Responding to Private Health Scheme Inquiry Recommendations released on Friday last week, ACDP Member of Parliament Cheryllyn Dudley today said that "the ACDP is urging that the recommendations are urgently considered and adopted.

We also call on medical schemes not to take a partial approach to the implementation of the recommendations as it would likely only compound existing market failures”.

The Competition Commission conducted an inquiry into the sector after observing increases in prices in the private healthcare sector of which only a minority of medical aid scheme members could afford. Investigators stated that the interventions proposed are closely interrelated and recommended that they be adopted as a whole.

In the interests of benefit to consumers and the long-term sustainability of the market, the ACDP wants to see change in the medical insurance sectors’ approach.  Dudley said that “it appears that medical schemes are clearly making a profit by increasing member fees while benefit packages cover less. Schemes show little evidence of efforts to design and implement alternative models to contain expenditure and provide value for money and fairer cover.”

Discovery Health, the largest scheme, shows growth and success over time which is positive but excessive profits are an indication of market failure, with no signs that the market will self-correct.

Dudley pointed out that what the investigators refer to as a profound lack of transparency - including on scheme options and quality of outcomes - means “consumers simply do not know what they are purchasing and cannot hold funders accountable. Therefore, they resort to choosing only what they think they can afford and are not in any way suitably or adequately covered.”

The report says trustees of schemes should be interceding on behalf of members to ensure that they receive value for money and found a lack of accountability of schemes to members. “There are too few incentives to ensure that scheme employees, trustees and principal officers always act in the best interest of consumers”, Dudley said.

“The ‘separation’ between schemes and administrators is apparently often artificial, particularly in the case of large open schemes. This failure in governance is a major concern.  Just as the fact that not-for-profit-schemes are administered by for-profit administrators and the for-profit administrators are dominant while scheme members and trustees are disempowered and unable to force administrators to align schemes to members’ interests even if they wanted to.”

The ACDP agrees with the inquiries recommendations that, “the performance of schemes must be measured in terms of the value delivered to members and remuneration packages of employees — particularly that of trustees and principal officers should be linked to that performance and capped”.

12 July 2018