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HEALTH MARKET INQUIRY September 2019 (complete pdf)

Executive Summary:

In our review of the South African private healthcare market we found that it is characterised by high and rising costs of healthcare and medical scheme cover, and significant overutilization without stakeholders having been able to demonstrate associated improvements in health outcomes.


2. We have identified features that alone or in combination, prevent, restrict or distort competition. The market is characterised by highly concentrated funders and facilities markets, disempowered and uninformed consumers, a general absence of value-based purchasing, practitioners who are subject to little regulation and failures of accountability at many levels.

3. We are concluding our work at a time when South Africa is embarking on a journey to establish a National Health Insurance Fund (NHI), a means to achieve universal health coverage. Based on the latest version of the NHI Bill, Gazetted on 26/7/2019 (Gazette no. 42598), it is envisioned that the NHI will create: a unified health system by improving equity in financing; reduce fragmentation in funding pools; and by making healthcare delivery more affordable and accessible, eliminate out-of pocket payments when individuals need to access healthcare services; and ensure that all South Africans118 have access to comprehensive quality healthcare services.

4. Full implementation of the NHI is some years away, with the Fund scheduled to be operational by 2026 at the earliest. The private sector will continue to operate in the interim and also after 2026. We have taken this into account in the implementation of our recommendations which will provide a better environment in which a fully 118 All South Africans, permanent residents and other registered users as defined in Chapter 2 of the NHI Bill will be covered by the fund. implemented NHI can function. Nonetheless, we have always had regard to the mandate reflected in the Term Of Reference: to primarily focus on issues that affect the private sector.

5. We have found there has been inadequate stewardship of the private sector with failures that include the Department of Health not using existing legislated powers to manage the private healthcare market, failing to ensure regular reviews as required by law, and failing to hold regulators sufficiently accountable. As a consequence, the private sector is neither efficient nor competitive.

6. A more competitive private healthcare market will translate into lower costs and prices, more value-for-money for consumers and should promote innovation in the delivery and funding of healthcare. As the state becomes a purchaser of services (from the private sector as indicated by the NHI Bill), it will be able to enter a market where interventions like the establishment of a supply side regulator, a standardised single obligatory benefit package, risk adjustment mechanism, and a system to increase transparency on health outcomes have already led to greater competition and efficiency.

7. Competition should occur on price, cost and quality, not on risk avoidance. The risk adjustment mechanism is a regulatory component designed to eliminate fragmented risk pools but, more importantly, it is an essential market mechanism to ensure that purchasing in the market becomes more effective, by forcing funders to compete on value and, therefore, stimulate competition between and the efficiency of providers. The resultant competitive environment will benefit the NHI. The proposed RAM includes income .....

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