High price of SA's private healthcare slated in WHO/OECD report

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The Competition Commission's Private Healthcare Market Inquiry is midway through the second week of its public hearings.

The first week of the hearings began with an oral submission from a consumer, Ms Angela Drescher, who highlighted her experiences with private healthcare funders (Medical Schemes) in relation to Prescribed Minimum Benefits(PMBs). The hearings concluded with a presentation from labour union Cosatu, who lamented the high price of private healthcare. High prices of hospital fees, call for a regulation of prices in the private healthcare and a lack of information on medical schemes, were the main themes which were bemoaned by each member of the public and consumer groups that presented their case.


A Sunday Times report said the inquiry has received more than 15,000 pages of submissions. Among them, a report by the World Health Organisation (WHO) and the Organisation for Economic Co-operation and Development (OECD) found that from 2011 to 2013, South Africans paid more for private healthcare than people in 20 European countries, as well as in the US and the UK.


According to a Health-e News report, the themes that emerged during the first three days of the hearings were that medical aids do their best to avoid paying, even though the Prescribed Minimum Benefits (PMB) set down what every fund is compelled by law to cover. Medical aid rules are designed to confuse members, while their codes confuse doctors. There are no standard tariffs or regulations, so hospitals and specialists charge whatever they like.

The report says hospitals account for the bulk of private health costs (around half), followed by specialists’ fees (33%). Many medical schemes are weighted in favour of hospital care. Limited cover for general practitioners (GPs) means that people run out of benefits before the year is out, and to help them, GPs often refer illnesses that they could treat to hospitals, testified GP Dr Norman Mashaba.

The report says WHO and the OECD told the hearing that, when compared with 20 European countries, South Africa's private hospital prices were ranked "the least affordable". South Africa's private hospitals' prices are "on a par" with those in the UK, Germany and France, yet people in these countries have much higher incomes, said the OECD-WHO submission. In addition, hospital prices had increased by around 6.5% every year, while other goods and services’ price increases were around 5.6%

Specialists also seem to be encouraging unnecessary medical procedures, the report said. South Africa's private sector is already notorious for excessive caesarean sections – over 70% of private births in 2014 were C-sections although the WHO recommends a rate of 15%.

The OECD-WHO research also uncovered a massive surge in knee and hip replacements, which was likely to be "supplied-induced demand" – a polite way of saying they were driven by specialists' rather the patients' needs. In the space of merely two years – between 2011 and 2013 – there had been a 53% increase in knee replacements and a 31% increase in hip replacements which could not be explained by ageing or new members.

Private nurses were discouraged by both private hospitals and medical aids although they offered cost-effective services. In addition, the report said, private hospitals employed "the minimum of nurses", preferring to use the services of nursing agencies even though this was much more costly and meant poorer services for patients, according the Society of Private Nurse Practitioners.

The WHO-OECD report concludes by recommending price controls to "help individual South Africans and the country at large get more value from their considerable spending on health care".

This was echoed by human rights organisation Section27, which recommended "fee norms" to be published by the Health Professions Council of SA (HPCSA) as patients were unable to "complain about overcharging by health professionals if standard fees were not set." "The current absence of an effective framework for price regulation compromises patient’s rights to high quality, affordable health care services," according to Section 27’s Umanyana Rugege.

The lack of fee norms was the fault of the Competition Commission itself, said Dr Norman Mabasa. Prior to 2004, hospitals, medical schemes and practitioners used to negotiate tariffs but that the Competition Commission had stopped this as it believed this was "anti-competitive behaviour", said Mabasa.

The report says currently, there were no set fees, which meant that specialists and hospitals could charge whatever they wanted, and those most vulnerable were people with medical emergencies, such as car accident victims, who were couldn’t shop around for services.

The SA Depression and Anxiety Group (SADAG) said specialists charged 200% – 300% of medical aid rates and people with mental illnesses had no choice but to pay as they had to see a psychiatrist to get their medication.

The report said Health Minister Aaron Motsoaledi, who has long criticised private sector costs, is watching the inquiry keenly. Curbing the high costs in the private sector is essential for the success of the National Health Insurance (NHI), as government wants to use private health services to achieve universal health coverage.


Motsoaledi says hospital and specialists' costs have reached "abnormal" levels. Private healthcare prices rise above inflation every year, leading to costlier medical aid premiums, reports The Times. The knock-on effect, according to the Council for Medical Schemes, is that people are purchasing cheaper medical aid packages with fewer benefits.

