World Health Organization INTERNATIONAL COMPARISON OF SOUTH AFRICAN PRIVATE HOSPITAL PRICE LEVELS Francesca Colombo, Head of Health Division, OECD Luca Lorenzoni, Economist, OECD Tomas Roubal, Health Economist, WHO South Africa Sarah L Barber, WHO Representative, South Africa 1
Why are South African private hospital prices a public policy concern? South Africa spends a higher share of its total health expenditures on private voluntary health insurance (41.8%) than any country globally – >6x OECD average (6.3%) – even though it only serves 16% of the population. This is equivalent to 3.7% of South Africa’s GDP. 41,8 45 34,9 40 35 30 20,9 25 20 15,2 13,9 20 13,2 15 9,3 10 8,9 7,2 6,5 6,3 5,9 5,3 10 4,9 4,6 4,4 4,2 4,1 3,5 3,5 3,2 2,7 5 2,4 2,1 2,1 1,9 1,8 4 1,3 1,3 0,8 0,6 3 0,2 0,2 5 1 0 South Africa Brazil Chile Slovenia France Canada Colombia Germany Australia Switzerland Korea OECD average Netherlands Portugal Austria New Zealand Luxembourg Spain Poland India Greece Hungary Finland Russia Denmark Costa Rica Latvia Italy Sweden United States Mexico Belgium United Kingdom Japan Indonesia Lithuania Czech Republic Estonia China Source: OECD health data 2015, data for 2013 or latest year available 2 Figure 1. Private health insurance as a share of total current health expenditures (%), 2013
Private voluntary health insurance (PVHI) in OECD countries tends to fill in the gap above public cover- unlike in South Africa where medical schemes mainly finance an alternative to the public sector. PVHI as % of Total health Country % pop covered by PVHI Type of coverage spending South Africa 41.8 16 Duplicate, supplementary USA 34.9 52.5 Primary Chile 20.0 18.3 Primary Ireland 13.4 44.6 Duplicate France 13.9 95 Complementary Canada 13.2 67 Supplementary Israel 10.7 82.9 Supplementary Germany 11.0/22.0 Primary/complementary 9.3 Australia 54.9/47 Supplementary/duplicate 8.9 New Zealand 4.9 29.7 Duplicate Portugal 5.3 21.1 Duplicate Spain 4.4 12.5 Duplicate UK 3.4 10.6 Duplicate Italy 1.0 15 Complementary Source: OECD, Health at a Glance 2015; WHO, Global Health Expenditure Database. Countries with private voluntary health insurance that offer duplicative cover spend much less on PVHI (3.4-13.4% of total health expenditure). 3
OECD countries have measures in place to cap, set or benchmark prices that RSA lacks • OECD: public sector tends to have some form of price setting for specialist and hospital services, and this provides benchmarks for the private sector. South Africa lacks these price setting measures. • For OECD countries, prices in the private sector are set using these benchmarks. This has been used as a means to contract/purchase private services to expand access. • Without these measures in South Africa, negotiations between a handful of medical scheme administrators and private hospitals and specialists determine how a large section of the country’s funds for health are spent (3.7% GDP). 4
Objectives of World Health Organization the study • Compare private hospital price levels in South Africa with OECD countries. • Examine c orrelations between a country’s income and hospital prices. • Estimate affordability of hospital services in comparison with general goods and services. • Using South African data, assess the factors influencing private hospital prices: volume and components of the price (hospitals, specialists, pathology, radiology) 5
World Health Methods (1) Organization • Cross-country price comparison requires standard units, definitions, and ways of measurement that can be applied uniformly across all countries to ensure comparison of “Like with Like.” • Approach applied and validated in OECD countries: OECD Eurostat Purchasing Power Parities (PPPs) project. The PPP project identified 28 case types as a sample of hospital services that are the most common services appropriate for international comparison. – 7 medical services – 21 surgical services 6
World Health Methods (2) Organization • These are services that are typically covered under the public basket, paid for through government contracting – regardless of whether they are delivered through public or privately- owned facilities. • Prices reported represent the total price paid for each case type, including capital • We also collected information on the number of admissions and average length of stay per case type • South Africa collected information on the following price components: hospitals, specialists, pathology, radiology. 7
