols/guidelines.
Dr Thandi Mabeba, the Chairperson of the CMS, says the block exemption is a positive step toward greater transparency.
“This marks a crucial move in the pursuit of implementing the HMI recommendations and the NHI objectives,” Mabeba says.
She says the council will play a pivotal role in implementing the draft interim block exemption for tariff determination, as outlined in the exemption framework. The CMS will oversee the tariff determination process, ensuring it aligns with the HMI’s recommendations.
“The CMS will ensure that the tariff determination process is fair, transparent, and competitive. We will also be tasked with implementing and managing the draft interim block exemption, allowing for information exchange and coordination between healthcare providers and medical schemes. Our responsibility will be to monitor and ensure that all stakeholders comply with the rules and regulations,” she says – Health-e News