Motsoaledi, attending the first session of the inquiry's public hearings in Pretoria, is quoted in the report as saying that hospital and specialists' fees were "abnormal". He warned that South Africa was in danger of becoming like the US, which spends more on healthcare per head than any other nation.

In 2004, the commission banned large hospital groups, medical aids and doctor groups from negotiating collectively on prices for appointments, operations and new procedures. But Motsoaledi said the negotiation ban had driven up prices. "This is one of the events that changed the private healthcare market – to make it so abnormal. We need to bring the private market back to normality."

Johann Serfontein, spokesperson for the Healthman Consultancy, said the prohibition of collective negotiating between doctors' groups and all medical aids had affected prices. "Patients are price- sensitive and do not like co-payments, so doctors are forced to charge fees set by medical schemes or patients go elsewhere."

According to the report, he said medical aid administrators used an outdated 2006 price list and then set prices that were not fair and did not reflect the actual cost of the procedure. "The costs of procedures on the 2006 reference price list were arrived at arbitrarily and did not reflect the actual practice expenses that healthcare practitioners faced."

Motsoaledi said another factor driving up prices was that patients went to specialists instead of general practitioners, and specialists charge more for simple procedures, the report said.


Speaking after the WHO and the OECD had submitted their reports, Motsoaledi said: "This is what I have been telling South Africans all along, but nobody wants to listen to us." Motsoaledi told City Press: "Nowhere in the world does private healthcare cost this much. We are even higher than the US, which has a private healthcare spend of 35% (of total health spend)." "But what is better about the US is that this 35% healthcare spend serves 61% of the population, while in South Africa 42% of the total healthcare spend serves 16% of the population," he explained.

Motsoaledi alleged private hospitals were planning to challenge the WHO and OECD report at the Competition Commission’s health market inquiry into private healthcare. "We have heard that private hospital lawyers are planning to bring in experts from the UK to come and rubbish the report. We are not surprised by this because they have done it before," he said. "Now they see that the WHO and OECD have presented strong evidence about what we have been saying for years, they are bringing in British experts to come and challenge the integrity of this report," he said. Motsoaledi explained that the submission by the WHO and OECD was the "most impactful as the WHO is the ultimate authority in health and the OECD the ultimate authority in competition".

The Hospital Association of SA (Hasa), which represents major hospital groups including Netcare – which led the case against the commission last year – denied this was their plan, the report says. "Hasa has no knowledge of any experts being brought in from anywhere for the purposes alleged (by the minister)," said Melanie Da Costa, the chair of the association.

Da Costa said Hasa had noted the submission of a working paper commissioned by the Department of Health, and tabled by an OECD and WHO study group, to the health inquiry. "Our initial response is to note that the paper uses data from some medical schemes that together represent only 60% of medical schemes in the country. We are, unfortunately, unable to ascertain which medical schemes these are, and whether they are managed by one or more of the medical scheme management companies,2 she said.

"Secondly, in our view the paper is essentially an affordability study. It focuses on the affordability of private healthcare for all South Africans, not those on medical schemes.

"We believe the paper might also have looked at the affordability of private healthcare for people with jobs in addition to the affordability of private healthcare for the unemployed, which it seems was the paper's focus.

"This would seem appropriate in a country that is acknowledged to embody both developed and developing economic characteristics and which has as wide a Gini coefficient (wealth gap) as ours," Da Costa is quoted in the report as saying.


"The current absence of an effective framework for price regulation compromises patient’s rights to high quality, affordable health care services." Health-e News reports that speaking during the first week of submissions, Section27's Rugege called for "fee norms" to be published by the HPCSA as patients were unable to "complain about overcharging by health professionals" if standard fees were not set. Section27 also said there was "widespread non-compliance with the coverage that all medical scheme members are entitled to by law, without any co-payments".

Ivan Evans, a member of Bonitas medical aid scheme, was diagnosed with HIV in 1999 and he has been on antiretroviral (ARV) treatment since the early 2000s. He has developed a painful side effect from his ARVs called lipodystrophy, which causes fatty growths to develop on his back and neck. As a result, Evans experienced headaches, back pain and impaired sleep and his doctor recommended the surgical removal of the accumulated fat around his neck.

