Red tape wasting healthcare billions

Millions of South Africans are paying billions of rands more than they should be to medical aids, doctors and hospitals, thanks to red tape choking the private healthcare sector.

This is the claim of many of the submissions to the Competition Commission inquiry into health costs, which was initiated by the Department of Health.

Submissions by the sector released last week point a finger at government regulation for driving up prices and stifling competition.

Government hospitals, with their deteriorating infrastructure and services leading to guaranteed work for the private sector, have also been cited in the submissions.

It is hoped that recommendations by the inquiry, due to be completed in November, will lead to lower health prices.

Big and small hospital groups, doctors' associations, medical aid administrators, healthcare practitioners and the government have made 68 submissions to the commission.

Reasons they give for high medical costs, include:

• Laws that require medical aids to keep 25% of contributions in reserve. Actuaries argue this percentage was arrived at unscientifically. Discovery Health says billons that could be paid to members are tied up.
• The time (five years) it takes to register a generic medicine through the Medicines Control Council. This creates a huge backlog of cheaper medicines not available to consumers. Some 50% of all drugs prescribed by South African doctors are generic, much lower than the 70% in the UK and US.
• The automatic granting of patents for pharmaceuticals. This gives drug companies extended monopolies on medicines. South Africa grants more patents than any other Brics country.
• The importing of medicines and medical equipment, expensive because of the weak rand.
• A severe shortage of specialists. The law prevents private institutions training doctors, and existing specialists can charge very high prices because they are in demand.
• Red tape that makes it difficult for foreign doctors to work in South Africa.
• A shortage of nurses, which is also exacerbated by a restriction on the number of nurses that private hospitals can train.
• A law that requires 270 diseases and 26 chronic conditions called Prescribed Minimum Benefits to be covered "in full". The law is designed to ensure all medical aid members get basic benefits, but data shows doctors overcharge for these procedures knowing they will be paid "in full".
• The Medical Schemes Act ensuring that most medical aid benefits are for hospital treatment, leaving less funding for preventative treatments or procedures done outside of hospital.
• Some doctors' abuse of medical aid coding and double-charging for procedures.
• The increased use of hospitals and their services. Discovery Health says claims for such treatment have increased 4.6% above inflation each year since 2008 - mostly due to increased demand and longer hospital stays.

In its submissions, Netcare says that an "inflexible and regulatory regime constrains innovations and limits competition".

"These factors individually and cumulatively retard private hospitals' ability to significantly lower prices."

According to both Discovery and the government, there has been an increase in diagnosis of bipolar depression.

Medication and treatment costs for ordinary depression do not have to be paid in full by medical aids as it is not a prescribed minimum benefit, but bipolar depression costs do have to be fully reimbursed. The change in diagnosis suggests the system is being manipulated so patients' total medical expenses are covered.

In its submission, the Department of Health says a national health insurance will require all consumers to contribute to a single medical aid fund. This will add to the expenses of middle-class consumers who already pay taxes towards state healthcare and contribute to private medical aids.

Announcing the publication of the submissions last week, the chairman of the inquiry, former chief justice Sandile Ngcobo, said nearly every submission had raised incomplete regulation for medical aids that undermined their sustainability and increased costs and premiums.

His panel has not formed any views on these or other issues.