Competition Commission Releases Provisional Report on Health Sector

Competition Commission

The private healthcare market suffers from multiple market failures.

The Competition Commission emphasized this in its provisional report on the Health Market Inquiry released last week.

The Inquiry got underway in January 2014.

It was conducted in terms of Chapter 4A of the Competition Act of 1998.

According to the Inquiry’s terms of reference, chapter 4A allows the Commission to conduct market inquiries in respect of the "general state of competition in a market for particular goods or services, without necessarily referring to the conduct or activities of any particular named firm”.

The Inquiry has looked at the general level of competition in private healthcare in South Africa.

It has focused on healthcare financing and healthcare services.

The private healthcare sector was also described as comprising a “complex set of interrelated stakeholders who interact with one another in an imperfect environment replete with information asymmetry, a lack of transparency and moral hazard.”

In terms of provisional recommendations for funders, the Inquiry found that “competition in the funders market is neither as vigorous nor as effective as it could, or should, be.”

Measures are proposed to strengthen governance so that medical schemes deliver value to members and that members pressurize schemes to improve value for money.

The Inquiry also wants the Council for Medical Schemes to exercise more effective oversight over funders and for schemes to promote alternative models of care that lower healthcare spending.

Measures are also proposed to improve transparency and promote competition and improve governance and align schemes’ interests with those of consumers.

As regards recommendations for suppliers of healthcare services, the Inquiry notes that the “provider side of private healthcare markets suffers from several structural, behavioural and regulatory imperfections that harm competition and undermine access to healthcare.”

In order to attain effective and efficient regulatory oversight of the supply-side of the healthcare market, the Inquiry calls for the setting up of a dedicated healthcare regulatory authority to be known as the Supply Side Regulator for Healthcare.

In general, the Inquiry recommends changes to the way scheme options are structured to increase competition, a system to increase transparency on health outcomes to allow for value purchasing and the introduction of a supply side regulator to improve competition.

Comment on the provisional findings and proposed recommendations is invited until 7 September 2018.

The plan is to publish a final report and recommendations by 30 November 2018.

Sabinet Cape Town Office