The minister was in a very bad mood. His voice was raised behind the door that leads from his office to his boardroom.
Just that morning, activist NGOs TAC and Section 27 had released their joint report into the state of public health in the Eastern Cape and it was, unsurprisingly, devastating. It showed a system in complete collapse. Inadequate nursing. Crumbling hospitals. Insufficient drugs. No access to basic services.
The view of the Pretoria Zoo from his window was peaceful.
But when Aaron Motsoaledi finally appeared from behind his office door, the atmosphere was charged.
The stinging criticism of his department would be the backdrop to a conversation about the government’s war with private health care.
The battle between them has been going on since before he entered office in 2009. But it has intensified over the past year, as lobbying for a market inquiry at the Competition Commission paid off.
On Friday the terms of reference for that inquiry are expected to be published in the Government Gazette, ushering in a process that will probably take two years to complete. It will pit a minister under enormous political pressure to deliver National Health Insurance and a strong regulatory environment against an industry that rakes in billions in profit.
Motsoaledi must deliver on promises made at the ANC’s elective conference in Polokwane in 2007. But the government has lost every court case and legal action embarked upon against private health care. He needs the commission to make recommendations that will allow him to develop new policy to regulate it.
The health minister was in a sling, having just returned from sick leave. Agitated, he hardly sat down.
“I can only say one thing: This is a revolution to bring justice to the poor. And revolutions happen in a way that may not be pretty. This is war. This is for the population to see how greed is fought. It’s naked, naked greed from powerful individuals who want a good life for themselves and a poor life for anybody else.”
The main issue between the warring parties is price. And Motsoaledi does not plan to go about business at the commission quietly. He starts with private hospitals.
“This is the missing party. Who is regulating the provider? Who’s telling them the dos and don’ts? They wake up and do whatever they want. If you go to any private hospital and you ask them what a Caesar costs, will they tell you? They won’t, why? They’re waiting for you to come in so they can bill you for everything they do, even their mistakes.
“Everything they do is money. If you are in ICU, when your money’s finished, they phone the nearest public hospital and say, take this person. They don’t care whether you’re going to die or whether you’re better.” He clicks his fingers.
“They’ll just say go. So should I sit there as a minister and look at that and say it’s fair to the population? It can’t be.”
The minister has lost patience with what he calls the “zama zama” system of a proposed risk equalisation fund – previously part of a government strategy for Social Health Insurance in which wealthier South Africans would cross-subsidise the disadvantaged. The plan was for income-related contributions, mandatory medical aid membership and prescribed minimum benefits (PMBs).
“Risk equalisation is off the table, just like the PMBs,” he says. “The risk equalisation fund was a copped-out mechanism to plaster a health-care system that wasn’t working. That’s the bottom line. The fund, the what-what, prescribed minimum benefits, they’re not working. The lower scheme what-what option, the higher scheme, they’re not working. All those have never served the public. The only thing that will help is universal coverage. And private health care started working against universal coverage in 2009.”
Motsoaledi had planned to introduce a pricing commission to try to deal with these issues, but it was thwarted. Is he only going to be able to do this after the commission, in that some policies may emerge out of its recommendations?
He says there are only three ways of funding health care.
“There’s the mandatory pre-payment. That’s NHI. That’s the NHS in Britain. That’s Obamacare, the NHI in Norway, in Ireland, in Mexico. They pay for health before the person is sick and it’s mandatory. The second is voluntary pre-payment. That is where medical aids come in.
“The third is out-of-pocket payment – cash. And I don’t know who gets confused because the preferred method is mandatory pre-payment. If you look at most of Europe, they’re introducing the very same system that they’re suspicious of in Africa where the system is overwhelmingly cash. That cannot be allowed.”
The response from private health care to the market inquiry has been vociferous. But the minister waves this off.
“They are not hiring expensive lawyers because of the commission. They hired expensive laywers the day they heard about NHI. The whole concept of universal coverage, where you are giving justice to the poor, is what they are fighting against.
“I’m not afraid to go to court. The judges of this country must tell us whether they respect the constitution. It’s not me who said health care is a right. It’s the constitution, and I realise very rich people like to choose those parts of it that suit them, but where there is a right, it cannot be sold to the highest bidder at the highest price.”
Motsoaledi is adamant that there is no political ploy.
“There is no agenda anywhere in the government, the department of health, in the ANC, in the alliance, no agenda to abolish private health care. I would put my head on the block. All we want is justice and affordability.
“I don’t control the commission. I’m not in charge. I’m going to the Competition Commission on an equal footing with them. I laugh. What they are doing to me, it’s like Diwani the guy who (allegedly) killed his wife. The communication group his people hired who were attacking General Cele when he said, we’re going to arrest this fellow, we’re going to throw him behind bars. They said this was already influencing the judiciary. He said, no, I am a policeman. I want all criminals to be locked up. I’m in the same situation.
“Somebody’s doing something wrong somewhere. Can we find out who it is?”
* Barry Childs - independent actuary
The regulatory environment for health envisaged before the Jacob Zuma administration came in is apparently no longer in frame. Is this right?
