Health Market Inquiry: ‘Nothing we don’t already know’, says Health Minister

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HeathMarketThe four-year long Competition Commission Health Market Inquiry‘s finding reveal what Health Minister Dr Aaron Motsoaledi says he already knew – that South Africa’s private healthcare has become so expensive, even those on medical aid can’t afford it. The inquiry singled out the dominance of Discovery Health among medical schemes, and Netcare, Mediclinic and Life Healthcare among hospital groups, as illustrations of competitive market failure.he commission found that the market was characterised by high and rising costs of healthcare and medical scheme cover, disempowered and uninformed consumers, and a general absence of value-based purchasing.

“That private healthcare has become costlier and costlier has been proven today, some of us knew it long ago back in 2009 that private healthcare no longer affordable, even for people who are supposedly rich who are on medical aid can’t afford it,” Motsoaledi said.

According to the inquiry’s chair, former Chief Justice, Sandile Ngcobo – who presented the executive summary of the report – the private healthcare sector market displayed consistently rising medical scheme premiums accompanied by increasing out-of-pocket payments for the insured, almost stagnant growth in covered lives and a progressively decreasingly range and depth of services covered by scheme options.

“It is generally believed that the private healthcare sector provides better quality care when compared to the public sector. However, this is difficult to assess objectively as the South African private market does not have any standardised means of measuring and comparing quality of healthcare services or outcomes. There is no measure of cost-effectiveness in the private healthcare sector,” the inquiry’s report noted.

Although there were 22 open schemes, two medical schemes constitute 70% of the total open scheme market and Discovery Health Medical Scheme comprised 55% of the open scheme market. The Government Employees Medical Scheme (GEMS) was the second largest restricted scheme. There were 16 medical scheme administrators and Discovery Health and Medscheme accounted for 76% of the market based on gross contribution income.

“While significant marketing takes place in the schemes market, consumers are not able to compare what schemes offer. With about 270 plans on offer, consumers cannot compare these nor can they choose scheme and plan options on the basis of value-for-money,” the inquiry noted. This, the inquiry criticised, was because of the deliberate manner in which the offerings were bundled, packaged and priced which allowed medical schemes to weaken, even avoid, outright price competition.

The inquiry collected claims data for the period 2010 to 2014. Over this period, the average expenditure per 10 private medical scheme member increased by 9.2% per annum. “After adjusting for factors such as inflation, age, members’ plan type, gender, disease profile and membership movement, the unexplained increase in spending per member was still greater than 2% per annum in real terms. To put this in context, 2% of spending amounts to about R3bn in 2014 terms, that is R330 a beneficiary per annum that could not be explained by factors rationally expected to drive expenditure,” Justice Ngcobo is quoted in City Press as saying. He added that most of this unexplained increase in claims cost could be attributed to in-hospital rather than out-of-hospital care.

The inquiry evaluated the effect of increased utilisation and the possible presence of supplier-induced demand in the private sector, and the investigation showed strong evidence that supplier-induced demand indeed was a cost driver. “In perfect conditions, the doctor would only prescribe treatment that is absolutely medically necessary. If this relationship breaks down and the doctor recommends or encourages a patient to consume more care than is required for their medical problem, this is called supplier-induced demand. This happens, for example if a doctor orders more tests than are absolutely necessary, conducts a caesarean section when it is not absolutely necessary to do so, or admits patients to hospitals when their condition can be treated out of hospital,” Ngcobo explained.

Ngcobo said the utilisation rates were “worrying”.

The inquiry also found that there was a failure by practitioners to explore multi-disciplinary models of care and that the fee-for-service model of remuneration only stimulated oversupply, and incentivised practitioners to provide more services than needed.

City Press says the inquiry also raised the issue of an overall incomplete regulatory regime in the private healthcare sector, as medical facilities were not regulated beyond the requirement to have a licence to operate and practitioners were licensed to practice by the Health Professions Council of SA but little more.

The report stated: “This can be attributed to a failure in implementation on the part of regulators and inadequate stewardship by the department of health over the years. Many of the recommendations we have considered are already provided for in current legislation but have not been implemented.”

Motsoaledi defended the government’s inability to not successfully regulate the sector, saying its own stakeholders resisted regulation and the department had been met with threats of litigation when trying to enforce regulation.

