A dynamic health care sector for South Africa

Private healthcare service providers and manufacturers of healthcare products operate industrial enterprises. Governments should therefore treat them like any other enterprise doing any other business. No amount of altruistic rhetoric can change that reality.

It is strange that the myth still prevails that there should be an element of altruism in the equation of the healthcare dispensing and consumption business. The people who invest years of toil and capital, studying to be health care service providers and manufacturers (doctors, nurses, pharmacists and other medical specialists) are motivated primarily by the belief that ultimately the years of sacrifice in pursuit of their careers will come to fruition; that they will be compensated for their investment in their intellectual capital. In business language this simply means that they believe they will realise returns on their investments.

The bottom line is that if healthcare professionals and businesses in the healthcare sector feel that their remuneration or returns are not commensurate with what they put in, they look for other options. This is the fundamental problem with the concept of price control on pharmaceutical products in particular and some aspects of healthcare policy generally.

There is an inclination to prejudice the healthcare sector through cumbersome policy measures. This inclination results from a failure to recognise that the health care industry is composed of people who are serving the sick and infirm, relieving suffering, treating and nursing people back to health.

Portraying people who provide essential and highly valued services as greedy interests profiting from the misfortunes and tragedies of others is a biased misrepresentation. Why do critics not portray food retailers as profiting from hungry consumers and expect them to carry out their work for little or no profit, and in some cases free of charge? Is it because health care is usually more critical, more immediate, with recipients closer to death? Are people to be rewarded less for providing services that can mean the difference between pain or no pain, life or death?

At the time we require a life-or-death medical intervention, would we not be prepared to give everything we possess to be relieved of suffering or to have our lives saved? However, once the crisis is over, what part of our possessions would we give to those who have saved our lives?

In recent years South Africa has witnessed an alarming exodus of medical personnel who have opted for greener pastures. In a vain and naïve attempt to stem the tide, some government officials have appealed to the patriotic sentiments of the emigrants. Not surprisingly, medical professionals act in their own self-interest as we all do, turn a deaf ear to the appeals, and move to countries where their services are appreciated. This is a reality of human nature. Incentives motivate people and disincentives demotivate them. To moralise about this characteristic of human behaviour is an exercise in futility. We achieve more when we accept that this is how real people function.

The President’s commitment that government will lower the cost of doing business in South Africa is encouraging. To achieve this the government will have to identify and repeal legislation and regulations that constitute an impediment to the operation of businesses. The President will have to arrange for the task to be performed under his direct supervision, as it will require statesmanship and real authority. To lower the cost of business requires that SA’s legislative framework consists of a truly enabling environment.

Such an enabling environment must apply equally to the health care sector if we want it to be dynamic. South Africa has a highly developed healthcare sector in which the private and the public sectors coexist and compete. It is important that the private sector should not be sacrificed at the altar of populist rhetoric that has no regard for economic laws. To bring about wider access and affordability, latitude should be created for a proliferation of healthcare businesses and professionals all competing on the basis of providing patients with good value for money.

SA has a sound basis for providing world-class services to all patients, including the poor. However, this will not happen if the private health sector is subjected to huge costs through regulation. Government already purchases pharmaceutical products from producers at extremely low prices and, given the right framework, will be able to purchase medical services for the poor at low cost from a vibrant and growing private sector. A viable vision for health care in SA is an increasingly affluent population paying for their own health care by whatever means they choose, while government pays for services provided to a diminishing number of poor patients.

Author: Temba A Nolutshungu is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article/ 13 February 2007