How sustainable is South African private health care?

Over the past 10 years, private hospital costs have increased by 121%. Specialist costs over the same period increased by 120%. A major increase has also been seen in non-healthcare expenditure by medical schemes. Broker fees, for example, are exorbitant. And despite medicine pricing regulations that have seen a decrease of 24% in the spend on pharmaceutical products in real per beneficiary terms, contribution rates per medical scheme beneficiary have nonetheless doubled over a seven-year period.

Other major concerns are that approximately 60% of health expenditure goes on 18% of the population, while the privately insured population is almost stagnant at seven million. One also has to factor in the impact of an aging population and HIV/AIDS on the total cost of health care. Taking all this into account, it's clear that the objective of health care for all South African citizens is not being achieved and that both the public sector and the private sector have failed in this regard.

In a review of health care in emerging countries, the recent Deloitte research study recommends that a fundamental restructuring is necessary to improve system performance. Rather than seeking state-of-the-art care for everybody or only the most basic care for the poor, there has recently been a shift to delivery of higher-quality care to all, based on the criteria of effectiveness, cost and social affordability. This requires more meaningful co-operation and the implementation of public-private partnerships (PPPs).

The report goes further to identify three major criteria for evaluating system performance: equitable access to quality care, individual affordability and financial sustainability. In short, it recommends combining social insurance with relevant aspects of managed care, a strategy that could improve the prospects of creating a financially sustainable national health care programme. Good health promotes economic growth and social stability, while reducing poverty and income inequity.

PPPs require constructive engagement between the public and private sectors, whereby the resources, expertise and personnel within the private sector can be harnessed to create a solution that achieves the objective of health for all. However, achieving this requires that both sectors be regulated optimally and relevantly. Government has a constitutional obligation and mandate to exercise appropriate legislative measures to ensure progressive realisation of the right to access to health care. The literature generally is emphatic that sustainability of the health sector is dependent on effective partnerships that share and optimise resources. This is the solution if we are to have a sustainable health system five years hence, let alone a sustainable private health care programme.

The private sector is developed, this is a fact! That it is confined to only 18% of the population is also a fact. However, it has spent huge resources to develop a good business model. The South African government should therefore engage with the private sector to help manage the health of all. Robust legislation and a strong framework from within which to work are required to achieve a successful outcome. The government needs to consider outsourcing management of the uninsured and poor to the private sector in South Africa, like the USA has done with Medicare and Medicaid. This will increase the risk pooling and will also allow for risk transfer to the providers. It will also allow for cost containment, enabling the move to an alternative reimbursement model like capitation, whereby providers are reimbursed at an agreed-upon fixed rate, rather than item by item. At present by endorsing the National Health Reference Price List, which is an official set of recommended tariffs for services, we are effectively entrenching a fee-for-service system. For the private sector to be sustainable, it has to look at implementing an alternative payment system.

The proposed national health insurance (NHI) is intended to create universal access to comprehensive packaged services of good quality, available to all, regardless of whether they contribute to the financing. This may be a possible solution in the medium term and long term. NHI development will need a collaborative working together of the public and private sectors. Private practitioners and private health care generally are resource-rich and can help ensure the seamless implementation of a NHI programme.

There is a need for honesty, strong co-operation and a commitment by all role-players in both sectors to a health care solution that will benefit all South Africans. There must be a separation of the roles of purchaser, provider and regulators of health care. Government's intention to be purchaser, provider and regulator of health, as indicated in proposed legislation, needs to be reviewed. The solution to ensuring sustainability of health care depends on urgent engagement and strong collaboration. It has worked in other parts of the world. It can work here.

It is common knowledge that the private providers have declared repeatedly their intention to work with government. Yes, we need regulation but we have major issues if we continue to allow ideological issues to obstruct our progress.