THE MARKET INQUIRY INTO THE PRIVATE HEALTH CARE SECTOR

THE MARKET INQUIRY INTO THE PRIVATE HEALTH CARE SECTOR Stakeholders Submissions to the Competition Commission on the: 1. Draft Statement of Issues. 2. Draft Guidelines for Participation. SECTION27 welcomes the publication of stakeholders submissions to the Competition Commission (the Commission) on the Draft Statement of Issues and Draft Guidelines for Participation on the market inquiry into the private health care sector. These submissions can be accessed on the Commission s website available here. A total of 25 interested parties made submissions to the Commission during the comment period ending 30 June 2014. The Commission is due to publish the final documents that will set out the scope of the inquiry and will provide the rules for participation by interested parties on 30 July 2014. Below is a brief summary of the common themes in stakeholders' submissions.

DRAFT STATEMENT OF ISSUES Key issues 1. Constitutional obligations, the public interest and social welfare perspectives Stakeholder views Anaesthesiologist Association acknowledges the constitutional context and submits that the focus should be on patient harm. The association also commits to a process that will lead to reasonable and fair fees. Board of Healthcare Funders claims that the assumption that improved competition will lead to improved access to health care services is not supported by international experience. Access to health care is paramount and interventions must promote access. Council for Medical Schemes points out that the overall objective of the theories of harm is to protect the public interest with regards to redistributive justice, equity and attainment of meaningful social solidarity. National Department of Health refers to the transformative objectives in section 2 of the Competition Act and argues that the social and economic welfare of South Africans contingent on the progressive realisation of rights. Life Healthcare does not view the constitutional dynamic as central to the Panel s mandate in terms of the Competition Act. Life believes it is not appropriate to rely directly on the Constitution when it comes to investigating the private health care sector because there is legislation specifically dealing with market inquiries. The panel need not look further than the provisions of the Competition Act. Mediclinic argues that the obligation to promote and fulfil every person s constitutional right to have access to health care services is an obligation that lies with the State only. COSATU is against a focus on market-led efficiency being prioritised over socio-economic objectives. 2

Discovery Health states that while competition analysis is important, it is not sufficient to understand all factors driving costs, which is the purpose of the market inquiry. 2. Prescribed Minimum Benefits (PMBs) Alexander Forbes points out that there are currently no standardised treatment protocols for the industry. This results in schemes independently setting their own treatment standards. Alexander Forbes urges the Panel to assess whether the current list of PMBs should be shortened to include fewer treatments or whether to change focus to more preventative and primary carry to better align with NHI. Health insurance industry stakeholders state that because PMBs are expensive and cannot be covered by schemes, the PMB is reduced to healthcare provision via the State as a designated service provider. The insurance stakeholders argue that PMBs do not achieve the social solidarity objectives and are fallacious and hollow and without substance. Board of Healthcare Funders of Southern Africa urges the Panel to investigate the content, regulation and enforcement of PMBs as drivers of inflated healthcare pricing and expenditure. Free Market Foundation states that PMBs prevent medical scheme actuaries from devising schemes to suit particular categories of members and circumstances. PMBs, according to the FMF, are a de facto entry barrier because they prevent designing of low-income insurance packages. They believe that PMBs are benefits that are determined politically and should be removed or exempt schemes in the lower end of the market. Independent Community Pharmacy Association points out that the use of DSP arrangements or networks within South Africa has become commonplace since the introduction of PMBs but that the PMBs are interpreted to the schemes advantage, having a negative impact on community pharmacies. 3. The role of the public health care sector in the inquiry Alexander Forbes believes that the poor quality and lack of accessibility and availability of services in the public sector may drive individuals towards the private health care sector, thereby increasing demand for private health and explains high expenditure. 3

Council for Medical Schemes regards the market inquiry as important because it is likely to affect the public healthcare sector and the National Health Insurance (NHI). Mediclinic features of the public sector impact directly on costs in the private sector eg private sector nursing and pharmacist salaries and the pharmacy component of private hospital costs. Suggests an additional theory of harm dealing with distortions caused by the public sector. Mediclinic also claims there is no constitutional duty on the private sector. COSATU argues that the private and public health care sectors should not be viewed in isolation. South African Medical Device Industry Association states 30% of the value of the businesses is derived from the public sector, therefore private healthcare sector cannot be viewed in isolation from the public sector. Anaesthesiologist Association public and private health systems are interrelated eg training, availability of equipment, support staff all influence where doctors work. 4. Drivers of health care costs Discovery Health points out that new health care technologies may drive costs as well as an ageing population and increased demand and utilisation of private health facilitates. Mediclinic urges the Panel to consider the impact of the prohibition on employment of medical professionals by hospitals. South African Private Practitioners Forum point out the following as a cost driver: the very nature of healthcare as a very manpower intensive service which therefore is less amenable to automation and therefore to the lowering of all overall costs of services. 5. Theories of harm Board of Healthcare Funders of Southern Africa states that the theories of harm approach narrows the scope of the panel s focus to harm to competition and suggests that workable competition is the 4