World Health Methods (3) Organization South Africa • Data from several large medical schemes from 2011-2013 – representing 59.4 % of members and total of 625,940 cases OECD countries • Used existing data already collected using same methodology for comparison (Purchasing Power Parities project) for representative sample • 20 countries: Austria, Czech Republic, Estonia, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland and United Kingdom • Lower income subset of 7 countries with GDP per capita level closer to South Africa: Czech Republic, Estonia, Hungary, Poland, Portugal, Spain and Slovenia 8
World Health Methods (4) Organization South Africa – data from medical schemes • Insight Actuaries South Africa and other experts from medical scheme administrators worked with OECD to adapt the methodology • Methodology was tested on the data from Government Employees Medical Scheme (GEMS) • Several medical schemes shared their data including GEMS, Medscheme Holdings (Pty) Ltd, Bonitas Medical Fund • Preliminary results were presented to and discussed with data providers and some adjustments were made to improve on the accuracy of the findings • These organizations generously gave their time and expertise to this study, and openly shared their data. We thank them! 9
World Health Methods (5) Organization Prices expressed in Purchasing Power Parities (PPPs) • Convert different currencies to a common currency and uniform price level • Equalize purchasing power across countries • Enables cross-country comparison of prices 10
World Health Methods (6) Organization Results are reported as comparative price levels • Average for comparison group is calculated as the geometric mean of the comparative price levels across all countries included in the comparison group, and is then set equal to 100. • Each country’s comparative price level is then expressed in relation to the mean of 100. Results should be interpreted looking at the relative positions of countries rather than looking at absolute levels. Exchange rates fluctuations are captured in both the CPI and hospital prices. 11
World Health Presentation of Organization Results South African prices by case type • Prices in Rand by case type, 2011-13 • Increases in prices over time Cross country comparison • Correlations between hospital price levels and income • Comparison of hospital price levels across countries • Affordability of hospital prices relative to other goods and services What is driving South African prices? • Length of stay and admissions • Components of the price: hospitals, specialist, pathology 12
Average price (in Rand) and average annual rate of change by case type: 7 medical cases studied Year Annual rate of Case type 2011 2012 2013 change (%) M01 Acute Myocardial Infarction 56,726 59,038 64,308 6.5 M02 Angina Pectoris 25,729 27,562 29,445 7.0 M03 Cholelitiasis 11,954 13,788 14,639 10.7 M04 Heart Failure 25,325 27,168 28,959 6.9 M05 Malignant Neoplasm of Bronchus and Lung 24,147 25,651 26,412 4.6 M06 Normal Deliveries 16,251 17,056 17,954 5.1 M07 Pneumonia 17,002 18,359 19,731 7.7 13 S01 Appendectomy 23,448 25,725 27,836 9.0
Average price (in Rand) and average annual rate of change by case type: surgical cases studied Year Annual rate of Case type 2011 2012 2013 change (%) 7.7 S01 Appendectomy 23,448 25,725 27,836 9.0 S02 Caesarean section 27,802 29,915 31,912 7.1 S03 Cholecystectomy 34,390 36,753 39,071 6.6 S04 Colorectal resection 95,850 99,863 103,543 3.9 S05 Coronary artery bypass graft 220,344 237,497 253,901 7.3 S06 Discectomy 80,847 83,851 87,977 4.3 S07 Endarterectomy 69,901 73,993 82,917 8.9 S08 Hip replacement: total and partial 111,210 116,976 120,758 4.2 S09 Hysterectomy: abdominal or vaginal 29,108 31,616 34,432 8.8 S10 Knee replacement 105,536 110,801 114,044 4.0 S11 Mastectomy 31,427 33,944 37,437 9.1 S12 Open prostatectomy 68,556 73,683 76,645 5.7 S13 Percutaneous transluminal coronary angioplasty 88,827 93,466 101,689 7.0 S14 Peripheral vascular bypass 95,008 94,889 106,260 5.8 S15 Repair of inguinal hernia 20,428 21,704 23,857 8.1 S16 Thyroidectomy 29,204 31,907 34,623 8.9 S17 Transurethral resection of prostate 29,176 31,500 33,196 6.7 S18 Arthroscopic excision of meniscus of knee 21,002 22,974 24,748 8.6 S19 Lens and cataract procedures 19,367 20,464 21,633 5.7 S20 Litigation and stripping of varicose veins - lower limb 21,060 22,122 24,275 7.4 14 S21 Tonsillectomy and/or adenoidectomy 10,044 10,853 11,442 6.7
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