Impacts of the tariffs on the healthcare sector

During a raging debate between the Namibian Association of Medical Aid Funds (NAMAF) and Namibia Private Practitioners Forum (NPPF) about the tariffs being unhealthy for the healthcare sector, Dr Dries Coetzee argues that it is is becoming impossible for general medical practitioners (GP’s) to sustain an economically viable practice. This was attributed mainly due to the fact that the Namibian Association of Medical Aid Funds (NAMAF) insists on unilaterally applying the NAMAF Benchmark of Tariffs (“the Tariff”) to which all medical aid funds in Namibia are “forced” to subscribe. The Tariff is politically attractive in a country where many live in poverty because it appears to reduce healthcare costs for the average patient.  However, the Tariff is quietly killing the healthcare profession with several established GP practices already indicating their eminent closure, mostly in rural towns. The Tariff is out-dated and discourages a viable and progressive healthcare system. This, in turn, is bad news for Namibians in need of good quality and affordable medical care, especially since Namibia already suffers from an acute shortage of healthcare professionals. The debate between the two about the situation is summarised as follows:

NAMAF and the Competition Commission ruling:
In 2011 the Namibia Private Practitioners Forum filed a complaint with the Competition Commission against NAMAF on the basis that, amongst others, the Tariff is unlawful in Namibia. After a three-year investigation the CC found that NAMAF and the medical aid funds did breach the Competition Act. The ruling was gazetted on 12 December 2014 in Government Gazette number 5630. On that same day NAMAF and all nine medical aid funds filed an application to the High Court, arguing that the CC had no jurisdiction over NAMAF or medical aid funds in Namibia, and that NAMAF accordingly has the right to set the Tariff. Ironically NAMAF claimed that application of the Tariff is in the public interest. As we will explain below, this could not be further from the truth.
NPPF cost study : The NPPF recently commissioned a comprehensive cost study (a first for Namibia) of healthcare professionals throughout Namibia. 50 GP practices across Namibia took part in the study conducted by South African professionals (Healthman Pty Ltd) who have decades of experience in similar studies in South Africa. The cost study assessed the costs of putting up and maintaining a viable healthcare practice. This is important because, as in any other business, if returns do not exceed setup and operational costs with a fair return on investment at a reasonable risk level, a medical practice will have to close down. This is happening in Namibia, especially amongst GP’s in the rural areas. The result of the GP cost study is now available, while more information on other participating healthcare disciplines is still outstanding or being processed.
Results of the cost study : The key points of the study on GP practices can be summarised as follows (all figures relate to 2014): It costs (on average) N$796,671 per year to operate a GP practice (excluding any remuneration for the GP); a GP that practices obstetrics will pay N$92,260 per year extra in malpractice insurance; a GP who wants to cover overhead costs and earn a salary equivalent to a doctor in the employment of government (who obviously has no financial or legal risk in his/her practice, unlike a GP in private practice) must charge N$307,05 per 15 minute consultation; and a GP who wants to cover overheads and earn an income comparable to other professions requiring 5+ years training must charge a fee of N$456.60 per 15 minute consultation.
On the methodology employed by NAMAF the report concluded that the current Tariff is “based on an outdated RSA BHF [Board of Healthcare Funders] Tariff and Coding list”. It also states that “there is no justification for these units [fixed time interval of 15 minute units] nor the variations therein”; “Namaf has no approval to use the coding structure as it is subject to copyright in South Africa” and “the tariff list is in many instances irrational, has no science behind it and is not cost based”. NPPF members can find the full report on the cost study at www.thenppf.com.
What does it cost to run a sustatinable GP practice? It is clear from the cost study that the Tariff is woefully inadequate to compensate GP’s fairly. In respect of a typical 15 minute consultation (using 2014 figures), PSEMAS pays only N$227 and the funds pay according to the Tariff N$ 296.20. However, a private practice GP who wants to earn a salary equal to a GP in the public sector should charge N$307.05. If the same GP wants to earn a reasonable salary comparable with a professional in another sector, he/she should charge N$ 456.60 (i.e. the Tariff should increase by at least 50%). The reality is that GP’s who are paid in accordance with the Tariff earn less in private practice than in the employment of government. Furthermore, GP’s subsidise PSEMAS out of their own practices as they would earn N$320.20 per hour more in the public sector as apposed to treating PSEMAS patients in private sector.
Legal proceedings by NAMAF and Medical Aid Funds: The CC, after an exhaustive investigation, held that NAMAF and the Medical Aid Funds breached the Competition Act by setting and following the Tariff. On 12 December 2014 NAMAF and the Medical Aid Funds (represented by Hartmut Ruppel of Lorentz Angula Inc) filed an application in the High Court requesting the court to rule that the Competition Act does not apply to them.
The NPPF, who was only a complainant to the CC in this matter, was also cited as respondent. Another complainant, a hospital group, was not cited to the application. The NPPF can only guess that this is because this hospital group has substantial financial resources and experience after successfully fighting unlawful tariff setting regimes in South Africa and would therefore be an unpalatable respondent for NAMAF.