/ 28 September 2007

Health minister slams private medical care

Health experts gathered in Johannesburg to probe a pathological, and potentially terminal, syndrome of private healthcare cost escalations last week. And they concluded that regulatory surgery was needed to save the patient.

In a room packed with suits of varying degree of slickness, different interest groups prepared to spin, lobby and argue themselves out of the firing line at the private health sector indaba called by the department of health.

The department gave its initial prescription — a coherent regulatory framework — which the meeting ultimately endorsed. Minister of Health Manto Tshabalala-Msimang said she had heard ‘loudly and clearly” the indaba’s agreement that self- regulation of private medical care had not been successful and said that they were ‘going to act accordingly”.

Opening the meeting, Tshabalala-Msimang described the structure of private healthcare in South Africa as ‘unsustainable, unaffordable and frankly, not ethically justifiable”, and criticised ‘an uncompetitive and inadequate level of diversity and competition”. Coming under fire were increases in hospital expenditure, rising costs of specialists and non-healthcare related items. Churning — the practice of moving people between financial products, such as medical schemes, with brokers earning commission as a result — also came under scrutiny.

The minister pointed out that while the number of people covered by medical schemes had not risen significantly in the past five years — the only real growth had been in the Government Employees Medical Scheme — broker fees had increased by 326% between 2000 and the 2006/07 financial year. ‘They just move the small pool of people from one scheme to the next at a fee,” she said. Lacking an influx of new members, medical schemes had been able to grow only by cannibalising each other — providing an opportunity for brokers. There was no discount to medical aid members who did not use a broker.

In a presentation on behalf of the health ministry, Deputy Director General Kamy Chetty said almost 14% of all household out-of-pocket expenditure was related to healthcare. Chetty said private hospitals, specialists and non-healthcare costs had seen the most significant expenditure increases. Non-healthcare spending had increased from 20% to 28% of benefits between 2002 and 2005. In real terms, administration fees had increased by 123% between 2002 and 2005.

Chetty said total benefits paid to hospitals had increased by 88% in real terms between 1999 and 2004. Medical scheme expenditure on hospitals, per beneficiary, had risen 189% in nominal terms — or three times the level of inflation — between 1997 and 2005.

Stephen Harrison, of the Council for Medical Schemes, a regulatory body, pointed out that the three main hospital groups in South Africa controlled almost 84% of the acute care hospital beds last year — up from just under 51% a decade earlier. Specialist fees consumed about 20% of total expenditure. But Harrison said specialists not only increased their fees above the inflation rate. They were also significant drivers of hospital costs.

Harrison said of particular concern to the council were conflicts of interest, such as doctors with shares in private hospitals or who were offered inducements by hospitals for their business.