advertisement
Updated 05 July 2018

Medical aid members getting a raw deal, Competition Commission finds after lengthy probe

The Competition Commission has found that medical aid members have been getting a raw deal.

0

Cape Town - The Competition Commission has found that medical aid members have been getting a raw deal and now schemes and healthcare providers have two months to respond to recommendations  that there be changes to the way the private healthcare sector operates and that medical aids clarify their offerings.

The Competition Commission, in its findings on a four-year investigation into South Africa’s private healthcare sector titled the Healthcare Market Inquiry released on Thursday, found that new interventions are needed because the current system is not competitive, medical aids are making huge profits and consumers are not getting fair value for their money.

The Commission initiated the inquiry into the rocketing costs of private healthcare by looking into the work of doctors and specialists, the role of new technologies and developments in the sector, hospital network operations and how medical aids present themselves to members in terms of their offerings and options.

The key problems with the current system were not primarily identified as the spiraling costs of medical aid cover, but rather overcapacity and over-investment in technology, higher treatment volumes and more complex, intensive and expensive treatment methods than patients need.

The inquiry found that practitioners, as the usual point of entry into the health care market due to their superior knowledge, act as agents for consumers.

In doing so they drive healthcare expenditure through their own activities, such as diagnoses and treatment, and through the services and treatments they recommend. These would include referrals for further investigation, treatment and hospitalisation.

This is happening in a market “replete with perverse incentives”.

General practitioners were found to form independent practice associations to promote preferred networks – with the information not made public, no peer review systems and no evidence of consequences for doctors who fail to meet satisfactory quality levels.

Specialists were found to also form associations to collectively resist joining preferred provider networks, while pushing up their prices without adding value.

The current pricing environment was found to be unregulated with an alignment of interests between facilities and practitioners so that both benefit from higher volumes, while the uninformed patient remains unaware of the long term financial impact this has on medical aid cover.

The Competition Commission found that, with approximately 270 plans on offer, consumers are not able to compare offerings, nor can they choose scheme and plan options on the basis of value-for-money. This confusing bundling, packaging and pricing was deliberate in order to allow medical schemes to weaken, even avoid, outright price competition.

“The absence of competitive pressure is primarily due to disempowered and uninformed consumers. There is no method for consumers to assess the value of the services that schemes procure on their behalf.

Without understanding this, consumers cannot hold trustees and Principal Officers to account. Consequently, trustees and Principal Officers experience no pressure to hold administrators and managed care organisations to account,” the report found.

There are currently 22 open medical schemes, with only two schemes constituting approximately 70% of the total open scheme market. Discovery Health Medical Scheme (DHMS) comprises 55% of the open scheme market and continues to grow organically and through a series of amalgamations with smaller restricted schemes. The Government Employees Medical Scheme (GEMS) is the largest restricted scheme and second only to DHMS on the number of beneficiaries.

The administrator market is also highly concentrated with 16 administrators in total, and Discovery Health and Medscheme accounting for 76% of the contribution income.

“We have observed no meaningful entry in the funders market over at least a decade. Competition could be much more improved if transparency, accountability, supplier-induced oversupply of care and value-driven healthcare were priorities of scheme trustees and administrators,” the Inquiry found. 

“We have not noted any existing players seriously challenging the dominant players… Some of the broker arrangements within these groups have the effect of blurring the lines between medical scheme and other insurance products and services.”

The Commission said Discovery Health has consistently earned profits well above its main competitors, with no sign of challenge. This could be attributed to good management, but did not fully explain the massive profitability gap as Discovery did not source services from any other industry stakeholder, risk selection and broker management to 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 signals that the market will self-correct,” the Inquiry found.

The top three administrators (Discovery Health, Medscheme and MMI) all failed to negotiate consistently better tariffs.

“One of the most important consequences of the dominance of the three large hospital groups (Netcare, Mediclinic and Life) is that no funder can afford not to contract with any one of the three big facility groups, or to totally exclude one of these groups from any provider networks.”

This means hospital profitability has been consistent and sustained and consumers left exposed as they are unable to choose between scheme options or service providers. 

Stakeholders have been given until September 7 to comment or propose recommendations on the report.

– Health-e News


 
NEXT ON HEALTH24X

More:

News
advertisement

Live healthier

Contraceptives and you »

Scientists create new contraceptive from seaweed Poor long-term birth control training leads to 'accidents'

7 birth control myths you should stop believing

Will the Pill make you gain weight? Can you fall pregnant while breastfeeding? We bust seven common myths about birth control.

Your digestive health »

Causes of digestive disorders 9 habits that could hurt your digestive system

Your tummy rumblings might help diagnose bowel disorder

With the assistance of an 'acoustic belt', doctors can now determine the cause of your tummy troubles.