However, Bonitas declined to approve the surgery even though he was entitled to it in terms of his benefit option. Only after Section27 took on Bonitas was Evans able to get back the money he had paid for the surgery.

Lauren Jankelowitz, CEO of Southern African HIV Clinicians Society, said doctors also battled to deal with medical aid schemes as cover for HIV and coding was confusing.

The report says the Competition Commission has initiated the inquiry because it "has reason to believe that there are features of the sector that prevent, distort or restrict competition". Public hearings will be conducted until early March and the commission is expected to table its recommendations by December.


When a patient has a "cardiac emergency", their hospital fees are supposed to be completely covered by their medical schemes, testified Dr Dave Kettles, president of the SA Society of Cardiovascular Intervention (SASCI) at the Inquiry. Yet recently one of his patients mortgaged his house to pay a R70 000 co-payment that his medical scheme insisted he pay for his hospital stay. "I got on the phone to the healthcare funder and that payment was reversed," Health-e News reports Kettles said. He added that many hours of doctors’ time was taken dealing with medical schemes.

"The doctor-patient relationship is undermined at every turn by funders, who decide what treatment we can use and what drugs we prescribe," said Kettles. "Funders also decide what we should charge, which is coercive in the extreme as, if we charge more, this cost will be passed on to the patient abd we risk bad debt," he added.

Schemes were also resistant to new technology even when it could save them money, said Kettles. A patient could be discharged soon after a heart attack if they were prescribed a new blood-thinning medication to prevent them from having another heart attack, at the cost of R1,000 a month for six months. But medical schemes still insisted on paying only a cheap drug called Warfarin, which meant that the patient remained in hospital for another week to be monitored at an additional cost of around R25 000, said Kettles.

Cancer Association of SA (CANSA) representative Professor Michael Herbst said there were often long delays in getting scheme approval for cancer treatment and cover ran out while patients were in the middle of radiation or chemotherapy. In addition, patients' pain medication was often not covered.


Cardiologists, speaking at the Inquiry, said they struggle to do their jobs because of resistance from medical schemes, and end up having to fight their patients' battles. Business Day reports that Kettles, who runs his own practice, said he often found himself sending requests to medical schemes that read as follows: "Please sir, I promise you a pacemaker is really necessary," and "You need an anaesthetic to do a bypass operation." Kettles said medical schemes also controlled the type of operations that were performed on their members and which medication they could take. This was because they would pay only for certain procedures and medications.

Because of medical schemes' resistance to funding the medication, they often ended up paying more for drugs that were sometimes inferior, rather than give in and pay for other medication, he said. "My integrity as a practitioner is threatened (as a result). None of my patents can afford to have an opinion, nor can I." The report says Kettles called the actions of the schemes "coercive in the extreme".

The report also quotes the Cancer Association's Herbst as saying that PMBs, a list of 270 diseases and 27 chronic conditions that medical schemes are obliged to cover in full, needed to be reviewed.

The report says the onerous PMBs have been a big concern for many people, who have made submissions on them since the inquiry started.


Kettles is quoted in The Times as saying that doctors wanted to be viewed by medical aid schemes as "ethical and competent practitioners who acted in the best interests of the patient".

Johannesburg cardiologist Jean Paul Theron told the commission that doctors were aware of affordability issues and avoided procedures that were expensive or added little value. But cardiology required expensive technology for diagnosis and life-saving operations, he said. "We are breaking our backs to get treatment for patients in fights with medical aids," said Kettles.

The report said Commission panel member Nthutuko Bhengu told Kettles he had "presented a good case on how medical aids interfere in the doctor-patient relationship" but it was the schemes "who had to pay for treatment". The specialists argued that medical aids held the power when negotiating prices for procedures. "We face enormously powerful opponents in that dialogue," Kettles said.

Theron complained that medical aids had all the data on what cardiologists charged, what the success rates of operations were, how many were done, and what medical aids could afford, but did not share this with doctors, putting them in a compromising position when negotiating fees with medical aid schemes.

"Legally, they are not for profit. Practically, that isn't correct. Medical aids are run by some of the strongest performing companies. There are big profits involved," Theron is quoted in the report as saying.


