Pricing and competition in Specialist Medical Services

Major disparities in the cost of health care have made the pricing of specialist and hospital services a contentious issue in South Africa, particularly in the private sector. To help inform policy debate, this paper profiles selected experiences on the pricing of health services, competition policy and models of buying specialist health care services from the private sector across the OECD. Firstly, South Africa is compared to OECD countries to identify countries where voluntary private health insurance – the major source of financing for private hospitals – plays a similar role. Second, this paper provides an overview of price setting across OECD health care systems. It then covers the economic rationale and the institutional arrangements which OECD countries have established to set prices, before moving to an overview of competition policy considerations surrounding these arrangements. Finally, the paper highlights a few models of buying services from the private sector for public patients, with a particular focus on Mexico and Turkey. It is argued that South Africa should separate the task of establishing a schedule of medical services from negotiations over overall payments to medical professionals.