Certificates of need are back on the table for the healthcare sector, though they are, to use a technical term, flapdoodle.
About a year ago, the high court issued an extremely welcome ruling that declared the National Health Act’s provisions in sections 36 to 40 that anyone who provides any health services must first acquire a so-called certificate of need, to be unconstitutional.
These provisions require the director-general (DG) of the Department of Health (DoH) to take into account various factors, including but not limited to demographics, ‘equitable distribution and rationalisation of health services and healthcare resources’, and the need to ‘promote an appropriate mix of public and private health services’.
Most pointedly, it requires the DG to determine ‘the probability of the financial sustainability of the health establishment or health agency’.
At the behest of the Solidarity Trade Union, the Alliance of South African Independent Practitioners Associations, the South African Private Practitioner Forum and several individuals, the North Gauteng High Court struck these provisions down on the grounds that they are unclear, give the DG unlimited discretionary powers, are inconsistent with the purposes of the National Health Act, and violate sections 10, 21, 22, 25 and 27 of the Constitution.
They violate the right to human dignity by vesting in the state the power to override the choices that healthcare personnel have made for themselves and their families. They violate the right to freedom of movement and to reside anywhere in the Republic. They violate the right to choose one’s trade, occupation or profession freely. They violate private property rights. And they violate the right to have access to healthcare services.
The ruling was not opposed by the respondents, the Minister of Health, the President and the DG. The judge, acting justice A J Bokako, spent a paragraph or two justifying why the court was competent to make its ruling notwithstanding the absence of the state.
Slapstick
In a slapstick turn of events, the DoH has been able to make the case that the state’s absence was not mere uninterest or incompetence, but that the respondents had never been served.
Apparently, when the sheriff tried to serve papers on the minister, they were told by the receptionist that no one from the legal department was available to accept the documents.
Instead of making the receptionist sign for them, or returning when the legal department had returned from their boozy lunch, the sheriff simply left without serving the papers on anyone.
The applicants’ attorneys emailed the court papers to the respondents, but that isn’t how you legally serve notice of motion.
Because the respondents were never legally served, judge Brenda Neukircher of the North Gauteng High Court last week – correctly, it pains me to say – rescinded last year’s landmark judgment.
Now the entire challenge will have to be heard again from scratch, and this time not unopposed.
If you’re a flunky of the court, and you ever think your work is not important, just consider that you can literally make or break important rulings about the constitutionality of laws just by being a half-wit. And several half-wit flunkies had to have been involved to produce a fiasco of this magnitude.
Flapdoodle
This makes it once again apposite to point out, beyond the excellent arguments made by acting justice Bokako, that the entire notion of certificates of need is, well, flapdoodle, which is a venerable, 200-year-old technical term for craziness, farce, folly, foolishness, idiocy, insanity, silliness, stupidity, applesauce, illogicality, inanity, incongruity, irrationality, jazz, jive, ridiculousness, senselessness, ludicrousness, or baloney.
The only way to determine whether a given enterprise, at a given location, offering a given set of products or services, will be successful, is to establish such an enterprise. If it is profitable after a reasonable amount of time, there was a need. If it is not, there wasn’t.
That’s it. The government has no means to determine whether or not there is a need for a doctor’s practice in a particular area, or a need for a dentist, or a need for a private clinic.
There are a great many unmeasurable factors that make a difference to whether there is a need for a given service in a given community.
What’s worse, certificates of need will only serve to insulate private healthcare practitioners from rivals in their area, reducing price competition and raising the cost of healthcare.
Subjective demand
In my town, there are several cheap dentists, who serve people with adequate but inexpensive care; they are usually fully booked weeks in advance. There are others who specialise in reconstructive and cosmetic work. One is the go-to guy for implants. Others are good with children. One talks entirely too much. A few are renowned for having all the latest technology, but only larney people go there.
Same with general practitioners. A few are strict and conservative, and would never dispense pain pills or antibiotics without good reason. A few are pushovers, who’ll rarely contradict internet-educated patients. One is well-known for his interest in and knowledge of mental healthcare. One is respected for dealing well with women’s issues. Some specialise in geriatric complaints. One is known for his knowledge of sports injuries. And several are here just because they want a laid-back practice in a chill beach town with three excellent golf courses before they retire.
No government bureaucrat can determine whether any of them are ‘needed’ in my community. There isn’t a formula that reliably spits out that there must be x number of doctors of kind y per 100 000 population.
The only way to tell whether there is a need for them is whether or not they choose to be there because patients subjectively value their service enough and their practice makes them an income they can live with.
Central planning
A government-issued certificate of need is a tool of central planning. It is, therefore, an important pillar of the socialist National Health Insurance scheme that both I and my colleague Jonathan Katzenellenbogen had occasion to critique this week.
Not only that, but central planning – a command economy – is what the ANC’s ideological lodestone, the National Democratic Revolution, ultimately demands.
Yet, as we all ought to know, thanks to the calamitous socialist experiments of the 20th century, central planning does not work, and the inability of the state to determine need is at the heart of its failure.
The economic calculation problem was described by Ludwig von Mises over a century ago in his essay Economic Calculation in the Socialist Commonwealth.
In a market economy, the price mechanism signals consumer needs and wants to producers, and signals producer costs and relative scarcity back to consumers. The knowledge contained in market prices is widely distributed, and reflects a myriad subjective value judgements. It is an imperfect but self-correcting system, and operates well at any scale.
In a socialist economy, where the factors of production are all owned collectively instead of by private individuals or companies, there are no market prices. No single person or organisation can ever have access to all the information represented by market prices.
That means that any prospective central planner, no matter how competent and well-resourced, will always have less – far less – information at their disposal than a well-functioning market contains. With the best will in the world, they have woefully inadequate information upon which to base their economic calculations and decisions.
According to Mises, without market prices it is impossible to determine the best use of resources and allocate them efficiently. Market prices, and market prices alone, provide sufficient information about relative scarcity and the value of goods and services to permit rational decision-making.
‘This isn’t,’ as Friedrich Hayek pointed out, ‘a dispute about whether planning is to be done or not. It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals.’
Ignis fatuus
There are some potentially defensible reasons why the government wants to interfere in the healthcare market. One is to ensure that healthcare is as accessible to the poor masses as it is to the more prosperous members of society.
It is not unreasonable to believe that healthcare is a matter of need, and not ability to pay.
There are other ways than top-down planning by which to achieve such goals, however. The government could fix the existing public healthcare system and root out corruption to ensure that the poor can rely upon the state for their healthcare. The government could subsidise healthcare in poorer neighbourhoods by issuing means-tested, tax-funded vouchers that people can use to pay for private healthcare services. The government could even make private health insurance mandatory, but priced progressively according to income level.
All of these interventions would make the market less efficient, but they wouldn’t fundamentally break the price mechanism that is the cornerstone of a decentralised market economy.
Thinking that the DG of the DoH will ever be capable of orchestrating the geographic distribution of private healthcare to adequately meet demand is, to use another technical term, ignis fatuus – a foolish fire, a will-o’-the-wisp, a friar’s lantern, an apparition, a mirage, a chimera, a daydream, a fallacy, a fancy, a fantasy and a delusion.
It also violates sections 10, 21, 22, 25 and 27 of the Constitution, as the good judge Bokako eloquently explained, and the long-suffering appellants will have to prove in court all over again.
[Image: Soviet-era poster, the legend of which translates as ‘The task of the party is performed!’]
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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