The report is open for comments until 7 September this year and the final report is expected to be released on 30 November.

 

There is a high level of concentration in the medical schemes and private hospital markets, Business Day reports the inquiry found. The inquiry concluded that competition in the medical aid scheme market could be much improved “if transparency, accountability, supplier-induced oversupply of care, and value-driven healthcare were priorities of scheme trustees and administrators”.

“We have not noted any existing players seriously challenging the dominant players. We have also not seen any innovative (disruptive) competition.”

Business Day reports that the inquiry also found sustained levels of profitability across the medical aid scheme market. “Discovery Health has over a sustained period of time earned profits that are a multiple of those of its main competitors, with no sign of effective challenge from incumbent or new firms. Good management played a role in this.

“However, higher than necessary service fees given economies of scale; a ‘locked-in’ Discovery Health Medical Scheme that does not source services from any other industry stakeholder; risk selection; and broker management contribute to its profitability.

“We see Discovery Health growing and becoming more successful over time. This is an indication of market failure and there are no signs that the market will self-correct.”

The private hospital market was also highly concentrated and this limited competition. Three hospital groups — Netcare, Mediclinic and Life Healthcare — have a combined market share of 83% of national private facilities in terms of the number of beds and 90% in terms of the total number of hospital admissions. The public hospital system does not provide competition to private hospitals.

“One of the most important consequences of the dominance of the three large hospital groups is that no funder (medical aid scheme) can afford not to contract with any one of the three big facility groups or to totally exclude one of these groups from any provider networks.

“If the market were less concentrated, for example with six (still large) providers instead of the current three large groups, a funder would likely have the option not to contract with one of the groups, creating a completely different bargaining dynamic to the benefit of beneficiaries.

“Profitability analyses of the three large hospital groups over the period under review shows that their profits have been consistent and sustained.”

Business Day reports that the inquiry found that despite the fact that private hospitals had excess bed capacity, new licences were still being approved allowing for new beds in an already oversupplied market.

 

As part of the inquiry, the Commission included a number of “recommendations” aimed at addressing the competition concerns identified, but also at introducing changes that will promote competition to the benefit of consumers and the long-term sustainability of the market.

Interested stakeholders have now been requested to provide submissions in respect of the proposed recommendations, focusing on the stakeholder’s view of the recommendations, the proposed manner of implementation, the proposed entity responsible for implementing the recommendation, and the proposed timelines.

BusinessTech summarised 12 of the biggest proposed changes below:

Funder recommendations: Overall, the inquiry found that competition in the funders market is neither as vigorous nor as effective as it could, or should, be. This is true of both administration services and medical schemes, it said.

One large player (Discovery Health in administration and DHMS in open schemes) leads the market, especially in terms of growth, innovation and profitability. Other players largely follow its lead.

As a result, there is limited competition between schemes on factors that increase the value of medical scheme cover (in terms of both cost and quality) and limited evidence of efforts to design and implement alternative reimbursement models to contain expenditure and encourage value-based contracting.

To remedy this, the inquiry’s recommendations are: To strengthen governance to ensure that schemes place greater pressure on administrators to deliver value to members, that members place greater pressure on schemes to improve value for money, and introduce measures that enable the regulator (the CMS) to exercise more effective oversight over funders; promoting alternative models of care that lower healthcare expenditure; the introduction of a stand-alone, standardised, obligatory ‘base’ benefit package that all schemes must offer. The package must include cover for catastrophic expenditure – the current Prescribed Minimum Benefits (including making provision for treating PMBs out of hospital) and; additionally, include, primary and preventative care. Supplementary cover can be provided for care not included in the base package; that the remuneration packages of employees of schemes, particularly that of trustees and principal officers, be linked more explicitly to the performance of schemes; that the broker system is an active opt-in system so that the interests of brokers and scheme members are more closely aligned; the mandated cover for Prescribed Minimum Benefits must be revised to make provision for out-of-hospital and cost-effective care for PMBs; and the PMB package must also be expanded to include primary and preventative care. This revised PMB package should make hospital plans obsolete and will be replaced by the obligatory standard package.

Recommendations on cost of healthcare providers: The provider side of private healthcare markets suffers from several structural, behavioural and regulatory imperfections that harm competition and undermine access to healthcare, the Commission said.

