12 March 2008
Madam Speaker and Honourable Members
Thank you, for giving me this opportunity to address you today on the rapid escalations in the cost of private healthcare services in South Africa. This sector provides care for about 7 million people or close to 15% of all South Africans but consumes more than the total expenditure by the public health sector. The per capita expenditure in the private health sector is about 8 times more than that in the public health sector. Put another way, the public health sector spends about R1000 per patient per year whilst the private sector spends about R8000. The private sector spends an estimated 5.5% of gross domestic product. In addition, this sector employs more doctors, pharmacists and dentists than the public health sector. Clearly, this level of inequity cannot be left unchallenged.
By increasing tariffs the private sector will add to this high level of inequity by making private health care services even more inaccessible to insured and self-paying patients. Typically people pay for private health care through membership of medical aid schemes. A number of people pay exclusively out of pocket. As the costs of private health increase the cost of medical aid membership also increase.
Honourable members will recall that the medical aid industry was poorly regulated when we came into power in 1994. Through legislation passed by this House over the years – the Medical Schemes Act and its amendments – we successfully stabilised the medical aid industry, ensured its solvency, introduced community rating, made it illegal to exclude people because of pre-existing conditions and introduced prescribed minimum benefits.
We also with the assistance of honourable members worked hard to reduce the cost of medicines through for example the introduction of the single exit pricing system – which covered regulation of the price of anaesthetic gasses. The private hospital sector responded to our measures to contain costs by shifting profiteering from medicines to ward and theatre fees and continued to make profits on anaesthetic gasses.
I have been concerned about the high rate of cost escalations in the private health sector for a while and therefore convened the role-players in the industry in September last year to discuss this matter. At this indaba with the sector everyone agreed that all was not right in the sector. There was unanimous support for government intervention to regulate the sector to ensure its survival.
In addition, towards the end of last year I became aware that the private hospital industry was over-charging patients for anaesthetic gasses. I wrote to the CEOs of the private hospital groups and warned them to comply with the law in this regard. Unfortunately, when I met them in January this year to discuss the 2008 tariff increases I learned that many of them were not compliant with the law and I informed them that they will be charged for this transgression.
In the January meeting with the CEOs I informed them that their tariff increases were unacceptable as it was way beyond CPIX and I asked them to reconsider these increases and peg them at CPIX at worst. I also agreed that the Department will meet with each of the groups to understand how they decided on their tariffs and what cost pressures they were responding to. This we have done and I shall report on that in a while.
After the meeting with the private hospital groups I met with the medical schemes industry. I was shocked to hear that they were by and large forced by the private hospital groups to enter into agreements on tariff increases even though they felt that the demands of the hospitals were not justified. They reported that the attitude of the hospital groups was: if you don’t like the increases, pay us whatever you want and we will recover the balance from your members. This off course pits the member against the medical aid as the hospital will inform the patient that her/his medical aid has refused to pay the required tariff and that the hospital therefore has no option but to bill the patient directly!!!
Madam Speaker, it is therefore clear that the playing field is not level. I met the private hospital groups again a few weeks ago to report on the results of our bi-lateral consultations that they requested. I informed them that the information that they provided to justify their increases were inadequate and by and large unconvincing. They informed us that the salary increases in the public sector – for nurses – have forced them to increase their salaries to be competitive and that the tariff increases were therefore necessary!
It is clear that we cannot sustain unregulated private health care service delivery in this country and at the same time regulate the medical schemes industry. We must therefore regulate the providers and the industry as a whole. The Department has been working hard to draft legislation to present to this House that will enable us to contain costs, prevent bad business practices and protect the consumer and I hope to table this draft legislation within the next 2 months for debate.
The Ministry of Health has and will provide leadership on all matters related to health care provision in this country. Some may ask why we are so worried about the private health sector which only provides care for 15% of the population. The answer to this question is simple: the private sector is part of the national health system. What happens in this sector affects the entire health sector. When for example a person cannot afford private health care any longer because of the cost escalations, they turn to the public sector – thus increasing the number of people that are dependent on the public health sector. As well, government must protect the interests of all its citizens – including those that use the private health sector.
Madam Speaker, when we debated the issue of private health care costs in this House on previous occasions there was widespread condemnation of the practices of some of the roleplayers in the private health sector. Even the Honourable Kalayan raised problems with the way the private sector is doing business. I am sure that when we bring draft legislation to this House to regulate the private sector all parties represented in this House will support us and I look foreword to the debate on the drafted amendments to the National Health Act that we shall propose to make private health care services more affordable to our people.
I thank you!!!!