Private hospitals drive rising costs

Health Market Inquiry finds above-inflation increases.

Tariffs not up much but significant increase in average cost per admission.

The much delayed Health Market Inquiry to probe the cost drivers of SA’s private healthcare market is now set to publish provisional findings on July 5. The inquiry will likely make a recommendation on the role private hospitals play in driving up healthcare costs, as these were responsible for a big portion of above-inflation increases by medical schemes for members.

An extensive analysis of medical scheme claims revealed the average private scheme spend per member increased 9.2% per annum from 2010 to 2014. This was nearly four percentage points higher than average consumer price inflation over the five-year period of 5.6%.

After taking into account changes in scheme members’ plan type, gender, disease profile and membership movement, there was an unexplained increase in spend per member of more than 2% per annum after adjusting for inflation.

“To put this in context, 2% of spending amounts to about R3 billion in 2014 terms. That is R330 per beneficiary per annum, or a total of R1 650 per beneficiary over the five-year period studied [2010 to 2014],” the analysis read.

The unexplained cost increase appears to be for out-of-hospital care (7.28% cost increase versus 5.6% inflation) while in-hospital care is a bigger driver (10.84% increase versus 5.6% inflation).

Hospital tariffs had not increased much above inflation, but there was a significant increase in the average cost per admission.

Industry defenders have argued that private healthcare costs have increased due to more use by members and not price increases.

Dr Mzukisi Grootboom, South African Medical Association chairperson, said: “The inquiry needs to look at how members [are] affected by medical schemes rules, if their rules are conducive to the competitive nature of the industry and if the use of brokers and administrators are responsible for high medical costs.”

After the release of the provisional report, the industry and the public will have an opportunity to comment before a final report is produced. “[The recommendations will be] in areas that need to be addressed on the state of competition in the private healthcare sector,” said Clint Oellermann, director of the inquiry.