/ 26 February 2008

Govt to curb private healthcare costs

The government is to intervene to curb rocketing private healthcare costs and prevent the sector’s ”demise”, Health Minister Manto Tshabalala-Msimang said on Tuesday.

The health charter task team, among others, has been discussing the challenge of making healthcare more affordable, she told the National Assembly’s health committee.

However, these discussions are taking much longer than anticipated, with no indication of the outcome.

”I have therefore decided that the current challenges in the private sector are best resolved through legislative interventions,” she said.

The resolutions at the private healthcare sector indaba (meeting), convened by the Health Ministry in September last year, have mandated the Health Department to introduce legislative interventions to address the high costs of private healthcare, she said.

The introduction of medicine pricing regulations a few years ago resulted in a 20% drop in prices, and savings of over R2,3-billion on medicines.

However, this has not resulted in overall healthcare savings for patients, mainly because of the increased tariffs of private hospitals, specialists and medical-scheme administrators since 1999.

Before 1999, private hospital ownership was largely in the hands of independents with no dominant market player, but after 2000, ownership has been consolidated within three large groups.

These groups own over 80% of the private beds in the country and one group dominates each of the regions, Tshabalala-Msimang said.

This dominance, together with the Competition Commission ruling against collective price negotiation, has weakened the bargaining power of medical schemes.

Consequently, private hospital price increases have outstripped inflation.

‘Untenable situation’

In 1997, medical schemes paid R803 per beneficiary for hospital benefits, but by 2005 the figure had risen to R2 320.

”This is clearly an unsustainable situation that would lead to the demise of the sector,” she said.

As specialists derive a large part of their income from hospitalisation, it is not surprising their costs have followed a similar trend.

At the September indaba, ”everyone agreed that all was not well” in the sector and the government needed to take regulatory measures to ensure the sector’s sustainability.

These regulations are now being finalised.

Despite this, private hospitals increased their tariffs in January by between 8% and 33%.

”Despite the high costs of private healthcare and decreasing affordability of medical-scheme membership, healthcare providers and schemes continue to implement price increases that are unaffordable to the majority of South Africans.”

Tshabalala-Msimang said that after meeting with the private hospital groups and schemes, it is clear that none of them are prepared to accept responsibility for high costs.

”Each sector is blaming the other for the high costs.”

She had proposed that private hospitals limit their increases to inflation and they had agreed to consider this.

The discussions will be finalised at a further meeting later this week.

”We are currently investigating a legislative regime that provides a fair basis for negotiation between medical schemes and providers,” she said.

Medical schemes have also increased their premiums and reduced benefits, which are often presented in a confusing manner, making it difficult for ordinary people to understand exactly what they are buying.

The Medical Schemes Amendment Bill will also be tabled this year to strengthen the governance structures of schemes and make trustees and principal officers more accountable for administrative costs.

Tshabalala-Msimang said she will soon meet with the private hospitals and medical schemes to discuss these issues.

She understood the public’s impatience for immediate lower healthcare costs, but ”unfortunately, life’s not like that”, and it will take time.

In recent discussions with her German counterpart, she had been told Germany had taken 124 years to reach the level of healthcare its citizens now enjoy.

Even countries that thought they had got it right, such as Britain, are now experiencing problems.

Many such countries are amazed at what has been achieved in South Africa in just 13 years, and policies introduced have been held up as a ”gold standard” for other developing nations.

These interventions include parallel medicine imports, essential medicines policy, generic substitution policy, expedited registration for essential medicines, single exit price for medicines, logistics fees, dispensing fees, international benchmarking, reference pricing and pharmaco-economic assessments. — Sapa