“The highly concentrated structure of the facilities market. At a national level, the three largest hospital groups have a market share of approximately 90% based on hospital admissions and 83% based on registered beds,” it said.

“Also, in the majority of local markets, concentration levels are alarmingly high according to several recognised metrics commonly used to screen for concentrated markets. One of the challenges of this, from a competition perspective, is that it affords the three biggest hospital groups ‘must-have’ status in bargaining for contracts with funders which reduces funders’ countervailing power.”

To remedy this the Commission said that changes need to be made on everything from licensing, monitoring of facilities, practicing numbering and how fees should be determined.

These recommendations include: improved facility licensing – including regular monitoring, inspection, reporting, and a stricter two-stage approach when applying for a licence; economic value assessments aimed at assessing the appropriateness of certain courses of treatment and to evaluate quality of care and value for money in the healthcare sector; a standard system should be developed to monitor the quality and outcomes of healthcare services. This requires the development of standard metrics that can be used to analyse the performance of a wide range of facilities and practices; changes to how health service pricing is determined, including a new independent regulator which will act as a go between medical schemes, patients, and hospitals; and new national measurement system focused on patients – allowing patients and funders to meaningfully compare costs and quality on value for money when contracting with providers.

 

Interestingly, Pam Saxby notes in a Legalbrief Policy Watch report, the inquiry report executive summary notes that “many of the recommendations … are already provided for in current legislation but have not been implemented”. It attributes the resulting “incomplete regulatory regime” for funders largely to “inadequate stewardship by the Department of Health over the years”.

As has been widely reported, with the aim of improving transparency and promoting competition, it is proposed that all medical schemes should offer “a stand-alone, standardised, obligatory base benefit package” covering “catastrophic expenditure” (in and out-of-hospital prescribed minimum benefits) as well as “primary and preventative care”. Making hospital plans “obsolete”, the base package would be introduced with a risk adjustment system disincentivising competition between schemes around “risk factors such as age” – instead encouraging schemes to compete by providing “value for money and innovative models of care”.

The needs of low-income scheme members would be met by “reconstituting” the existing tax credit regime into a “contribution subsidy” administered through the risk adjustment system integrating an income-adjusted subsidy with risk, in line with international best practice. It is envisaged that supplementary cover for care not included in the base package would be underpinned by “uniform standards and requirements” across all available options.

Saxby writes that in the panel’s view, this would make product coverage and value comparisons easier, enabling consumers to make appropriately informed choices.

Other recommendations include: linking the remuneration of scheme trustees and principal officers to scheme performance, measured according to the “value” delivered to (its) members; comparing the performance of scheme administrators in an annual report among other things measuring the value of claims paid from risk and those paid from savings; modifying scheme annual general meeting attendance requirements to ensure the “adequate representation of members who are not employees, brokers, officers, consultants or contractors of the scheme or its administrator”, avoiding conflicts of interest; developing a set of core competencies for scheme trustees, “taking into account the diversity of expertise required”; an “active opt-in” broker system “more closely” aligning the interests of brokers and scheme members, and providing for “proportionally lower scheme membership fees” where members choose not to use the services of a broker; and facilitating the entry of regionally-based schemes by way of “reinsurance for small new entrants” facing the demographic and claims risks associated with lower membership levels.

 

Ngcobo said doctors have probably been unnecessarily referring patients to hospitals, to fill the private sector’s rapidly expanding number of beds, in part explaining the rapidly increasing costs to medical aid users.

According to a Daily Maverick report, the investigation found evidence that as private healthcare facilities have expanded, doctors have been referring patients to seek treatment in hospital despite them being able to receive care without having to go to hospital.

“In healthcare markets the doctor decides what treatment a patient should receive. Patients do not know what care they need and are not able to critically assess the doctor’s advice,” said Ngcobo. “So, if there are more beds available they can be used, and in healthcare they will be,” said the retired justice. “If you can go to specialists rather than a GP or a nurse, you will.”

Speaking of doctors making unnecessary referals, Ngcobo said: “This happens, for example, if a doctor orders more tests than are necessary; conducts a caesarean section when it is not absolutely necessary to do so; admits patients to hospitals when their condition can be treated out of hospital or admits them to an ICU when general ward admission would be appropriate.”

