The cost of healthcare in South Africa

Access to health care varies greatly in different countries across the world and is largely influenced by social conditions, economic conditions, as well as the health policies in place at the time.

This is according to Dr Jaco van Zyl, Medical Executive at Cipla SA, who points to statistics from the World Health Organisation (WHO), indicating that the worldwide provision of health care related products and services consumed on average 9.95% of Gross Domestic Product (GDP) in 2014.

“Over the same period in South Africa, total expenditure on health care in South Africa (SA) accounted for 8.5% of GDP, with an annual increase of 8.8% projected for the years between 2013 and 2017.”

“In South Africa, healthcare services and products are provided by parallel running public and private health care systems. Even though private health care is only available to a very small section of the South African society (16.3%), it still accounts for a disproportionate 52% of the total expenditure on health care,” said Dr van Zyl.

He said that in the private health care market the two main methods of health care financing is through private health insurance (medical schemes) and direct out of pocket payments by the patients, with the bulk of out of pocket payments made by medical scheme members.

Below Dr van Zyl analyses how these two methods affect the cost of healthcare in South Africa.

Medical Schemes as source of private health care funding

Despite policy initiatives aimed at structuring affordable low cost health care funding products, medical schemes have remained unaffordable, and therefore inaccessible, to the majority of South Africans over the last couple of years.

Most recently the Council of Medical Schemes (CMS) reported that Medical scheme contributions increased by around 9% between 2014 and 2015 but the average contribution increase announced by open medical schemes for 2017 is averaging 10.3%.

This accelerated growth in member contributions appears to be driven by a toxic cocktail of:
1. An increase in claims
2. The fact that scheme members are getting older and sicker, requiring more resources
3. A negative member growth rate
4. An increase in the cost of Prescribed Minimum Benefits (PMBs)
5. An increase in operating losses by schemes as well as a decrease in solvency ratios

With the majority of patients accessing private health care through scheme funding channels it is clear that affordability is still the most important challenge facing the private health care in South Africa today.

Direct out-of-pocket (OOP) payments

OOP payments is the alternative for patients wanting to acquire private health care services and products. According the CMS medical scheme members paid R3.2 billion out of their own pockets more for private health care in 2015 than in 2014 (R27.2 billion in 2015 compared to R24 billion in 2014).

A 13.4% growth rate that outpaced even the growth in scheme contributions.

A third (33%) of the total OOP expenditure was spend on medicine, meaning patients spend around R9 billion rand out of their pockets on medicine alone.

It is also important to note that OOP constituted a large proportion (18.6%) of total healthcare expenditure for individuals that was already making significant premium contributions to medical schemes, CiplaSA said.

Private health care in South Africa is expensive and relatively inaccessible to the majority of South Africans. With scheme contributions by members increasing at an alarming pace, and out-of-pocket expenses by members showing double digit growth, private health care affordability is set to remain a big challenge in the future, Dr van Zyl said.

The cost of biologics and the promise of biosimilars

The cost of treatment in general and medicine in particular is an important barrier to health care access, with the rising cost of medicine contributing to the growing pressure on affordability. A key objective of pharmaceutical genericisation is to reduce the cost of the patent expired molecule and therefore improve treatment access.

“The introduction of the exciting new group of treatments called biosimilars, products that can be loosely defined as biologic medicine generics, promises to slow down the above average growth currently seen in treatment cost, growth largely fuelled by the increased cost of biologic medicine,” said Dr van Zyl.

Read: Best and worst medical aid schemes in South Africa – with prices

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The cost of healthcare in South Africa