While high salaries of nurses have been held by private hospitals as one of the major drivers of private healthcare cost, the utilisation of private nursing services might bring the cost down, the Inquiry heard. A Moneyweb report quotes Debbie Regensberg, a private nursing practitioner and national executive member of the SPNP, as telling the inquiry that private hospital groups have over the last five years reduced their nursing staff. Those with advanced skills "were the first to get chopped" and only core staff was retained. Additional nurses are supplied by nursing agencies as needed.

According to the report, Regensberg said apart from the fact that agency costs add up to 40% to the nursing bill, the retained and agency nurses have only basic skills. Many nurses with advanced skills in, for example, wound care, midwifery, breastfeeding consultancy and insulin education for diabetics are now in private practice.

Patients still need the advanced care of these nurses, but medical schemes refuse to pay them, arguing the cost should be covered by the hospital. Paying for private nursing services in addition to the hospital cost would amount to double billing, they argue. As a result, the patients have to cover the cost themselves.

She said in some cases the medical schemes pay the private nurses, only to reverse the payments at a later stage. One of the society's members had two years’ payments reversed and the patient was liable for the full cost of her services. The scheme threatened to charge the private nurse with fraud and unethical conduct.

Doctors ask for the advanced nursing services that private nurses can provide and in some cases they retain patients in intensive care for longer periods, for them to benefit from the higher level of nursing care. This inflates costs. She said private nursing fees are more affordable than doctors' fees and in some cases nursing services are more appropriate than a visit to the doctor, but the medical schemes only cover doctors’ visits.

Regular wound care for a leg ulcer may for example prevent costly hospitalisation and even the amputation of the leg, while the services of a midwife can bring down the cost of childbirth and the rate of Caesarean sections in the country.

Regensberg is quoted in the report as saying that medical schemes are complaining about the large number of Caesarean sections, which are more costly, than natural birth. Utilising midwives in hospital, where help is at hand in case of unexpected emergencies, can lower this cost. Private hospital groups are however reluctant to allow private nurses, including midwives, to work in their hospitals, which often leaves pregnant mothers with a Caesarean section in hospital or a midwife-assisted natural birth at home as their only choices.

Also, the report said Regensberg told the Inquiry, many of the primary health care given by private nurses at primary healthcare facilities should be covered by the medical schemes as prescribed minimum benefits (PMBs), but that nurses are not recognised for this purpose. She said the current regulation does not permit nurses to become partners in multi-disciplinary practices that might include, for example, doctors, physiotherapists and psychologists. Nurses are also severely restricted with regard to advertising and are not even allowed to list their services on electronic listing services like Dial-a-Nurse.

These restrictions limit patients' choices and often leave them no choice but to use more expensive service providers in order to enjoy the benefits of their medical schemes.

The report says she asked the inquiry to address this and also interrogate the Nursing Council about matters that might give private nursing professionals easier access to the market.


Medical schemes and their administrators are prioritising short-term savings over patient health with their unscientific formularies. Business Day reports that this is according to specialist physician cardiologist Jeff King in the second week of the Inquiry.

Medical schemes incentivise patients to use the medicines listed on their formularies by levying additional fees, or co-payments, on medicines that are not on the list. King said many of the patients he saw in his practice required medicines that were not on their schemes' formularies, which were drawn up by non-experts with a vested interest in minimising costs instead of optimising therapeutic outcomes.

There was an inherent conflict of interest between medical scheme protocols devised by non-neutral individuals and evidence-based medicine, he is quoted as saying.

King made the case for the treatments he prescribed for his patients, presenting evidence sent to him by Discovery Health Medical Scheme in 2010 that showed the rate of hospitalisation among his patients was much lower than among his peers. He said he regularly motivated on behalf of his patients to get their medical schemes to agree to pay for medicines not on their formularies. He emphasised that he was not opposed to generic medicines, which were generally cheaper than innovator medicines, but aimed to put patients on the medicine that would provide the best therapeutic benefit.

King said he would not join any medical scheme's network of preferred providers, because this would prevent him from providing unbiased care to his patients. He also took aim at medical scheme administrators, saying they received their fees regardless of the outcomes for medical schemes and patients. Both administrators and healthcare professionals should be remunerated based on performance, he is quoted in the report as saying.

Press release Public submissions YouTube Inquiry hearing broadcasts Full Sunday Times report Confidential submissions Health-e News material OECD Report summary Full report in The Times Full City Press report Health-e News material Health-e News material Full Business Day report Full report in The Times Full Moneyweb report Full Business Day report

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