The report says South Africa has high hospital and ICU admission rates compared to other Organisation for Economic Cooperation and Development (OECD) countries and as those costs are incurred by medical aid schemes they are passed on to all users. It costs on average R38,000 more if a patient is admitted to ICU and if the country had similar ICU admission rates to the US or Belgium, R2.7bn, or 2% of annual private healthcare spending, could be saved each year.

But as new hospitals keep being built, admissions keep rising, with no evidence of corresponding demand. A Discovery Health study said hospital openings in 12 regions led to R379m in extra claims that cannot be explained in changes in its plans, demographics, or disease burden.

Daily Maverick reports that regarding the funders, or medical aid scheme operators like Discovery, the report said consumers don’t have relevant information to choose between medical aid options, nor do they have any real way to check if they are getting value for their money. “At the heart of the failure of funders to deliver better value to consumers lie multiple problems: A profound lack of transparency (including on scheme options and quality of outcomes), a lack of accountability of schemes to members, and a failure of governance that align scheme interests too closely with that of administrators,” it read.

Also, Daily Maverick says the report hammered medical aid companies reasoning for their complex product offerings. “We disagree with administrators of open medical schemes and self-administered medical schemes that this complexity primarily reflects innovation. Rather, the deliberate manner in which these offerings are bundled, packaged and priced allows medical schemes to weaken, even avoid, outright price competition.”

The problems start when you try to choose a medical aid programme. “There are too many plan options, very little understanding of what they cover, how the plans compare, and no measure of the value that consumers are receiving. In the absence of such information, consumers may simply choose what they can afford.

On “supply-induced demand” the report said medical aid companies fail to protect their customers from unnecessary referrals, despite that they are supposed to be acting in clients’ best interests. That appears to matter little for the companies as they continue to profit despite their poor service to customers in a complex and confusing sector.

Daily Maverick says Ngcobo’s report also criticised government. It said some of the problems in the private healthcare industry could have been resolved if the department of health had enforced rules already in legislation.

However, Health minister Aaron Motsoaledi is quoted in Daily Maverick as saying he had been asking the Competition Commission to change the private healthcare industry’s costly fee structures since 2009. “As the Department of Health, from this inquiry we got more than what we were asking for,” he said on the report.

Ngcobo said his recommendations were in line with proposed legislation looking to introduce National Health Insurance and a law currently in Parliament amending controls over medical aid providers.

After stakeholders offer their comments, Ngcobo plans to release the final report in November.

Daily Maverick reports that private healthcare companies took the inquiry to court multiple times in the inquiry’s four-year history and resisted sharing crucial information and data, which they may try again before the report’s final release.

 

Absolute age-adjusted hospital admission rates increased significantly from 2010-14 and were higher than all but two of 17 OECD countries examined. Business Day reports that utilisation rates of specific discretionary surgical procedures were higher than the average for six of the seven procedures studied, and the highest of all countries for four out of seven.

The panel also found that age-standardised admission rates to intensive care units were higher than all the eight countries with comparable published data. “If the ICU admission rate per person were reduced to half of its current level (that is to between levels found in Belgium and the US); and half of the costs associated with these avoided ICU admissions were reinvested in better ward-based care, approximately R2.7bn would still be saved annually – just over 2% of private healthcare spending overall for the period studied,” the executive summary of the report said.

Business Day reports that looking at the factors likely to influence admission to hospital, the panel found that for nine of the 11 specialities examined, “there was a significant positive correlation between risk of admission and number of doctors or hospital beds in that geography. The same relationship was shown for ICU admission and numbers of ICU beds.”

The report said there was little need for explicit or formal collusive agreements between hospital groups and practitioners as their interest in higher treatment volumes and treatment intensity was aligned. “The uninformed patient assumes that these arrangements are always to his/her advantage and is not concerned with the longer-term financial impact on medical scheme cover.”

Private hospitals promoted the use of sophisticated technologies on patients and this drove up costs when it did not provide value for money. The hospitals are forced to use these technologies to secure a return on their investment.

“A key problem underlying high and rising costs of care and medical scheme contributions is not primarily prices as such, but overcapacity and overinvestment in technology, higher treatment volumes, and complex, intensive and expensive treatment methods”, which patients might not need.

“Certainly the absence of any health outcomes data makes any claims about the benefit of the level of intervention in the private market hollow,” the report said.