Leading up to the ANC’s Polokwane conference, the plan for health reform was to pursue universal coverage through an expansion of medical schemes at more affordable levels and a strengthened public health-care system. At the conference, the policy direction changed to go straight to National Health Insurance rather than work through the previous plan for a Social Health Insurance, which would have included mandatory medical scheme membership.
It’s a bigger, and I think more difficult, jump – but speaks to the political and critical service delivery imperative to improve health care for those most in need, first.
The problem is that meanwhile, with the incomplete medical scheme regulatory regime, medical schemes are at significant risk of increasing unaffordability. Thus more people may drop out and depend on the public sector, increasing the burden there.
Will mandatory pre-payment be possible?
Some governments prefer mandatory pre-payment. The NHS in Britain is probably the most widely cited example, where everyone belongs to one big risk pool and private cover is just a top-up. A key question is whether we can get to such a model in good time with our unemployment, GDP growth and income disparity. Seventy percent of households earn less than R7 500. These factors make it much more difficult.
Are private health care and the minister on the same page?
A better functioning private and public health system is necessary for effective universal coverage, whichever structure is followed.
It is important politically, socially and economically to make significant progress in the effectiveness of the overall system.
It will take a huge amount of work to get it right, which is perhaps why there have been delays in finalising policy. It’s no easy task. The key will be to strike the right policy balance between academic soundness, given where we are and where we want to be, and pragmatism, taking into account current and expected future resources.
In the interim, the private sector still needs a more complete set of regulations that support solidarity and sustainability principles and we just don’t have that at the moment.
* Jonathan Broomberg, chief executive Discovery Health
What are your views on the regulatory vacuum on prices?
A modern system of coding and tariffs can only be achieved in an organised forum in which health professionals, medical schemes and regulatory authorities can work in a spirit of transparent co-operation. We strongly support that approach.
So we view the inquiry in a positive light and hope it will lead to better access to care, improved quality of care and a sustainable, competitive and cost-effective system to benefit consumers and the broader system, including public health care.
And the prescribed minimum benefits?
Our medical scheme has honoured legislation by negotiating extensive direct payment arrangements to pay for prescribed minimum benefits in full, while negotiating rates payable to doctors. The majority of other schemes did not do this for many years, which may explain why many of them have tried to avoid paying these claims in full. Now, many are following our lead.
Should doctors be employed by private hospitals?
One of the key issues we hope the inquiry will investigate is the regulation that forces most health professionals to practise on their own. This prevents cost-effective teamwork and forces duplication and significantly higher costs, with lower quality outcomes.
How has the outlawing of collusion by hospitals and medical schemes on price affected the sector?
Regarding hospitals, we do not believe any entity should prescribe prices, as this is likely to lead to price distortions and market inefficiencies. The real drivers of increasing hospital costs are the increasing use of services as members of schemes age, new technology and procedures becoming available and the rates of chronic disease and cancer increasing.
Another major reason is the outdated hospital model. We still have a one-size-fits-all in which every hospital does most procedures. Elsewhere, there is a shift to leaner hospitals and fewer procedures.
Would mandatory membership of medical schemes help?
Research suggests costs of cover can reduce by about 10 percent if membership is mandatory for everyone above the tax threshold.
There would be an increase in surpluses generated from young and healthier membership, which would lead to a decrease in the average cost per member.
* Mark Heywood, Executive Director of Section27, a law centre that uses and develops the law to advance human rights
TheRE have been a number of botched attempts by the Department of Health to introduce reasonable regulation of private health care, the last being when the Hospital Association succeeded in knocking out the National Health Reference Price List as a result of litigation in 2010.
We’ve always believed reasonable regulation is not just necessary, but constitutionally required. So the ministry is within its rights, but we have also always emphasised this needs to be reasonable, not draconian in terms of the interests of the consumer.
What makes regulation difficult is that this area of private health care is highly litigious and contested. There’s a lot of smoke and mirrors, blaming and finger pointing about who is driving the undeniable price spiral.
The best basis for government to implement proper systems of regulation is by establishing evidence through an inquiry. Section27 has been lobbying not just the health minister, but the Competition Commission as well.
There was an issue before in that the Competition Act did not make formal provision for an inquiry like this. Then the Competition Amendment Act was passed, which provides for market inquiries.
Section27 made a lot of arguments to the minister of Economic Development, Parliament and the commission about why this should be brought into effect.
As Section27, we’ll watch this inquiry very closely, we’ll provide it with evidence ourselves and try to represent the interests of consumers of private health care. And although that consumer is primarily middle class and a medical aid member, because of the poor quality of public health care, there is a large out-of-pocket expenditure happening generally, including by very poor people.
Some literally risk their lives seeking it.
The notion that it is only the rich who use the private health sector and require affordable health care is clearly mistaken. There is a wide public interest.
* Melanie da Costa, chairperson of the Hospital Association
What is the process of tariff setting in the hospital business?
Tariffs are negotiated principally among three large medical scheme administrators (Discovery, Medscheme and Momentum) and the Government Employees Medical Scheme on a one-on-one basis with private hospital groups.
