What's Driving the High Cost of Private Healthcare in South Africa?

10 Oct 2013

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Private healthcare costs are spiraling out of control in South Africa. So much so that our Competition Commission has launched an inquiry into the high cost of private healthcare in South Africa. SACSIS' Fazila Farouk caught up with executive director of SECTION27, Mark Heywood, to find out if this market inquiry will go far enough in its investigation to get to the bottom of the problem.

We discovered that the inquiry might not even get off the ground if the private healthcare sector gets its way. According to Heywood, given the delay in getting the inquiry's terms of reference finalised, there is reason to suspect that there's a war going on behind the scenes -- particularly, led by some of the private healthcare companies that are trying to kill this inquiry even before it starts.

Transcript of Interview

FAZILA FAROUK: Welcome to the South African Civil Society Information Service, I’m Fazila Farouk in Johannesburg.

Does a visit to the doctor or the dentist make your wallet feel significantly lighter? Do you think that your monthly medical aid fees are too high?

Well, you wouldn’t be alone. Private healthcare is extremely expensive in South Africa so much so that our Competition Commission is launching a market enquiry into the cost of private healthcare.

According to Section 27 of the South African Constitution everyone has, the right to have access to healthcare services but many South Africans, both amongst the poor and middle class, don’t access healthcare for two reasons. And those two reasons are: firstly, because our public healthcare system is dysfunctional and secondly because private healthcare has simply become too expensive.

Now our discussion today is going to focus more on the private healthcare system. The question I’m interested in interrogating is: Is the private sector above the law in South Africa? Do they not have an obligation to fulfill our constitutional requirements by making healthcare accessible to South Africans?

Our guest today is Mark Heywood. He is the executive director of SECTION27, a public interest NGO that promotes human rights through the law. And they focus specifically on the socio-economic human rights that are enshrined in Section 27 of our constitution hence the name of the organization.

Welcome to SACSIS Mark.

MARK HEYWOOD: Good morning Fazila and thank you.

FAZILA FAROUK: Mark, now I know that your organization has made a submission to the Competition Commission on their market enquiry terms of reference and we’ll get to your submission in a while. But first, I want to start the interview off with a very simple question to you. Do you think that private healthcare in South Africa is too expensive and why?

MARK HEYWOOD: Well, I do think it’s too expensive and I’m not alone in thinking it’s too expensive. I think that anybody who has the privilege in inverted commas of access to the private healthcare system feels that to some extent the services they receive are disproportionate, excessive.

I mean the cost of the services are disproportionate and excessive and that despite the protection that things like medical aid schemes are meant to give you, you end up significantly poorer whenever you access private healthcare. You know for some people the cost of private healthcare can be catastrophic, particularly, if you’re not insured. You know if you end up having to spend a week or two weeks in the private hospital it can cost literally hundreds of thousand of rands.

And what happens to many people these days is that the medical aid will pay a certain portion of that, but once that amount has been used up then the rest falls upon your shoulders. So, one of the strange things that we’re seeing in South Africa today is that medical aid is meant be a form of insurance that gives you access to private healthcare, but today, people are taking insurance upon the insurance.

So they have a medical aid but they’re also increasingly purchase, something that is, strangely called, gap cover. So, you’re insuring yourself against the gap. And in the last few years, research shows that there have been something like 250,000 gap cover schemes that have emerged.

Now, if anything that tells you that there is a problem in the pricing of private healthcare.

FAZILA FAROUK: Can you tell us a little bit about the scope of the Competition Commission’s inquiry. Do you think it goes far enough?

MARK HEYWOOD: Well, can I just take a little bit of a step back Fazila before I come to the scope of the enquiry because it relates to your question about does it cost to much and your question about price?

You know the South African government over the last 15 years has taken some steps to attempt to regulate price of medicine, price of healthcare services, etc.

If you remember, you know, a decade ago there was a big battle over something called the Medicines and Related Substances Control Amendment Act and the purpose of that Act was to allow entry of generic or cheaper medicines into the market, was to allow government to purchase medicines from other countries if they were sold cheaper than in other countries. And to set in place certain institutions and mechanisms to control the price of medicines because, of course, medicines is a very key component of healthcare.

Now it’s debatable how successful that has been. It’s another discussion in some ways. But, what we have seen is that whilst there’s been an attempt to regulate the price of medicines there has been no attempt or only failed attempts to regulate the price of private healthcare services more generally.

So, to give you an example, you know, a decade ago there used to be something called the National Health Price Reference list, which was a reference list that medical aids could consult to check whether you, Fazila, in charging me, you know, R5,000 for a toe operation are charging something out of proportion to what is considered an acceptable price for a toe operation -- which may turn out be, in fact, R300.

But that National Health Price Reference list and various other means, which the government half-heartedly attempted to introduce to control prices has been knocked out by litigation by the private healthcare sector.