 

The South African Medical Association (Sama) believes that the report is faulty in its findings, particularly that doctors increase demand for unnecessary services. The association says in a Bizcommunity report that in light of the fact that the investigation took almost four years to complete and runs to hundreds of pages, it is, on first review, somewhat disappointed in the overall analysis of the private healthcare sector.

Sama is particularly concerned about the allegations that doctors increase demand of unnecessary services, including increased admissions to hospitals, says chair, Dr Mzukisi Grootboom. “The HMI reached this conclusion after analysing claims data. We are of the considered view that the methods used by the HMI were not robust enough to conclude that many admissions are unexplained and thus constitute a doctor-induced moral hazard,” he says.

In 2017, the Medical Research Council presented to Parliament the top 10 diseases that kill South Africans. These included HIV and Aids, cerebrovascular disease, lower respiratory tract infections, ischaemic heart disease, tuberculosis, diabetes mellitus, hypertension, interpersonal violence, other trauma-related injuries, liver disease and diarrhoeal illnesses. In 2015, Statistics South Africa reported cancer to be the fifth cause of death in the country.

“Typically the private sector uses the Prescribed Minimum Benefit Chronic Conditions List (PMB CDL list) to define chronic conditions. The list only includes three of the conditions which kill South Africans. The HMI can therefore not conclude that there are unexplained admission after adjusting only for chronic diseases and age. Sama believes the increase in admission can be explained by high prevalence of injuries, acute infections, cerebrovascular accidents, cancer, tuberculosis, and substance abuse, amongst other factors,” says Grootboom.

Bizcommunity quotes Grootboom as saying it is also concerning that the HMI assumed all psychiatry and paediatric admissions are discretionary. This is patently wrong.

“This cannot be true given the recent developments in mental health. If psychiatry admissions are really discretionary, we would not have witnessed the development of the Life Esidemeni crisis. No doctor will choose to admit a mental health patient if an option for community-based care exists. In a country where high causes of mortality rates in children include lower respiratory tract infection and diarrhoea, assuming that all paediatric admissions are discretionary is quite flawed,” Grootboom notes.

The HMI analysed the proportion of discretionary admissions in 10 specialities. He says it is astounding that all cardiology and cardiothoracic admissions appear to have been considered discretionary against the backdrop of ischaemic heart disease being responsible for a significant proportion of deaths in the country.

He notes that almost all of urology and orthopaedics admissions were also considered discretionary.

“Treatment of hip fracture with arthroplasty or early prostate cancer is not discretionary; these are the standards of care,” he is quoted in Bizcommunity as saying.

In addition Grootboom notes that black men in South Africa are more likely to suffer aggressive forms of malignancies or cancer and that a watch and wait strategy is therefore clinically not appropriate in our setting.

Further to the report’s findings that unpaid claims should be construed as unnecessary care, Grootboom says schemes typically do not fund clinically appropriate care if they judge it is not a prescribed minimum benefit and not covered by plan type.

“Unfortunately, the allegations of doctor-induced demand can erode the patient-doctor trust. As a profession we will continue doing our level best to care for and save the lives of all South Africans. We will also further engage with the HMI after a complete analysis of this lengthy document.”

 

Fin24 reports that in his response to the inquiry report and recommendations, Discovery Health CEO Jonathan Broomberg said: “We support the recommendation to address the fragmentation of regulation on the supply side, and the recommendation that there be more careful evaluation of need and evidence to be applied in the licensing of hospitals and other facilities.

“We also support the proposals to allow for maximum fee-for-service tariffs that professionals charge for prescribed minimum benefits to be determined through an organised tariff determination process, although it will be critical that this process is carefully designed to ensure full participation by all relevant stakeholders.”

Fin24 says Sama also welcomed the introduction of a new independent regulatory body, saying it couldn’t have come at a better time as the trust deficit between medical schemes and its members was at its lowest. Grootboom, said: “If you look at supply-side issues, in terms of the hospitals, there is a large amount of profiteering by the groups. There is a large admission rate and too many procedures are done in intensive care units, and the inquiry is basically saying there are some procedures that are cost drivers that we can explain and others that we can’t explain.”

Broomberg said: “These are progressive and workable proposals, and we are looking forward to working with the regulators to ensure that these changes are implemented in a workable fashion that benefits medical schemes and their members.

“At the same time, we are mindful of affordability constraints and the need to ensure that prescribed minimum benefits are reviewed to ensure that we are not adding costs to the already hard-pressed medical scheme members.

