Transcript Document

Issues regarding the Structure of the
South African Health Market
Prof Alex van den Heever
Chair in the Field of Social Security
[email protected]
Source for Content
The contents of this presentation reflect a high level
summary of the analysis in a report provided to the
Competition Commission in 2012
http://www.compcom.co.za/assets/HealthcareInquiry/Review-of-Competition-in-the-South-AfricanHealth-System.pdf
What makes markets work?
• Basis for exchange
– Individuals produce products and are able to exchange
them for other products
• Consumers
– Understand the product (price/quality)
– Have a choice of alternatives
– Able to exercise choice
When do markets fail?
• Basis for exchange
– Individuals produce products and are unable to exchange
them for other products (absence of efficient systems of
exchange – money)
• Consumers
– Do not understand the product (price/quality)
– Have limited or no choice of alternatives
– Unable to exercise choice
How do consumers lose control of demand?
• Product complexity
– Price, cost and quality comparisons not possible in real
time
– Market problems possible despite competition
• Market concentration
– Structural reduction in products choice
– National or geographic markets
• Market manipulation
– Collusion to exclude competition from the market
• Agreements between market participants, including the sharing
of information (e.g. prices/costs)
• Punishment for non-compliance
– Payment of kickbacks to intermediaries able to determine
demand (agents)
– Market segmentation
• Forcing consumers into market segments on the basis of their
ability to pay
Correcting dysfunctional/failing markets
• Ensure an efficient basis for exchange
• Put consumers rather than product suppliers in
control of demand
– Effective market signalling
• Price
• Quality
– Product simplicity – remove need for advice
• Correcting markets is more than just about price
What about efficiency?
• Allocative efficiency - static
• Technical efficiency - static
• Dynamic efficiency - innovation
ANALYSIS OF THE SOUTH AFRICAN
MARKET
Two key “products”
• Insurance
• Healthcare
• What about consumers?
– Don’t understand what they’re buying
– Don’t understand the pricing or the cost
– Have no idea about product quality
– Key strategic product purchases are channelled through
conflicted intermediaries
Health insurance unregulated
Financing and Risk Pooling
Brokers
Health insurance - regulated
3rd Party Administration
Holding companies
Diagnostic
Specialists
Consumer
Information
asymmetry
General
Practitioner
Surgical
Specialists
Hospital-based
and substitute
services
Information
asymmetry
3rd Party Managed Care
Medicines and other medical
products and services
Health goods and services
Health insurance unregulated
Financing and Risk Pooling
Brokers
Health insurance - regulated
3rd Party Administration
3rd Party Managed Care
Diagnostic
Specialists
Consumer
Information
asymmetry
Gate keeper
Consumer agents
Possible conflicts of interest
Moral hazard
Anti-selection
Risk-selection
Commercial relationships
General
Practitioner
Surgical
Specialists
Hospital-based
and substitute
services
Financial sector
holding companies
Information
asymmetry
Medicines and other medical
products and services
Health goods and services
WHAT’S IN THE CONTRACT TODAY
Systemic Market-related Issues
What is internalised/externalised within contracts between
consumers and health insurers?
• Price
• Cost
• Quality
Regulated
Insurance
Unregulated
Insurance
What is internalised/externalised within contracts between insurers
and health care providers?
• Price
• Cost
• Quality
Regulated
Insurance
Unregulated
Insurance
Markets only compete on factors/signals that are transparent to relevant decision-makers
Internalised into Insurance contract –
medical schemes
•
•
•
•
•
Risk
Price
Quality of coverage
Quality of health care services
Quality of healthcare products
Medium
Medium
Medium
Medium/Weak
Medium/Weak
• Regulations prevent some risks from being
transferred arbitrarily back to consumers
Insurance contract – other
•
•
•
•
•
Risk
Price
Quality of coverage
Quality of health care services
Quality of healthcare products
Weak
Weak
Very weak
Very weak
Very weak
Internalised into insurance contract with HC
service providers
• Derived from the contract between consumers and
insurers
•
•
•
•
•
Risk
Price
Quality of coverage
Quality of health care services
Quality of healthcare products
Weak
Very weak
n/a
Weak
Weak
MARKET OUTCOMES
Year
Hospital claims
Source:
Specialist claims
Rest claims
GCI
Council for Medical Schemes data from scheme audited financial statements 1990 – 2012 (adjusted for CPI)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
500
450
400
350
300
250
200
150
100
50
0
1990
Index 1990 = 100
Real per capita changes in medical scheme
expenditure and GCI (2012 prices)
Year
General Practitioners
Source:
Specialists
Dentists
Hospitals
Medicines
Council for Medical Schemes data from scheme audited financial statements 1981 - 2012
Other
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1981
Percentage of total claims
expenditure
Changes in the structure of medical schemes
expenditure on benefits (1981-2012)
Hospital claims (real pbpa) compared to beds per
1,000 and market concentration (HHI) (for private
beds)
250.0
200.0
150.0
100.0
Point at which beds per 1,000 is roughly equal to the US and UK (noting
that they have vastly older populations)
50.0
Hosp claims
Beds/Pop
HHI (lag 1 yr)
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0.0
1997
Index with 1997 = 100
300.0
Changes in total beds in South Africa 1976 to
2010: public and private sector
140,000
120,000
100,000
80,000
60,000
40,000
20,000
Beds (pub)
Beds (prv)
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
0
Return on Capital Employed (Mediclinic and
Netcare)
Source: Anthony Felet, Duncan Lishman and Fatima Fiandeiro, “Do hospital mergers lead to healthy profits?”, 2012, p.11
Return on Capital Employed (Mediclinic and
Netcare) – 1997 - 2011
Source: Anthony Felet, Duncan Lishman and Fatima Fiandeiro, “Do hospital mergers lead to healthy profits?”, 2012, p.11
Average age of Medical Schemes 2000 -2013
Average age of beneficiaries
35
30
25
20
15
31.2
31.6
31.6
31.9
32.0
31.7
31.6
31.4
31.5
31.6
31.5
31.6
32.0
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average age of beneficiaries
Sources: CMS Annual Reports 2003-4, 2004-5, 2005-6, 2007-8, 2009-10, 2010-11, 2012-13
2001 to 2006
Real hospital cost (pbpa) changes from 2001 to
2006 (percentage) (includes medicines)
Other causes
53.9%
5.5%
5.4%
0.0%
10.0%
Other
20.0%
30.0%
Nurse salaries
40.0%
50.0%
Age
60.0%
Non-health expenditure trends from 1974-2010:
percentage of Gross Contribution Income (GCI)
16.0%
Percentage of GCI
14.0%
Major deregulation
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
Total Non-health
Source:
Administration
Council for Medical Schemes data from scheme audited financial statements 1974 - 2010
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
0.0%
CONCLUDING REMARKS
• Ensure that health insurers have the incentive to
purchase efficiently
– Remove conflicts of interest in markets for advice
– Simplify and standardise products
– Market transparency on key indicators central to consumer
choice
– Internalising price and quality into the contract
– Deal with regulatory arbitrage
– Ensure governance arrangements correctly locate the
commercial imperative in the scheme
• Ensure that insurer incentives cannot be undermined
by anti-competitive structures and conduct on the
supply side
– Market transparency (price/cost/quality)
– Conflicts of interest
• Separate doctors from other products
– Accumulation and abuse of market power
• Market diversification
• Penalise abuse
– Collusion
END