Costs drive regulation threat

By Staff Writer

The health department is determined to intervene in the health-care industry crisis by way of regulation, says Dr James Arens, clinical operations executive of Pro Sano Medical Scheme.

“It is not yet clear which sectors are targets for regulation. However, the health minister, Dr Manto Tshabalala-Msimang, has singled out private hospitals and specialists as the main drivers of cost in SA’s private health-care industry.”

He says in her recent briefing to the portfolio committee on health she mentioned SA’s spiralling health-care costs as a major concern, apparently fuelled by:

nNon-transparent billing practices by private hospitals; and

nA disturbing pattern of collusion among some pharmaceutical companies.

“All of these, in my opinion, bring to bear the unjustifiably high costs ultimately imposed on the consumer of health care,” said Tshabalala-Msimang.

Arens says SA’s private health care is less than ideal for market forces to operate efficiently because:

nHealth-care services are not always demanded by the consumer but often by an intermediary in the form of the health care provider, who often bears no risk in the funding arrangement;

nThere is an imbalance of information between most providers of health care and patients whereby providers get away without having to justify their choices of investigation or treatment options, or even discuss or agree on service fees with the patient.

nThe medical schemes sector is excessively regulated in relation to its health-care industry counterparts, such as private hospitals and providers; and

nThe position of private hospitals is strengthened by the almost monopolistic dominance they wield in the industry.

“Medical schemes are rendered awkwardly helpless and vulnerable in the health-care industry, often left with no strategic options but to increase contributions to survive the next year.”

He says demand for health care is inherently insensitive to price — which is an international phenomenon — meaning that price hikes are a poor deterrent for demand as physicians are significant drivers of health-care demand.

“Excessive demand, especially when driven by health-care providers, fuels medical inflation and hence the CPIX, which is not good for the general economy and the medical-schemes sector in particular.

“With the unfavourable conditions that schemes operate in, no market forces will ever balance the price of health care to a fair and acceptable point.

“The industry has entered a vicious cycle of upwardly spiralling health-care costs. It is a pity we had to be threatened by the prospect of further regulation before we can come to our senses as participants in the industry.”

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