“We also welcome the concept of risk equalisation on the basic benefits, and the acknowledgement that a key challenge for medical schemes has been the incomplete implementation of the social solidarity regulatory framework,” Broomberg added.

Fin24 reports that Bonitas principal officer Gerhard van Emmenis conceded that the plans were hard to choose from and welcomed the recommendations around transparency and simplification for the consumers to make it easier for them to access information. “One of our key focus areas is to drive education and awareness among our members and consumers in general, and this dovetails with this. In this regard, brokers are a critical part of the financial services sector as a whole,” van Emmenis said.

“While consumers are becoming more savvy and educated about the inner workings of the medical scheme industry – especially in terms of selecting the right plan in an increasingly complex environment that is often rife with confusion – brokers help alleviate some of this confusion by providing an independent evaluation of a person’s specific circumstances (from a financial and healthcare perspective).”

The CEO of Advanced Health, a network of 12 day hospitals around the country, Carl Grillenberger said that the group was confident the report would lay the foundations for a more equitable landscape in which to compete. “As a smaller organisation, we, and other day hospital administrators, have felt the pressure of the larger hospital groups and the restriction of specialists who want to treat their patients in day hospitals. We fully support the inquiry’s investigation into anticompetitive behaviour and restricted competition,” he said.

Mediclinic said it was still studying the provisional findings and recommendations, as well as the underlying data, information and analyses and its potential impact on the private healthcare industry in detail and would provide “considered feedback in due course”.

 

Broomberg rebutted accusations that Discovery Health charged higher than necessary service fees to its medical scheme clients and insisted that its profitability was due “to a number of business factors, including continuous innovation and greater operational efficiency driven by management excellence and by large investments in advanced systems and customer service technologies”, reports Business Day.

In the year to end-June 2017 Discovery Health, which had 3.4m members and a 40% share of the medical-schemes market, increased its normalised operating profit 11% to R2.5bn. Premium income from its core new business annualised rose 18% to R6bn.
Ngcobo said in his speech that the analysis conducted by the inquiry over the 10 years from 2006-2015 “shows that one player, Discovery Health, recorded sustained high profits over the entire period and much higher than its competitors Metropolitan and Medscheme”.

The report said sustained levels of profitability had been found across the funder market and that “Discovery Health has, over a sustained period of time, earned profits that are a multiple of those of its main competitors, with no sign of (an) effective challenge”. “We acknowledge that much of Discovery Health’s success is partly due to a highly competent management team, but we do not think this alone explains the significant gap in profitability when compared to its direct competitors. Higher than necessary service fees given economies of scale; a “locked-in” Discovery Health Medical Scheme that does not source services from any other industry stakeholder; risk selection; and broker management contribute to its profitability,” it said.

“Under normal competitive conditions, Discovery Health’s profitability would attract new competitors and stimulate competition from incumbents. There is no sign of this. On the contrary, we see Discovery Health growing and becoming more successful over time.
“This is an indication of market failure and there are no signals that the market will self-correct.”

Broomberg said in Business Day that publicly available data demonstrated that “the weighted average administration expenses and managed care fees incurred by the open schemes administered by our major competitors were very similar to those incurred by Discovery Health Medical Scheme”.

Public data also confirmed that the administration expenses and managed care fees incurred by Discovery Health Medical Scheme were almost exactly the same as the weighted average of all 22 open schemes when measured as a percentage of gross contribution income.

“The fees charged to Discovery Health Medical Scheme are in fact the 14th lowest out of 22 open medical schemes when measured on a rand per beneficiary per month basis, or 10th out of 22 open schemes when measured as a proportion of contribution income,” he said.

“Similarly, the expenses incurred by Discovery Health’s 18 restricted scheme clients are very close to the average expenses incurred by schemes administered by our competitors, and the weighted average fees charged to Discovery Health’s restricted scheme clients are almost identical to the weighted average fees charged by our two major competitors.”

Business Day reports that an analysis showed that in 2017 for every R1 spent by Discovery Health Medical Scheme on administration and managed care fees, the members of the scheme received R2.10 in value from the activities of Discovery Health.

 

The Competition Commission report focused on cost and competition in the sector, but also included important recommendations to enforce patient rights regarding Prescribed Minimum Benefits, says a Daily Maverick report.