holy grail of the Inquiry. BHF suggests that in constitutional terms this is simply not true. Discovery Health proposed that a seventh theory of harm is included called Structural issues in the healthcare system. This would refer to the current structure of private healthcare delivery and the history of how it developed into its current state. Mediclinic is concerned that the Panel has not provided any factual or economic evidence in support of [the] theories of harm and suggest that the failure to formulate theories of harm on the basis of sound evidence, gathered during a fair consultative process, will undermine the key objectives of the inquiry. Netcare submits that the formulation of the various theories of harm is too vague and does not identify the necessary underlying factual basis for such theories to allow for meaningful submissions in respect of the theories of harm. 6. Regulatory framework Alexander Forbes commenting on providers of healthcare products and services investigating how GPs and specialists set prices as there are currently no guideline tariffs in place. Discovery Health points out that the Ethical Rules of the HPSCA should be a priority regulatory area for the Panel. Life Healthcare views the HPSCA and its rules as important for the Panel to look as part of the regulatory environment. Board of Healthcare Funders urges the Panel to inquire into whether the benefits of SEP are passed on to consumers. Discovery Health views SEP as a priority regulatory area to focus on. Life Healthcare believes that the impact that pharmaceuticals and consumables has on private health 5

care costs is significant and the Panel should evaluate the impact of SEP. Mediclinic highlights the SEP regime as significant cost driver. 7. Draft regulations: demarcation between medical scheme products and medical insurance products Free Market Foundation states that pharmaceutical manufacturers have been forced to endure below-inflation increases since the SEP regime. Alexander Forbes would like the Panel to take account of the impact that the draft demarcation regulations will have when investigating competition between medical schemes and other insurance products noting that public comment on the draft regulations is due in July 2014. Health insurance industry stakeholders ask the Commission to intervene and liaise with National Treasury in respect of the draft demarcation regulations as well as urge National Treasury to suspend the proposed changes in the draft regulations until the Commission makes its findings. Discovery Health Medical Scheme draws attention to the draft regulations and specifically asks the Panel to assess the issue of gap cover insurance and hospital cash plans. DRAFT GUIDELINES FOR PARTICIPATION 1. Principles for open and transparent inquiry Netcare states that the principles of natural justice, and in particular the principle of audi alteram partem (hear the other side), should underpin the inquiry process in order to ensure that it is fair and efficient. Medscheme states that cross-examination may lend itself to an adversarial process if it is not appropriately curtailed. Hospital Association of South Africa proposes that working papers on each theory of harm and ultimately each recommended remedy be published by the Panel in order to give stakeholders an opportunity to comment on their substance. The working papers should be published before the 6

public hearings and recommendations. 2. Methods of gathering information National Department of Health states that while the draft guidelines deals with public hearings in detail, there is a lack of detail in terms of the other methods for gathering information in the inquiry process. COSATU believes that any form of engagement must allow citizens equal access. The Commission is urged to ensure that consultation do not only take place in elite urban areas. 3. Submissions to inquiry Netcare believes that the inquiry process would be more efficient through the use of staggered submissions based on parties who support certain theories of harm followed by those who do not support certain theories of harm. Netcare also proposes that the Panel explicitly include in the timeline an opportunity to comment on the provisional findings and recommendations. Medscheme acknowledges the difficulty of identifying adversely affected parties when making written submissions to the Panel. Hospital Association of SA recommend that the Panel call for submissions on its provisional decision prior to publishing the final report. 4. Public access to information Discovery Health urges the Panel to include in the final guidelines that there is public access to the written submissions of other parties immediately upon the closing date for submissions. Netcare have proposed that the Panel provide periodic written updates on progress during the various stages of the inquiry and that this should be formally included in the final guidelines in a revised timeline. 5. Public hearings Discovery Health acknowledges that the inquiry process is not intended to be an adversarial process. However, they propose the final guidelines set out a procedure including timelines incorporating advanced warnings to answer questions and a procedure identifying the subject matter of the 7

question(s) and the identity of the person/entity posing the question(s). Life Healthcare proposes that there should be an automatic right by any party calling its own witnesses to lead the evidence of its own witnesses. They further suggest general public hearings open to all parties interested in attending and holding more specific hearings to which a limited number of participants are invited, based on their particular interests. Netcare proposes that the inquiry team should produce issue papers prior to oral hearings to facilitate engagement on the issues. Hospital Association of South Africa recommends that the Panel holds hearings on proposed recommendations, which should further legitimise the process and possibly avoid judicial review. 6. Confidential information Life Healthcare suggests that there be physical separation of dates when firms are expected to present completely sensitive information in order to ensure that other firms are excluded from the hearings in which completely sensitive information is presented. They further suggest that the final guidelines make provision for access to confidential information by external counsel and economists and a clear procedure to request such access. National Department of Health believes that all information submitted by Participants should be available for review by other Inquiry Participants and where confidential information is considered biased or flawed there should be a method available for relevant participants to have controlled access to this data in order to offer the Panel a review thereof'. Netcare supports the approach to confidentiality claims in line with the provisions of the Competition Act. They further state: In accordance with the requirements of audi alteram partem, parties, or at least their external legal and economic representatives, should have access to, and a reasonable opportunity to respond to, adverse information which is submitted to the inquiry panel under a claim of confidentiality. 8

For more information: Umunyana Rugege SECTION27 rugege@section27.org.za +27834585677 Janneke Saltner SECTION27 saltner@section27.org.za +27790587597 Tim Fish Hodgson SECTION27 fish@section27.org.za +27828719905 9