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Spiralling cost of health care in SA in focus again

The cost of health care, particularly in the private sector, became the focus of discussions at this year’s Board of Health Funders (BHF) conference this week.

Unsurprisingly, Minister of Health Aaron Motsoaledi attacked the players behind the spiralling costs and even called for the 2004 Competition Commission’s ruling – which barred medical schemes from negotiating prices with service providers – to be reversed.

His comparison of existing medical schemes between then and now substantiated his argument prices charged for health care services were sinking smaller schemes.

“Before that (Competition Commission) ruling in 2001, we had 180 medical aids. Now there are less than 100 because they are being liquidated and it’s not their fault. They can’t carry the cost,” he told delegates at the conference.

Hospitalisation costs – according to Department of Health (DOH) calculations among the highest in Organisation for Economic Co-operation and Development (OECD) countries – have been blamed for driving South Africa’s health care inflation.

According to the Council for Medical Schemes’ (CMS) 2011 report, hospital costs amounted to R31.1 billion of medical schemes’ total R84.7bn expenditure last year – R30.8bn of that was paid to private hospitals.

The DOH said the cost for maternity hospitalisation and other procedures in SA was five times higher than in other OECD countries when purchasing-power parity was taken into consideration. Purchasing-power parity is the adjustment to the exchange rate so that identical goods have the same price in two countries when expressed in the same currency.

Bearing in mind that some specialists’ bills come separately from the hospital bill, the cost of hospitalisation may even be higher in some instances.

Specialists alone claimed R19bn of the total medical aid scheme expenditure in 2011.

The Health Professionals Council of South Africa pointed out at the conference the logic behind the explosion in specialist fees was due to them charging whatever their consciences would allow.

The so-called “ethical tariff” was the only form of fee structure in this industry.

BHF head of benefit and risk Rajesh Patel said specialist categories – that charged as much as 500 to 700 percent more than what medical schemes reimbursed – included especially anaesthetics and orthopaedics.

Medical schemes administrator Thebe Ya Bophelo said schemes also had this experience with neurosurgeons.

But hospital groups dismissed allegations they were driving up the costs in the private health care sector.

Hospital group Medi-Clinic Southern Africa said SA hospital costs could not be compared with those of other OECD counties because different systems of reimbursement were used.

Lack of international standards for levels of input, such as nurses in hospitals, also meant nursing ratios varied from country to country, which further complicated price benchmarking.

“South Africa has not invested significantly in support structures, such as home-nursing and facilities for lower levels of care, as have most of the countries used in the analysis.

“These can reduce the cost of delivering certain types of services,” said Medi-Clinic spokeswoman Tertia Kruger.

The South African Medical Association (SAMA) argued doctors should be reimbursed for the high costs of running their practices – they had to earn a fair amount for the work they did.

Although doctors’ salaries in SA had improved over the past few years, they still earned considerably less than in the US and UK.

Dr Marmol Stoltz, the chairwoman of SAMA’s General Practitioners Private Practice Committee, said doctors had taken the blame for the escalating costs over the past two decades. Medical schemes believed they were exploiting medical aids and patients were abusing them.

But Stoltz argued all parties – but the members who got caught in the crossfire – were to blame for the abnormality in the cost of private health care.

In 1990, the average Consumer Price Index (CPI) inflation was 14.2 percent.

The average medical scheme inflation at the time was 27.3 percent, yet the average contribution per beneficiary per month was R74.45.

When you fastforward to 2010, the average CPI inflation was 5.4 percent and the medical scheme inflation was 11.3 percent.

The average contribution per beneficiary per month was R975.82. So, based on the 2010 CPI, the medical aid contribution per beneficiary per month should have been R168.08.

So what pushed up the costs and medical inflation?

Stoltz blamed the concept of managed care that originated in 1990.

The portion of members’ contributions going to non-health care costs, together with administration costs and broker fees, had increased yearly.

Stoltz argued that while the managed-care system was created to control the costs for the treatment of acute diseases, it had not brought the costs down. Instead, managed care had become more commercialised.

Medical schemes paid R11.56bn in non-health care costs in 2011, which comprised administration and managed care costs as well as broker fees.

Instead of controlling the costs, the system had promoted hospital-based care.

“The benefit design (of medical schemes) forces patients to use hospitals as a point of entry,” said Stoltz.

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