The PMB list includes 270 acute conditions and 25 chronic conditions. The inquiry found the Department of Health hadn’t regularly reviewed the list as required by law. There is no system to ensure medical schemes pay the costs from their risk pools (companies pool members’ contributions to pay for health care expenses) rather than members’ savings accounts.

Welcoming the release of the report, Section27 deputy director Umunyana Rugege said: “Patient rights continued to be a focus of the inquiry. We welcome the protections of these rights as patients navigate the private health system as well as the strengthening of the regulators.”

“The high price of health care must be addressed as a priority and we’ll be exploring the Health Market Inquiry’s proposals on tariff setting and the reframing of prescribed minimum benefits to achieve greater access to a comprehensive package of services.”

According to Daily Maverick, the inquiry analysed data from medical schemes and found that they mostly complied with regulations related to in-hospital PMB claims. Only 0.37% of such payments came from members’ savings accounts with 3% going unpaid. Out-of-hospital claims are more concerning. Schemes are increasingly following the regulations, but in 2014, 9% of PMB claims were paid from savings accounts and 5% went unpaid.

“The complexity of the PMB system creates a non-trivial enforcement problem,” read the report.

The inquiry made a number of recommendations to ensure that medical scheme members understand and can access PMBs. To simplify schemes on offer, it said companies should all offer a base package including PMBs, which must be expanded to include primary and preventative care. It also said the PMB package should be reviewed at least every three years and scheme members should be given information to help them understand what they’re entitled to and when additional costs can occur.

That would include a checklist of all prescribable medicines for each PMB; a list of designated service providers where members can seek treatment; and when a member seeks treatment, explicit advice on whether a service provider or treatment has further cost implications and what alternatives are available.

Daily Maverick says the report spent considerable time on the claim that obligatory PMB payments have led to the ever-rising costs of private health care. “The (Health Market Inquiry) was unable to find support for the assertion that PMBs are a primary driver of cost escalation in private health care,” it concluded.

“Even though PMBs are not a primary driver of expenditure escalation, they are an increasing component of medical scheme expenditure over the analysed period,” it continued. The report made a number of recommendations to decrease the cost of schemes covering PMBs, largely linked to reforms in arbitrary pricing models and “supply-induced demand”.

 

Standard tariffs for medical practitioners, the standardisation of medical scheme options, and more targeted licensing for hospitals are in the offing if the government decides to implement the recommendations, reports Business Day. The provisional inquiry report has recommended the creation of a dedicated Supply-Side Regulator of Healthcare to regulate medical practitioners and determine tariffs. It has also recommended that tariffs for prescribed medical benefits should be binding and that tariffs for non-prescribed medical benefit conditions should have the status of reference tariffs.

The recommendation on standard tariffs for medical practitioners was welcomed by the Sama chair, who said the association, which represents doctors, had been lobbying for this for many years. Grootboom emphasised, however, that the process of tariff setting would have to be fair and that no doctor should be expected to provide services at below cost and should be able to earn a reasonable return on their investments. It was also important, Grootboom said, that the regulator be neutral and completely independent from the Department of Health.

Council for Medical Schemes (CMS) acting registrar Dr Sipho Kabane is quoted in Business Day as saying he welcomed the proposal to standardise medical scheme options. It was something the council had been advocating for a long time as the multiplicity of options confused consumers. The council was developing a framework to guide the industry on what should be contained in the reduced number of standardised options.

This framework would include a risk-adjustment mechanism to mitigate the consequences the consolidation of options would have on cross-subsidisation. Kabane believed standardisation would encourage competition in the market on the basis of quality and service. It would enable consumers to compare the various options available.

The inquiry found that the “deliberate” way in which medical aid schemes bundle, package and price their options allowed them to weaken and even avoid outright price competition. Dealing with the pricing of health services, Ngcobo said in his speech that one of the most frequent complaints made to the inquiry was that there was currently a “tariff vacuum” in the private healthcare sector that made it very difficult for schemes and members to estimate and compare the costs of care among providers.

The Supply-Side Regulator could set tariffs either after extensive consultation with stakeholders in a public forum or through a multilateral price-setting mechanism in which stakeholders would conduct tariff negotiations.