So today we sit in an environment in South Africa where the cost of a hospital that you may have to go to, the cost of a specialist that you may have to go to, the cost even of a GP that you may have to - not may have to, you do have to go to - is completely unregulated and that is what we think has lead to…or is one of the contributory factors to this explosion in the cost of private healthcare.

And the challenge is how do we control that explosion of cost? How do we try to bring down prices to make private healthcare more affordable to people who are on medical aid schemes or people who for one reason or another choose to go into the private healthcare system.

Now of course private/public is another issue, which you may want to raise and it’s in that context that the Competition Commission, I think, at the beginning of this year or the end of last year, came up with a proposal to institute what it calls a health - private healthcare - inquiry that aims to really try and look at what is it that is driving cost, what is it that is driving prices?

Now what the Competition Commission intends with this is its business. As far as we’re concerned as human rights activists who work on health, we would like to see it achieve two things.

One thing is that we would like to see much greater transparency about what healthcare services actually cost. And about, you know, what is the difference between the cost of -- let’s take another example now, I don’t know, some heart surgery that I may require at a certain point -- the actual cost and a reasonable add-on and the cost that takes account of the investments in technology and the price that is charged.

So, let’s get to the bottom of those issues. What does it cost to run a private hospital? You know, is it reasonable if a private hospital costs R100,000 a month to run a ward, to fill that ward in way that gives you a return of a million rand or two million rand a month.

You know, so if we have access to that information it empowers us.

The second thing is that if government has access to that information then it allows government to try to put in system -- into place a system that allows reasonable regulation of prices to the benefit of all of us.

And in the context of National Health Insurance which as we all know is the government’s grand plan for universal access to healthcare services. And for overcoming some of the financing problems, this issue of the private healthcare sector and what it costs, has to be addressed.

So that’s a mouthful to say we welcome this inquiry by the Competition Commission. Our concern is that the Competition Commission, first of all, should have the political will to go through with inquiry because we know there is going to be opposition from very profitable private healthcare companies.

FAZILA FAROUK: So they haven’t quite started with the inquiry. I understand that the actual inquiry is going to take two years to complete.

MARK HEYWOOD: Ja, ja…they haven’t started at all. I mean they…several months ago, they published draft terms of reference. They sought public comment on the draft terms of reference. As SECTION27, we made comment on the draft terms of reference. They were supposed to publish the final terms of reference, I think in September of this year. Well we’re now almost in November. We don’t have final terms of reference published.

And what we fear - and we have some grounds for suspicion - is that there is a war going on behind the scenes now, particularly, led by some of the private healthcare companies to try to kill this thing before it even starts, which we think would be obviously a great, great pity.

FAZILA FAROUK: Mark, I want to talk about something that’s happening internationally and, you know, we could potentially be looking at the cost structure of private healthcare in South Africa. But looking internationally in the UK, under the auspices of their National Health Service, they’re also having an inquiry. And they’re looking at whether the care provided by ordinary doctors is adequate. And surgeries that are deemed not to be providing adequate care will be forced to shape up or close. And some of the areas that are being reviewed are, for example, are surgeries open for long enough -- long enough hours in a day? Are doctors available after hours? They’re also looking at mistakes that doctors are making in terms of the medications that they’re prescribing.

Are we likely to see a similar review taking place in South Africa at any point either through this market inquiry or other initiatives?

MARK HEYWOOD: We certainly should.

Look, I mean the example you’ve given is of the UK. The UK doesn’t have a constitution, a written constitution; it doesn’t have a bill of rights. You know we have a constitution, which is the supreme law of South Africa. We have a bill of rights that includes Section 27. Section 27 says “everyone has a right of access to healthcare services.” Let’s say that again “everyone has a right of access to healthcare services.”

And then it goes on to say that the state must take reasonable, legislative and other measures within its available resources to ensure the progressive realization of that right. What that means in simple English is that the state is the guardian of my right and your right to healthcare services and the state has the power to intervene to protect to us and to advance our right of access.

Now in the case of the market inquiry, what a part of the state, which is what the Competition Commission is doing, is saying, we are going to…its not even about regulation at this point. We are going to just inquire, we are going to understand what it is that is influencing this market, what it is that is driving the perception that the costs are just going up and up and up and up and up.

So that has got a fairly narrow focus. But of course the issues that you have raised are also very important issues. I mean we know in South Africa that one of the issues in the private – well, let me not brand everybody – but one of the problems with private healthcare is, for example, over-servicing. So you make money by sending people to a chain of specialists they don’t really need to see. And that may happen because there is collusion between you and the specialist who is three doors down in the private hospital and the clinic as a whole.

That’s the way of bringing money in. That’s one of the suspicions. We think there’s over-servicing…well we know.

I personally have experienced it in a private hospital where, you know, you need one blood test, but you can picture those sheets that have a hundred little test on them and instead of just ticking the one blood test, the doctor or the pathology lab may say, have 10 or 20.

Now you and me are ignorant. I’m not a doctor. I’m not a specialist; and health is something we feel very protective about and very vulnerable about. So it’s not often that you would say to the pathology laboratory, “Er, excuse me, do I really need that and that and that and that and that?”

