Profmed CEO unpacks the cost of healthcare inflation in private healthcare

Home » Profmed CEO unpacks the cost of healthcare inflation in private healthcare

According to CEO of medical scheme Profmed, Craig Comrie, private healthcare costs in South Africa are very competitive to rates found across the world. While the bulk of South Africans rely solely on the public healthcare system, over 8 million citizens are privately insured and look to the private healthcare system for quality care. A further 8 million citizens pay for private healthcare from their own pockets and remain outside the traditional medical scheme market.

Yet, most of the 8 million privately insured South Africans still struggle with the rapid rise in healthcare costs.

“The issue is that most people tend to use standard inflation measurements such as consumer price inflation (CPI). This is a false equivalency as healthcare costs tend to sit 3% – 4% above inflation every year. This is why the industry references healthcare inflation as a more relevant metric.”

Comrie says there are numerous drivers of healthcare inflation, but every year those drivers shift and change. Covid-19, he says, provides a perfect example of how new diseases and new technology drive healthcare inflation.

“At the start of the pandemic we didn’t have the vaccines and luckily they came through relatively quickly. But these came at a cost,” he says. “Where in 2019 there was no COVID-19, in 2020 we had to pay for general treatment, hospital and pharmaceutical costs that we never saw in the previous year.”

Comrie says the cost to research, procure and distribute these treatments form part of what the healthcare industry calls “new technology tax”, a typical driver of healthcare inflation. “Sometimes you can’t predict what is going to drive inflation in healthcare but new technology, like Covid-19 vaccines or new expensive oncology treatments, remain one of the constant drivers. COVID-19 is a reminder that new or old diseases like cancer, need lifesaving investments in new technology.”

Another driver of healthcare inflation comes in the form of population demographics. “When you have a young population like we do in South Africa, the benefits of fighting a disease like Covid 19 are different to other older countries. We have had fewer deaths despite very large infection rates. This is a result of a younger population however we are seeing an ageing population in the professional market and even the medical scheme market. ,” says Comrie. “This number of elderly people will continue to increase, which will put further strain on the healthcare system and lead to rising costs,” says Comrie.

According to the WHO’s World Report on Ageing and Health, the proportion of South Africa’s population aged 60 years or older will double from 7.7% to 15.4% of the country’s total population over the next 35 years. Comrie says age and a growing burden of disease even amongst the younger population are driving people to use healthcare services more regularly than in the past. This will result in growing healthcare inflation, and we must focus on creating a healthier population through preventative measures such as healthy activities and behaviours.

Lastly, Comrie points to basic economics and fact that we have fewer doctors and specialists which means long waiting lists even in the private sector further while these specialists can demand much higher remuneration. “This is not about the clinic or available hospital facilities but the skills who operate and provide services in these facilities. We are simply not creating enough nurses, doctors, and specialists in our system to actually create more supply of services  for people to access.”

This sentiment has been echoed by our own Minister of Health Dr Joe Phaahla, who revealed in parliamentary Q&A that the country currently has a doctor-to-patient ratio of 1 to 3,198. When compared to 2019, when that ratio was sitting at 1 to 1,266, Comrie says the future requires serious intervention to create a wider base of healthcare skills, and unfortunately until this happens healthcare costs will continue to escalate.

As private healthcare costs continue to rise, Comrie believes medical schemes have a fundamental role to play in curbing those costs. “We are always carefully considering the claims we receive and engage regularly with specialists and hospital groups to limit their prices but also to improve their outcomes.”

Issues like hospital-acquired infections, or instances where procedures need to be repeated, are quite carefully monitored and Comrie says medical schemes are in a good position to analyse those performance numbers in a bid to get the best value in terms of healthcare outcomes for members. “That process is ongoing to analyse claims and trends every month of every year so when we reach the next year we are  positioned to tailor-make our benefits so that  they are more in line with what people need.”

Despite these efforts, Comrie says the issue of healthcare inflation will always play a role in price increases. “All we can do is try our best to identify the problems, find possible solutions and prepare ourselves for the changes that we can predict,” he concludes.