The government has opened the door for an era of collective determination of tariffs in the healthcare sector — a seismic policy shift that could rein in runaway medical costs.
The measure, which is to be managed by the department of health, could give healthcare funders such as medical aids more bargaining power in relation to providers such as hospitals and drug companies, as the government’s plans to implement the contentious National Health Insurance Act loom.
Trade, industry & competition minister Parks Tau has gazetted an interim block exemption for both prescribed minimum benefits (PMBs) and nonprescribed minimum benefits (non-PMBs).
The exemption, for at least three years, will allow healthcare funders to bypass sections of the Competition Act that prevent competing companies taking co-ordinated action to fix selling prices or trading conditions or divide markets.
But it will fall under a new tariffs governing body (TGB) chaired by a senior health department official, with up to eight additional members appointed by the director-general of health, the gazette said.
Tariffs will be set by a multilateral negotiating forum (MNLF) also appointed by the department, and the tariffs governing body will establish rules for tariff determination in cases where members of the forum are unable to reach agreement.
Reservations
The Board of Healthcare Funders (BHF), which represents many of SA’s largest medical schemes, expressed reservations about the new dispensation. It said the quickest solution to making private healthcare more affordable would be if the Competition Commission granted exemptions to allow medical schemes to collectively negotiate tariffs with willing healthcare providers.
“We have serious reservations over the department of trade industry & competition putting the power in the department of health’s hands to manage the block exemption negotiation process.
“This is because to date they have actively kept private healthcare expensive and inaccessible to justify the implementation of NHI,” the BHF said.
The department explicitly linked the block exemption to the NHI, describing it as an interim measure that would provide a system-wide regulatory framework to facilitate multilateral tariff determination.
“The promulgation of the NHI Act signals a significant long-term restructuring of the healthcare sector, with the aim of universal health coverage. The NHI Act will introduce new regulatory and funding models, but until the NHI framework is fully operational, there remains an immediate need to address the current gaps in tariff determination,” the department said.
The exemption gives the green light for collective determination of healthcare services tariffs; and the collective determination of standardised diagnosis, procedure, medical device and treatment codes.
The department said exemption would apply to specific categories of agreements or practices related to tariffs and quality standards.
The exemption excludes day clinics, mental health institutions, drug and alcohol rehab facilities and private hospitals.
Members of the MLNF will be appointed by the accounting officer of the department of health and will include representatives from the government, associations representing healthcare practitioners, healthcare funders, civil society, patient and consumer rights organisations, and any other regulatory body within the healthcare sector.
Consensus
The MLNF will be responsible for determining the maximum tariffs for PMBs and non-PMBs for healthcare services — with its decisions expected to be taken by consensus.
In the event that MLNF members are unable to make a determination on tariffs or deviate from the determined tariffs, the tariffs governing body shall have the authority to make a final determination of the tariffs.
The gazette said a multi-stakeholder tariff determination framework was consistent with the recommendations of the health market inquiry.
“A multi-stakeholder tariff determination framework is intended to establish a more equitable and transparent framework for tariff determination, contributing to the long-term goal of reducing costs, promoting universal access to health and enhancing the quality of healthcare,” it said.
“Funders and healthcare professionals may engage in bilateral negotiations only for the purpose of concluding an agreement on reductions, but not increases, on the tariffs for PMBs and non-PMBs as determined by the MLNF process.”
The health market inquiry report, published in 2019, was meant to bring down private healthcare costs.
One of the findings that flowed from the inquiry, chaired by former chief justice Sandile Ngcobo, was that the private healthcare market in SA was characterised by high and rising costs of healthcare and medical scheme cover, and significant over-utilisation without stakeholders being able to demonstrate associated improvements in health outcomes.
The inquiry report recommended the establishment of a third-party supply-side regulator for health who would be tasked with ensuring pricing is determined transparently and legally by setting up a negotiating forum between the various private sector role players.
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