Government must intervene in health care costs

He was speaking on the final day of the Board of Healthcare Funders (BHF) conference, held at the Champagne Sports Resort in the Drakensberg.

Pillay believes that only government intervention will bring the prices down. He also called for government to step in on the level of quality assessment of hospital services.

Pillay based his opinion on a survey of prices paid for the same treatment in countries in the Organisation for Economic Cooperation and Development (OECD). These were compared to prices based on the purchasing power parity (PPP). The PPP is an adjustment of prices to the exchange rate so that an identical product or service in two different countries has the same price when expressed in the same currency.

No competitive market

"Even if you were to adjust for the most wealthy person in South Africa rather than taking an average for the whole nation, you are still going to overpay in the South African environment," he said. "Nobody is getting a good deal." One of the problems is that there is no competitive market in the hospital sector. Patients are booked in by their doctors and are not in a position to make a choice based on quality or cure rates.

"What happens is that patients start comparing hospitals in terms of their hotel qualities. That may encourage hospitals to compete on non-healthcare related aspects." Pillay also looked at whether, in a fixed price environment, there is an incentive to improve services. What he found was that the risk of patient mortality was higher in areas where there was less choice and less competition.

An interim solution

The pricing commission, announced by the Minister of Health earlier at the same conference, is an interim solution to the problem. Pillay feels the commission is a vital first step because of the inability of medical schemes to negotiate with providers in a fair and transparent way. "The current information vacuum is to the advantage of the hospital groups, not the general public," he said.

He challenged hospital groups to make their costs and prices known. "This is easily solved," he said. "If hospital prices are reasonable then put them in the public domain. Then medical schemes can engage with them." One of the stumbling blocks to transparency is the non-disclosure agreements that medical schemes are forced to sign with the hospital groups.