The reason was escalating costs, he said, and then he compared the huge cost differences, based on anecdotal evidence, between public and private hospitals.
For example, he said, private hospitals charged up to R15 000 for a circumcision whereas township clinics charged a “few rands”. A private hospital charged R150 000 for a spinal decompression whereas the Steve Biko Academic Hospital in Pretoria charged only R30 000.
For the ordinary, thinking South African, this guide to the relative costs of public and private hospital treatment simply will not do. Yes, it is true that private medical scheme rates are growing faster than other categories of medical expenses and the consumer price index. But it is not due to the cost of private medical care per se, but to the conditions forced on the medical scheme industry by the state. For example, they are not allowed to charge according to members’ health risks or exclude some pre-existing conditions, and they are forced to offer fairly generous minimum benefits to all. These measures quickly raise costs to levels way above those that a private medical scheme would institute if it was left alone.
The comparative costs quoted by the minister illustrate why science disregards anecdotal evidence. The examples do not compare like with like and were probably chosen to be maximally misleading.
No doubt the circumcision example compares straight forward circumcisions involving normal foreskins with the most complicated and expensive circumcision operation carried out in a private hospital.
Comparisons
The same goes for the spinal decompression. For example, a procedure that involves putting in artificial discs, cutting through the abdomen and moving aside organs to insert expensive hardware is doubtless much more expensive than the more common practice of fusing the vertebrae without an abdominal invasion.
Most unforgivably, the minister was quoting what was charged to the patient (or their medical aid) and not the true cost of the procedure. On top of that, he simply omitted to include in his calculation the huge state subsidy, paid by taxpayers, that finances public health.
To do a fair comparison, we have to compare overall hospital costs per patient, taking into account factors such as:
- The different reasons for treatment (the type of problem);
- The severity of the condition, including the number of hospital admission days;
- The risks involved and the extra procedures or expertise necessary to counter these; and
- At public hospitals patients do not have to pay value-added tax as they do at private hospitals.
Innovative Medicines South Africa, a pharmaceutical industry association, has conducted such a study. In a rough comparison, without taking into account any of the above factors, it found that private hospital costs were, on average, 1.438 times more expensive than public hospital costs. This is the result of an unadjusted, like-versus-unlike comparison that the minister made with his examples.
Experience
But, after equating like for like, they found that private hospital costs were 1 053 times those of public hospital costs. But this figure does not take into consideration the differences in the quality of medical care and associated services such as food and bedding.
A substantial number of public health doctors are newly qualified or interns who are doing community service. They are not experienced. Because private health pays more and is more likely to have patients who will sue if something goes wrong, it is more discerning about who it employs. That is why, in private hospitals, there are more experienced doctors and nurses with better skills, who know that they are likely to be dismissed if they do not perform well.
Private medical care staff tend to have a better professional attitude than those in public health. Private hospitals have better equipment and are better able to maintain stocks of basic necessities such as rubber gloves, syringes and swabs. Patients at private hospitals are not subjected to common public hospital problems such as a lack of bedding or decent food.
The effect of these problems on the quality of care is substantial. In a paper presented at a symposium in Toronto last year, “A comparison of health outcomes in public versus private settings in low- and middle-income countries”, Dominic Montagu et al reported that the risk of mortality in private health institutions was 60% of that in public health.
Private medical care is accused of “overservicing” for profit. But even if this is so, it is not really making private hospital care any costlier than public hospital care.
Costs
The main factor that leads many astray in their reasoning, including Motsoaledi, is the huge state subsidisation of public hospitals. Economist Mike Schüssler has compiled statistics from independent sources, such as Statistics South Africa, the treasury and the Council of Medical Schemes’ reports. He says that, on average, 100% of the cost in private hospital care is borne by the patient, whereas only 2% of the cost of public hospital care is charged to the patient.
If we fail to take all the relevant factors into account and consider only costs passed on to the patient at private and public hospitals, the average private hospital charges are 60 times those of public hospital charges.
But just because a public hospital patient does not pay 98% of the cost of their care, it does not mean the cost does not exist. What it does mean is that someone else (the taxpayer) has to pay it..
Channelling this payment through the government instead of paying it directly to the hospital involves a significant amount of it being diverted into the government to cover aspects such as administration. In other words, the government funding figures underestimate the actual cost of public hospitals to taxpayers and the true cost to the country. Even the pharmaceutical association’s calculation, when estimating the relative cost to the economy of private and public hospitals, does not take this inefficiency into account.
Let us apply the sixtyfold ratio of private to public hospital patient charges to the minister’s anecdotal examples. If patients paid full costs in public hospitals, his “few rands” for circumcision would be more than R100, if not several hundred, and the costs of a spinal decompression operation could be as high as R1.8-million in public hospitals. Alternatively, if private care was subsidised to the same extent and did not pay VAT, a patient could be charged as little as R250 for a private circumcision and R2500 for a spinal decompression, which makes the minister’s case look bad.
Healthcare decline
Schüssler shows that between 2000 and 2008 private hospital charges rose by 74% and, although public hospital charges rose by only 12.8%, the government funding cost per admission rose by an astounding 111.7%, which would mean that full public hospital costs rose by 108%. That is 46% more than private hospital costs.
The difference was particularly marked between 2001 and 2006. During that period, a report by the Council for Medical Schemes states, private costs per admission rose by 22.1% and public (full) costs per admission rose by 57.7%. Therefore, public hospital costs rose by 161% more than private hospital costs in that period, despite only a 0.5% growth in public hospital admissions and a 8.5% growth in population between 2000 and 2008. There was also a 42% mortality rate increase between 2000 and 2005. So, in the face of greater urgency, the ability of public healthcare to reach the poor declined by 7.4% during that period.
In sum, reliable statistics indicate that private hospital care is, at worst, 5.3% more expensive than public hospital care, but it is likely to be significantly cheaper when the quality of care and other services, as well as the inefficiency of the government funding channel, are taken into account. For example, if, in South Africa, Montagu’s finding that the risk of mortality is 60% less in the private than in the public sector, the cost of saving a life is 36.8% cheaper in private hospitals than in public hospitals. Furthermore, in terms of the cost to the economy, public hospital care has been, and is likely to continue, getting rapidly more expensive than private hospital care.
Finally, public hospitals are getting worse, not better, at providing affordable healthcare to the poor.
To provide more healthcare at a lower price to the poor, the government is undermining the many private efforts of South Africans to look after their own health. Less obviously, it is shifting a great proportion of the country’s resources away from other important areas to provide far from satisfactory healthcare.
The declining public admission rate per capita and the high mortality rate show that the government’s healthcare policy is leading to less care for the poor. Even if we were to accept that the health of the poor justifies a drop in the overall standards, the anti-private, pro-public path chosen by the government is a failure. If the government is serious about saving the lives of the poor and improving welfare in general, it needs to take a different path.
Garth Zietsman is a statistician