The government’s proposal to allow the private healthcare industry to collectively negotiate tariffs has been panned by two of the key figures involved in the Health Market Inquiry (HMI), who say the plan is unfeasible and at odds with its recommendations.
The HMI was established by the Competition Commission to probe barriers to competition in the private healthcare sector, and published its final report in 2019.
Trade, industry and competition minister Parks Tau published draft regulations on Friday to the Competition Act, granting private healthcare providers and medical schemes a block exemption to the act’s prohibition on collective bargaining.
The regulations propose setting up a multilateral negotiating forum overseen by a new tariff governing body located in the national health department. It is the first step the government has taken towards implementing the HMI’s recommendations, but critics say it does not go far enough.
Former HMI panellist Sharon Fonn, who is a professor of public health at Wits University, said the inquiry had emphasised its recommendations were interrelated, and implementing aspects piecemeal would not foster competition or protect the consumer.
“Controlling prices achieves little in the absence of the recommended holistic framework, which addresses the incentives of schemes to contract on cost, quality and demand,” she said. In addition to a tariff negotiating structure, the HMI recommended establishing a supply side regulator to oversee healthcare providers and an organisation to monitor the outcomes and quality of the services received by patients.
“Perhaps one of the most problematic elements is that to protect patients there needs to be some system to prevent opting out. It it is likely that providers will opt out of this system and pass on additional costs to patients,” said Fonn.
Wits governance professor Alex van den Heever, who worked closely with the HMI, said the regulations lacked the comprehensive approach recommended by the HMI.
“Controlling prices in the private health system is insufficient if you do not also address demand-related incentives,” he said. “The HMI did extensive work to show that supplier-induced demand was a problem — clearly indicating that price controls will achieve nothing in the absence of broader interventions,” he said.
The proposed structure deviated from the HMI’s recommendation that any price regulator be independent and shielded from political interference, he said, noting the official in charge would be appointed by the health department.
Board of Healthcare Funders (BHF) head of research Charlton Murove questioned the exclusion of private hospitals, saying they were a major contributor to medical scheme expenditure. “We know small schemes pay multiples more than big schemes,” he said.
The BHF is an industry association for medical schemes and administrators that previously failed in its bid for an exemption to the Competition Act’s prohibition on collective bargaining. Two other organisations also sought exemptions without success — the Independent Pharmacy Association and the SA Orthopaedic Association.
SA’s biggest medical scheme administrator, Discovery Health, which is not a BHF member, said it supported the move towards multilateral tariff setting. “We believe this is a fair and balanced approach to ensure the provider market remains competitive while improving sustainability in the funder market,” Discovery Health CEO Ron Whelan said.
The health department said private hospitals had been excluded from the exemption in line with the HMI’s recommendations. “It was the view of the stakeholders who consulted that the hospital groups already have good negotiating power based on their size. It would merely have increased the complexity and administration of the exemption and would be unlikely to further contain prices,” spokesperson Foster Mohale said.
The government had not established a supply-side regulator for health because it did not have the resources to create a new schedule 3A public entity. It was deemed feasible to administer the multilateral negotiating forum within the existing capacity of the Council for Medical Schemes and the national health department, he said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.