NEWS
07/07/2018 09:43 SAST | Updated 07/07/2018 09:43 SAST

5 Things You Need To Know About The Healthcare Market Inquiry

In short, consumers are being duped by the private healthcare sector.

Siphiwe Sibeko / Reuters

A new report has, for the first time, laid bare how consumers are being misled, treated unnecessarily and prevented from getting value for their money by the private healthcare sector. Consumers were described as confused and disempowered in the 800-page report.

The Healthcare Market Inquiry released its preliminary report on Thursday, following a four-year investigation into the private healthcare sector. The inquiry was conducted by a senior panel put together by the Competition Commission and headed by former chief justice Sandile Ngcobo, according to Times Select.

The inquiry was commissioned to investigate why prices in the sector keep rising, and whether anti-competitive practices were a factor in this, the site reported.

The report was apparently ready for release in November last year, Times Select revealed, but complaints by hospital groups and Discovery Health delayed its release. The panel complained of delays by stakeholders over the years, including a court case by Netcare in 2013.

In a nutshell, consumers are getting a really raw deal.

According to Times Select, the report states:

"The market displays consistently rising medical scheme premiums accompanied by increasing out-of-pocket payments for the insured ... and a progressively decreasing range of services covered by medical scheme options."

  • Practitioners are not regulated enough. According to Business Tech, the panel found that doctors are not peer-reviewed, and that this was a problem. Doctors are incentivised to "over-service". This reportedly means recommend more hospital stays, longer hospital stays and more expensive kinds of care than the disease burden of the population requires.
  • Consumers cannot compare medical schemes. Schemes are essentially lying about the affordability of certain products, but the range of benefits reduce over time.
  • While there are 22 open medical schemes (this means it is available to anyone), two dominate the market. Discovery Health has a 55 percent share of the market, with Medscheme following at a close second.

"Sustained" levels of profitability among medical schemes caught the commission's attention. According to the Sunday Times, medical aid schemes across the market remained profitable. Again, Discovery Health was mentioned. "Discovery Health has, over a sustained period of time, earned profits that are a multiple of those of its main competitors‚ with no sign of effective challenge from incumbent or new firms.

"Good management played a role in this.

"However‚ higher than necessary service fees given economies of scale; a 'locked-in' Discovery Health Medical Scheme that does not source services from any other industry stakeholder; risk selection; and broker management contribute to its profitability.

"We see Discovery Health growing and becoming more successful over time. This is an indication of market failure, and there are no signs that the market will self-correct," the report said.

  • There was also an overconcentration of players in the private hospital sector, with just three groups — Netcare, Mediclinic and Life Healthcare — having a combined market share of 83 percent, to the detriment of patients. If the market were less concentrated, by even three more competitors, this would create "a completely different bargaining dynamic to the benefit of beneficiaries".
  • Hospital admission has increased dramatically since 2010, although this is also linked to the increasing number of hospitals, according to Times Select. And South Africa's rate of admission per person is double that of the U.S., and seven times that of European countries.