Presented by Medshield Medical Scheme

Navigating the Affordability of South African Healthcare

 ·18 Jun 2024

Unveiling the impact of health inflation versus consumer inflation

By Kevin Aron, Principal Officer at Medshield Medical Scheme

South Africa’s healthcare system has long been discussed, particularly regarding affordability. The rising healthcare costs have become a significant concern for individuals and families who find it an ever-increasing challenge to afford quality healthcare.

Knowing health and consumer inflation dynamics is crucial to understanding healthcare affordability. Health inflation refers to the rate at which medical costs increase over time, while consumer inflation measures changes in general prices across various goods and services.

These two types of inflation impact individuals’ purchasing power differently.

The disparity between consumer inflation (currently at 5.6%) and the much higher healthcare inflation is a cause for concern.

While general living expenses may see moderate increases or remain stable over time (as reflected by consumer inflation), healthcare costs continue their relentless ascent at an alarming rate (as indicated by healthcare inflation), compelling individuals to allocate more of their income towards medical expenses.

Healthcare costs in South Africa consistently exceed general consumer inflation rates, and several factors contribute to this trend. Firstly, input costs into healthcare and medical technology advancements resulted in increased expenses.

Additionally, rising drug prices and the higher demand for medical services all contributed to increasing costs associated with diagnosis and treatment options.

Healthcare providers grapple with additional challenges, including maintaining highly skilled employees and complying with stringent regulatory requirements that increase input costs. Pharmaceutical prices continue to rise due to global market dynamics and patent protection laws.

Furthermore, an ageing population places additional demands on healthcare services while also increasing overall expenditure for chronic conditions such as diabetes or cardiovascular diseases. As a result, these increasing expenses are passed on to patients through higher fees for consultations, procedures, medications, and hospital stays.

A struggle for middle and low-income households

The impact of high health inflation is felt most acutely by low-income households dealing with escalating medical bills while struggling to meet basic needs.

For many South Africans living below the poverty line, healthcare becomes a luxury they cannot afford, exacerbating existing inequalities in access to quality healthcare services.

However, the middle class is not immune to these challenges. As health inflation outpaces salary increases and general consumer inflation, individuals and families confront difficult choices between prioritising their health or managing essential expenses such as education, housing, and food.

Private healthcare is often perceived as more expensive than public alternatives, offering benefits such as shorter waiting times and access to specialised care. However, these advantages come at a cost that many individuals struggle with.

The high cost of private healthcare can be attributed partly to health inflation but also reflects the higher tariffs of doctors and specialists working within this sector compared to their public counterparts.

Prescribed Minimum Benefits and in particular Regulation 8 which allows healthcare practitioners to charge any amount they want if the treatment or service is a PMB has also played a material role in the increase in healthcare costs.

Medical schemes are crucial in making private healthcare more affordable for individuals. These schemes pool members’ contributions to cover medical expenses and negotiate rates with healthcare providers. By leveraging their collective bargaining power, medical schemes can negotiate lower fees for services and medication, mitigating health inflation’s impact on individual members’ budgets.

However, it is essential to note that medical scheme contributions have also been subject to significant increases over the years due to rising healthcare costs, posing a challenge for consumers and medical scheme providers in balancing affordability with adequate coverage.

Addressing affordability challenges

Various stakeholders need to collaborate and implement effective strategies to address the affordability challenges in South African healthcare. Here are some potential solutions:

  • Increased government investment in healthcare: Allocating more resources towards public healthcare infrastructure and services, including funding hospitals, clinics, medical personnel training programmes, and subsidising essential medications.
  • Price regulation: Implementing stricter regulations on drug prices can help control excessive costs within the pharmaceutical industry. Negotiating fair pricing agreements with pharmaceutical companies can ensure that life-saving medication remains accessible to all citizens.
  • Promoting preventive care: Shifting focus towards preventive care rather than reactive treatment can help reduce long-term healthcare costs for individuals and society. Encouraging regular check-ups, healthy lifestyle choices, and early intervention programmes can lead to better health outcomes while minimising financial burdens.
  • Public-Private Partnerships (PPPs): Collaborations between public and private sectors can improve access to affordable healthcare options by effectively leveraging resources from both domains. This can be further enhanced by exploring innovative insurance models catering to low-income households and providing much-needed financial protection against high medical expenses.
  • Enhanced competition rather than restricting market entry: Encouraging competition among private healthcare providers can drive down prices while maintaining quality standards.
  • Transparent pricing and sharing of healthcare information: Ensuring pricing transparency across all healthcare industry sectors will empower consumers to make informed decisions about their care options.

While medical schemes are vital in making private care more accessible, addressing these challenges requires collaboration between government entities, industry stakeholders, and consumers.

The widening gap between consumer and health inflation rates highlights the need for comprehensive but sensible reforms to curb rising costs while ensuring equitable access for all citizens.

Through collective efforts, South Africa can progress towards achieving an affordable and sustainable healthcare system for all its citizens.

For more information on Medshield Medical Scheme, click here.

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