And it’s this power imbalance that is a big part of the problem. So I guess again, what I am saying is we need systems that provide oversight -- oversight about quality, oversight about cost, oversight about the relevance of the service that you go through, and so on.

So, all very, very necessary. Now one of the good things that is happening, I think, is that the government, in fact, in the last month or two has signed into law an amendment to the National Health Act to establish a body called the Office of Health Standards Compliance. And the Office of Health Standards Compliance is an independent body – independent of the Department of Health; independent of any private hospital, whose legal duty is to ensure that all health facilities comply with certain standards, whether they are private or public.

So we have to see, you know, I think it’s within the ambit of an institution like that to carry out the type of inquiries that you have just suggested. But that’s the future. And you know, the future depends upon people like you and me and activists making sure that we protect the right; that we monitor the right because good health is fundamental to good life.

FAZILA FAROUK: And it’s becoming increasingly important that we get both the private and the public sector working with the impending National Health Insurance.

MARK HEYWOOD: Correct and I do want to say this in case there’s any misunderstanding – you know, SECTION27 and others like us are not arguing for the disbandment of the private healthcare sector. We see that it has a role within South Africa. But what we are arguing is that the private healthcare sector should serve national objectives around health. It shouldn’t undermine national objectives around health.

And, you know, if, for example, you have this uncontrolled spiralling of costs then it undermines national objectives because what it does is it has a consequence of, one, denying healthcare to people. Secondly, throwing people back onto an already overburdened public healthcare system.

Very often what it also does is pull resources and doctors and specialists out of the public healthcare system and into the private healthcare system. And that’s not…it’s not good for the private sector ultimately. It’s not good, certainly not good, for the public sector in the immediate term.

So what we are saying is reasonable regulation. You can make profit from health. You can make profit from health. You make profits from medicines. That’s fine.

But is it fine to get a 25% return on capital employed if you’re a private hospital? Is that level of profit earned or is it a level of profit that is exploited, that’s engineered, that’s manipulated.

Those are legitimate questions. And that’s not just questions from mad Mark Heywood or mad Aaron Motsoaledi. The principles that we are talking about here are principles that are universally accepted. They’re accepted by the World Health Organisation. They’re practiced in other countries like England and in other countries. So, there is nothing that we are trying to do that is out of step with understandings about health that exist across the globe.

FAZILA FAROUK: Mark Heywood, thank you for joining us at SACSIS.

MARK HEYWOOD: Thank you very much.

FAZILA FAROUK: And thank you to our viewers and listeners for joining us at SACSIS. And remember, if you want more social justice news and analysis, you can get that at sacsis.org.za

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11 Oct

Private Healthcare

We have known for many a year now that private health care is a con and that we lesser mortals are being ripped off. I really cannot see anything being done about this for those of us who have to fund our own health care. My wife and I, being pensioners, it is nearly half of our pension income and that being just on the lower plans. We cannot afford medicines and we find that even if there is help from the medical aid on this that one always has to pay a co-payment and this appears to go up every month so in the end I personally believe that one is actually paying for the full cost of the medicine(s).

Using the Public health service for medicines as we cannot afford to pay for the medical aid medicines now, we often find that many of the medicines we need are not available. Look, we are just a couple struggling to live on a small pension and I have to believe that no one really cares about us, and indeed many others in the same like ourselves, in the same situation, and we die, quite unnecessarily, and nobody cares. Poof we are gone due to greedy medical aids and a dysfunctional public health system.

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Everywoman Verified user
12 Oct

A Population at Risk

Thanks for a very informative interview on this issue. I'm pleased to hear the Competition Commission is investigating the cost of private healthcare and medical aid cover, as I feel this is long overdue. Issues such as collusion, over-servicing, excessive profit-taking and gaps in medical cover definitely need to be investigated.

Part of the problem, I would suggest, is the insurance model of providing healthcare cover which, as Mark points out, leaves medical aid members with significant gaps in their medical cover.

Even with *gap* cover, I found myself having to cover several large bills myself after recent back surgery. So even if one is paying for medical aid, a broker *and* gap cover, one can't rest assured that all medical costs in a case like this will be covered.

This is partly why I'm in favour of a national healthcare system that provides universal access to healthcare, and which is funded equitably from contributions made by all working people. In practice, though, it's clear that the present government simply won't be able to manage a national health system effectively, which leaves the entire population at risk in some way or another ...

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31 Jan

Escalating Medical Costs

I write as a pensioner, and I contend that all participants providing health care in this country are responsible for the exorbitant cost of health care.

The government for its part imposes tariffs on all pharmaceuticals used by the private health care providers. This constitutes 30% of ones total hospital bill.

Medical aids on the other hand, increases on an annual basis our subs by more than the inflation rate, whist simultaneously eroding benefits as well.

It is still not clear to patients whether PMBs are to be paid per invoice or at Scheme rates.

It appears to me the CMS in spite of it being a statutory body is, to say the least ineffective and toothless.