What is driving costs?
A large increase in medical scheme members and the increasing burden of disease. Our well-being is deteriorating. More people suffer from chronic diseases, which are then associated with increased use of hospitals and specialists.
Private hospitals are also treating a greater proportion of older patients and their care can be up to 50 percent more intensive. Another factor that explains medical aids’ expenditure on hospital and specialist fees is new technology including drugs, devices, treatments and rehabilitation. Many of these have positive long-term effects, but they come at a cost in the short term.
Should government be involved in setting prices?
Generally speaking, attempts to increase regulation tend to be counterproductive and undermine the proper functioning of the market. Such attempts dampen innovation and are less flexible.
The focus should be on addressing health-care delivery issues in the public sector on which the majority depend.
What about medical inflation, which helps to make private health care unaffordable for most South Africans?
Hospital inflation has in recent years been close to changes in the Consumer Price Index. But there have also been significant increases in electricity tariffs, rates and taxes and so on. It should be noted that hospitals face specific cost pressures that may not be felt in other sectors. For instance, there is a significant shortage in health-care skills. This impacts on wage pressure.
There are issues that the government is seeking to address, such as re-opening nursing colleges, increasing the number of trained doctors and trying to persuade a small pool of specialists not to emigrate, but these issues will take a long time to address.
* What follows is an edited interview with Trudi Makhaya, the deputy competition commissioner.
Competition authorities have a long history with private health care. Why?
“We’ve dealt with various segments of the private healthcare industry especially with the medical administration industry and hospitals. There have been mergers and acquisitions which consolidated private health care, especially in the 1980s and 1990s.
“But as you mature as a competition authority, you think, we’ve done all these things in this market, but shouldn’t we be thinking about it differently? We’ve had many reviews of this sector internally, so it’s something that we’ve always been concerned about independently.
“A big event for us was 2003. Before that, medical aids and hospitals used to get together to negotiate prices and that was obviously a cartel.
“The commission recommended these arrangements stop, but it has been argued those historical arrangements might have played a role in levelling the playing fields so each small medical aid scheme did not have to negotiate on its own.
“We don’t know if we made things worse by breaking up that arrangement, and it’s not possible to reconsider it as cartels are strictly prohibited.
“But what we do know is that there are lots of complaints.
“People seem unhappy with medical aid schemes.
“People complain about out-of-pocket expenses.”
What is it that you’re trying to understand in this inquiry?
“We’ve had a lot of people requesting advice and opinion. For example, medical administrators can often only go to a certain network of doctors. Is this anti-competitive? Instinctively, you might think it’s better for consumers because volumes are being driven to that network, so it can charge less. But we don’t know if the lower costs that come with those volumes are being passed on to the consumer.
“You depend on the medical aid administrators negotiating on behalf of patients to ensure prices patients pay in hospital are appropriate, the premium is not too high. But is that actually happening? Are the services the hospitals offer efficient?
“We need to understand doctors. As a specialist, are there incentives that ensure you channel your patients towards certain kinds of treatments? Who has oversight over that? If I’m a doctor and every patient who walks through the door has to have an X-ray or an MRI before I talk to them, is there a board somewhere that reviews my work and says, well, that’s out of line?
“It has been argued that the employment of doctors might make a difference because private hospitals can’t do that, and if the hospital doesn’t employ the doctor, how much leeway do they have in terms of performance assessment?
“The role GPs play is important. It has been argued that people immediately go to specialists. Why is there this rush to hi-tech solutions in an emerging economy?
“A vexed issue has been that of low-cost medical plans. Why aren’t these emerging? There are exciting things happening in the rest of Africa and India that are not happening here, like specialist hospitals that focus on specific things like cataracts, in a very modern, kind of mass-produced way, whereas here it’s all hi-tech, all very slow. Long stays in hospital.
“Entrepreneurs seem to battle to come in. International players, anecdotally, won’t touch this market. Are barriers to entry too high?”
Will this inquiry be influenced by the minister of health?
“His views don’t affect how we think about this. But I think the minister has been misinterpreted because he’s saying: I have an issue that I would like debated and resolved. Because it’s the minister, it’s seen as meddling. But when the private sector does it, it’s not cast in the same light.
“He’ll have strong views. But it should be made clear that the Department of Health would be just one participant.
“This lack of engagement (from private health care with the government) could mean that whatever the business model is that’s going to emerge, they’re not going to be part of it because they don’t understand what role they can play, which is odd, because profit is profit no matter what you are called when you generate it.
“The hospital groups have a reputation for being litigious, but we found them to be quite open, except for one which seems to be trying to talk to the minister through us. And this is just not about any of that.”
What happens if private health care ultimately takes legal action against the recommendations of the inquiry?
“It’s hard to conceive how they would challenge it, unless there was something wrong with the analysis. I don’t see how they could be full participants with all the information, given the opportunity to rebut anything and bolster their argument, then mount a constitutional challenge. This is going to be a fact-based process.
“The focus should be on how you capitalise on the processes that emerge. Surely this has to be about building a new society, and having a new role in it – a more fulfilling role?”
The Star