BALANCING ACT: The commission’s Trudi Makhaya says preliminary work has been done on framing the terms of reference of an inquiry.

THE nature of competition in the various healthcare subsectors has been at the heart of an emotional debate on the cost of private healthcare in SA.

Health Minister Aaron Motsoaledi has described the rising costs as "uncontrolled commercialisation" — giving a clear sense of the government’s thinking on the issue.

The Competition Commission has already indicated its desire to conduct a market inquiry into the private healthcare sector and the cost drivers in its different subsectors, once it has set the terms of reference.

However, the commission faces several challenges, including lacking the authority to summon witnesses who could supply the information needed for it to reach a meaningful conclusion.

The complexity of the healthcare market will be among the focus areas at the 6th Annual Conference on Competition Law, Economics and Policy. The conference is organised by the commission, the Competition Tribunal, the Mandela Institute and the University of Johannesburg’s Centre for Competition Economics.

Dr Motsoaledi, who is championing the government’s push for National Health Insurance that is meant to give the poor access to decent healthcare, will be the keynote speaker.

Trudi Makhaya, the commission’s head of advocacy, says opinion is split between those who argue that healthcare costs are driven up by older, sicker people making greater use of their medical aid funds, and others who think cost increases are a reflection of market power exercised by the players.

"It does not have to be one or the other, it can be both. That is where the inquiry comes in: to bring everybody together and understand what are the drivers of price, where is competition not working, and where regulation is needed," says Ms Makhaya.

"It will be good if the industry players participate as they are the custodians of the information," she says.

However, the Competition Act in its current form does not provide for formal market inquiries, nor does it empower the commission to summon people to provide information.

However, the Competition Amendment Act, passed by Parliament but given no effective date, provides for market inquiries and gives the commission special powers to summon witnesses and to require individuals to give evidence under oath.

Robert Wilson, a partner at law firm Webber Wentzel, says for the inquiry to be meaningful the commission will require extensive information to be fed into an analytical framework.

"If that does not happen there is the danger of ‘regulatory capture’, where special interest groups decide to participate and only provide a certain type of information to influence the outcome of the process."

In contrast, the 2008 banking inquiry into the high cost of banking succeeded because the sector was not as complex and multitiered as the private healthcare sector. SA’s big banks were aware of the risk to their reputation and wanted to be seen to be co-operating.

Mr Wilson says: "Ostensibly the commission is not out to get particular firms, it wants to see how the various markets interplay with each other. The question will be: can competition be enhanced in order to result in lower prices and better quality services, or are these markets better served by regulatory interventions?"

Daryl Dingley, also a partner at Webber Wentzel, says the terms of reference for the inquiry will be critical. "It will give industry players comfort to come forward and engage with the commission. If the commission moves off the terms of reference, it will have difficulty in obtaining buy-in," he says.

Ms Makhaya says the commission has done preliminary research that will form the basis for the terms of reference. It has identified key relationships in the industry that are not working, such as doctors not moving patients in the most cost-effective manner through the system. "We need a balance between competition and regulation," says Ms Makhaya, adding that "extremes" do not work.