The major factors driving up medical aid and private hospital costs in South Africa
The Competition Commission has published its latest findings on competition in the healthcare sector. The analysis attempts to identify the “unavoidable drivers” of cost increases in the private sector, and isolate areas in which the Competition Commission can intervene.
What was immediately clear, the Commission said, is that the South Africa has a problem with cost escalation
“The average private medical scheme spend per member increased by 9.2% per annum over the five year study period,” it said.
“This was after adjusting for inflation, change in the age profile of members contributed to the greatest proportion of that increase (for the factors that we have data) and was more pronounced for open medical schemes.”
“However, even after taking into account changes in member’s plan type, gender, disease profile and membership movement, the unexplained (or residual) increase in spend per member was still greater than 2% per annum in real terms – once again higher for open medical schemes.”
“To put this in context, 2% of spending amounts to around R3 billion in 2014 terms i.e. R330 per beneficiary per annum, or a total of R1,650 per beneficiary over the five year period studied,” it said.
Private hospitals
The report found that the biggest driver behind the unexplained costs was in-hospital care. This stands in sharp contrast to flat or declining hospital-based spending in many countries, once
risk factors are adjusted for, it said.
“Somewhat surprisingly, however, given that tariffs have not increased much above CPI, there was a significant increase in the average cost per admission (~2% unexplained increase per annum),” it said.
“Rates of increase were very similar between open and closed schemes, but were substantially higher for surgical episodes than medical ones (2.9% vs 1.3%, respectively).”
“Based on the discrepancy between tariff increases and total cost per admission increases, we suspect that much of this increase is due to increasing intensity of care for the same condition (e.g. length of stay, ICU use, consumables use),” it said.
Read: Taxpayers fork out over R2.3 billion for medical negligence at state hospitals
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