Information asymmetry and the misalignment of incentives in the South African private healthcare sector

Type Thesis or Dissertation - PhD Thesis
Title Information asymmetry and the misalignment of incentives in the South African private healthcare sector
Publication (Day/Month/Year) 2023
Healthcare markets are notorious for information asymmetry, which may result in the inefficient organisation of scarce resources. This dissertation examines information asymmetry occurring in both the demand for and supply of healthcare in the private sector of South Africa. This dissertation’s main contribution is of insights into inefficiencies within the private healthcare sector resulting from inherent information asymmetry in healthcare markets. These inefficiencies in the South African context make healthcare more expensive than it should be. The government has started implementing the National Health Insurance (NHI) which will require an efficient allocation of scarce resources. Research in South Africa is primarily focused on the public sector, although there are many lessons to learn from the private sector. The first essay discusses the presence of adverse selection in the market for health insurance in South Africa. It then examines individuals’ demand for insurance by identifying characteristics that influence
their propensity to insure. The study found that some adverse selection may be built into the health insurance market. Individuals have a higher tendency to purchase insurance if they have a chronic condition or are pregnant. However, socio-economic factors appear to be major contributing factors to individuals’ insurance purchasing decisions. Once people join a medical scheme, they tend to maintain their membership. Therefore, measures to address wasteful healthcare spending that would decrease the overall cost of healthcare and, ultimately, the cost of insurance could sustainably increase the size of the risk pool. The second essay reports the results of a survey to investigate variations in treatment decisions among spine surgeons. It also identifies associations between surgeons’ characteristics and the treatment they select. The findings make a case for evaluating outcomes and costs to identify value-based care. Such research would assist countries seeking to contract with providers based on value. Greater uniformity in treatment and easy reporting of outcomes would provide guidance to patients. Further investment in training and participation in fellowship programmes may be necessary, along with greater dissemination of information from the literature.
The third essay reports on a case study of rhizotomies to identify necessary conditions and red flags that could provide plausible signs of supplier-induced demand. A rhizotomy is a low-risk, discretionary procedure that is one of many treatments a patient can receive to address chronic back pain. The study used claims data from a large health insurer to investigate four broad themes: outcomes of the treatment, practitioner and patient characteristics, incidence and the total cost of trends, and practitioner landscape. This study found that some practitioners are likely to induce demand for rhizotomies. It illustrates how analysing claims data could assist in detecting supplier-induced demand. It indicates the need to pool claims data across the industry to provide funders with a useful tool to address such demand and overservicing, and to develop benefit options based on high-value

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