 

Russell Rensburg, programme manager health systems and policy, University of the Witwatersrand writes in The Conversation that the new healthcare plan promises to overhaul South Africa’s massively skewed system.

Rensburg writes: “Since 1994 South Africa has invested substantial resources in health care services. As a result, it’s has made significant health gains. For example, nearly 4m people get HIV treatment and mother-to-child transmission has nearly been eliminated.

“Service delivery has also been significantly expanded to more than 4,000 health facilities. And there’s been a large increase in the number of health care professionals. But health care needs aren’t static. For example, non-communicable diseases like diabetes and hypertension are now responsible for more deaths than HIV and TB combined. And in some instances successes have created challenges. For example, the expansion of HIV treatment has meant that there’s now a large cohort of chronic patients requiring ongoing care. In addition, the reality of a largely youthful population requires interventions so that health gains aren’t lost.

“Health services in South Africa are delivered by a large public health system as well as very sophisticated (and profitable) private health providers. Funding in the public sector has declined progressively for the past six years. The result is that public health services are under increasing strain and unable to deliver adequate care to poor people, particularly those living in rural areas.

“The private sector has also been under pressure. This has led to price hikes, making many medical aid schemes unaffordable. Membership numbers aren’t growing, partly due to the country’s very high unemployment levels – medical aid membership is linked to formal employment. The result has been even more pressure on the public sector.
Reform is clearly needed. All that’s in dispute is what it should look like.

“The release of the National Health Insurance Bill is the government’s answer to the problem. The central plank of the plan is a National Health Insurance Fund that will buy health care services from health professionals and deliver through both public and private facilities.

“The Bill has been met with a raft of criticism, included funding concerns and the fact that it won’t fix the collapsing public system. But I believe that more fundamental questions need to be asked: does it address the goal of delivering universal access to health care for all South Africans? And can it do it in a way that doesn’t incur catastrophic expenditure?

“The answer to these two questions I believe is yes. Despite the Bill’s flaws, it has two great merits. The first is that it addresses the country’s current approach to health care where the quality and type of services people receive is informed more by their socio-economic status rather than their need for care. Instead, it adopts a population-based approach. This means that budgets would be allocated based on how many people live in an area and what their disease profiles and health care needs were.

“If properly implemented, this approach would result in lower health costs over time because diseases like diabetes and hypertension could be detected earlier and health conditions would be managed more efficiently.

“It’s second major merit is that it looks at health services through three vantage points: what services are needed, who needs them, and who will deliver them. This means that it separates who procures the health services from those who will deliver them.

“The Bill also promises to transform the way money is spent on health care because it’s premised on separating the procurement and the provision of health care services. This has two benefits.

“Firstly, it will mean that health budgets are allocated more efficiently based on health needs rather than purely on use. Secondly it can potentially unlock significant savings through strategic procurement.

“The country spends just under a half a trillion rand on public and private health care combined. But the funds aren’t allocated and spent efficiently. For example, nearly half of the money that goes to primary care services is being spent on managing chronic HIV patients. While spending to maintain access to HIV care is important, funds need to allocated to dealing non-communicable diseases which are becoming an increasingly significant public health threat.

“The private sector services has its own set of problems. Chief among them is that it’s approach is curative – that is treating people in hospitals – rather than preventative. The Bill envisages that primary health care facilities will become the main point of entry for all patients.

“There’s another benefit to the proposed scheme: a more equitable spread of services. There are currently over 4,000 public health facilities that service over 80% of the population’s primary health care needs. In the private sector there are close to 5000 general practitioners who service the health care needs of only 16% of the population. And most are concentrated in urban areas. People in rural areas are therefore largely dependent on an ailing under resourced public sector.

“At the centre of the proposed universal health care system is the promise that everyone will have access to health care where they need it without incurring vast expenses. By consolidating the health market, the Bill opens the door to more equitably allocate resources. If it’s successfully implemented, this approach offers a real opportunity to address the country’s grossly unequal access to health services.

“The national health insurance should be seen as an opportunity to bring about much needed health care reform in South Africa. But South Africans need to wake up to the fact that implementing this highly complex new system will be more like running a marathon rather than a sprint.

“The final implementation of the national health insurance is still a long way off – another two phases are planned. And the release of the Bill is also only the first legislative step. Over the next four years 12 additional pieces of legislation are expected to be introduced.

“South Africans should be prepared to be patient.”

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