Easier comparisons will boost medical scheme competition, inquiry finds
‘With approximately 270 plans on offer, consumers cannot compare these nor can they choose scheme and plan options on the basis of value for money’
The Competition Commission’s health market inquiry has recommended that medical aid schemes change the way they structure their various options so that they can be compared more easily and thereby increase competition in the market.
It found that the "deliberate" way in which medical aid schemes bundle, package and price their options allows them to weaken and even avoid outright price competition.
"While significant marketing takes place in the schemes market, consumers are not able to compare what schemes offer. With approximately 270 plans on offer, consumers cannot compare these nor can they choose scheme and plan options on the basis of value for money," the panel for the inquiry said in its provisional report, released on Thursday.
The panel also recommended greater transparency on health outcomes so consumers can make their purchases on this basis. Furthermore, it recommends the creation of a supply-side regulator to improve competition in the market.
The inquiry looked into the constraints on competition in the private healthcare sector in a context of high and rising costs of healthcare and medical scheme cover. It found that the medical aid scheme market was not transparent and not easily understood. Consumers who are increasingly finding private healthcare insurance unaffordable were "disempowered and uninformed". This contributed to a lack of competitive pressure from consumers on medical aid schemes.
The panel concluded that the multiplicity of options was a form of risk-rating in the absence of a regulated risk adjustment mechanism as medical scheme members had to self-select the scheme option they could afford.
"Thus they compete at a cosmetic level predominantly on choice of products available to consumers rather than on value for money. Other strategies funders (medical aid schemes) employ to make products more affordable include the consistent reduction in the range of benefits covered over time."
To address these rising costs, hospital plans have been developed as a more affordable alternative to medical aid scheme membership. However the panel said these plans had resulted in more care being shifted to hospitals. This ultimately raised costs and eventually contribution levels and ironically made the cost of cover less affordable.
"Hospital plans create the impression that all treatment must occur in hospital. However, these plans cover by law all prescribed medical benefits and the stipulated chronic conditions, many of which can be managed outside of hospital."
The inquiry found that medical aid scheme administrators were not doing enough to manage supply-induced demand to protect scheme members’ health and financial interests.
"Schemes and administrators are not sufficiently effective in using buying power to negotiate contracts that would decisively benefit consumers by improving quality of care and achieve savings in premiums and reduced out-of-pocket expenditure."
Describing the state of the medical aid schemes market, the panel said it displayed "consistently rising premiums accompanied by increasing out-of-pocket payments for the insured, almost stagnant growth in covered lives and a progressively decreasing range and depth of services covered by medical scheme options."
The panel found that the regulatory regime was incomplete largely due to the failure of implementation by the regulators and inadequate stewardship by the Department of Health over the years.
"Many of the recommendations we have considered are already provided for in current legislation but have not been implemented."