Government attempts over the past five years to get private medical schemes to take care of more South Africans have failed as high costs have generally precluded those earning less than R5 000 from joining private schemes.
Medical inflation has outpaced overall inflation by around 5% every year, and this has virtually nullified regulations introduced from January 1999 aimed at opening up the private sector.
Scheme membership has stagnated and there has been no significant increase in beneficiaries (members plus dependents) since the regulations were introduced, according to researchers Jane Doherty and Professor Heather McLeod, writing in the latest SA Health Review (24 march embargo).
In fact, there is a trend towards people down-grading their medical packages or opting for hospital plans only as they find they are paying proportionally more of their earnings on healthcare each month.
Only about 16% of South Africans ‘ approximately seven million people ‘ belong to medical aid schemes but over 50% of the country’s spending on healthcare is in the private sector, which generates some R35-billion annually.
The Council for Medical Schemes (CMS), the statutory body that aims to protect the interests of both schemes and members, says schemes need to take part of the blame for cost increases.
CMS CEO, Patrick Masobe, says “poor benefit design by medical schemes and poor risk management which focuses on excluding the elderly and less healthy as opposed to putting a focus on managing access to appropriate health care” are two big reasons for cost increases.
Masobe, who is also the Registrar for medical schemes, also lists “rampant non-health costs, including high administration fees and broker commission; inappropriate use of reinsurance; inefficient prescribing of drugs as well as purchasing decisions on drugs and hospital beds”.
From January 2004, government has pegged the commission paid to medical scheme brokers ‘ people who recruit members to open schemes ‘ at a maximum of 3%.
It has also ruled that all basic health packages include treatment for 25 chronic diseases such as diabetes, hypertension and asthma.
This is to counter a trend by medical schemes which, when compelled by 1999 regulations to accept all paying customers and their dependents, tended to only offered chronic care cover on more expensive packages.
Government and the CMS were concerned that this was a backdoor method of excluding sicker and older people or dumping them back on the public sector once their benefits were exhausted.
The CMS is adamant that the compulsory chronic care “should not push costs up to consumers”, and commissioned the University of Cape Town’s Centre for Actuarial Research to cost its introduction.
Using records from the country’s largest medical administrator, Medscheme, the centre concluded that adding the chronic care to the prescribed minimum benefits package should mean that the new basic package costs R640.33 (2001 prices) a month for a family of two adults and two children using private facilities.
These costs could be cut by around 30% if private patients were treated at state facilities.
Both Medscheme, the country’s biggest administrator of schemes, and Discovery, the country’s biggest open medical scheme, say that they do not expect the chronic care package to push premiums up.
However, Medscheme’s MD for Group Services, Gary Taylor points out that the basic prescribed package excludes primary health care costs.
“Research shows that most people want their medical aids to cover the cost of visits to their doctor,” says Taylor. “So while it may be correct actuarially to say that a medical scheme can offer a basic package at that price, such a package is not likely to be desirable (to potential members) and would need to be extended.”
Discovery’s clinical manager, Brian Ruff, says that at this year’s prices, the basic package would cost around R840 a month, which is higher than his company’s lowest package, Key Health Core (R719).
However, he says costs depend on whether schemes will be obliged to cover all drugs for the 25 chronic conditions or whether there will be an essential drug list for these.
Ruff does not believe that public health will result in a 30% saving unless the state provides private patients with medication it has obtained through the state tender system.
“If they supply these drugs to a legitimate paid-up medical scheme member, they could face a legal challenge from the pharmaceutical companies,” says Ruff.
Taylor blames a range of factors for cost increases, including expensive new medical technology; new diseases such as HIV/AIDS; and increase in old diseases such as depression; more demand for specialists; fraud and abuse; stressful lifestyles and an ageing population
Doherty and McLeod blame the fee-for-service system, saying that this often results in healthcare providers over-servicing medical schemes members.
Taylor agrees that over-servicing is a serious problem. “Around R1 in every R3 spent on health is for treatment that is not essential,” he asserts.
He agrees with Doherty and McLeod that the only way to contain costs is to introduce managed healthcare, but disputes their assertion that managed care hasn’t been introduced properly in the country.
“We have been involved in managed care for some time. We don’t simply believe in financial management, with limits and patients’ saving accounts,” says Taylor.
“If a diabetic runs out of medication in November, that person is probably going to end up in hospital and cost the scheme a lot more. For this reason, we have become involved in actual disease management. Many of the schemes we manage play a gatekeeper role, checking to see whether treatment is necessary.”
For the past year, Medscheme members on the cheapest schemes have been directed to Prime Cure Centres, which are essentially primary healthcare clinics. Nurses do a lot of the initial examinations rather than doctors, and members can only see specialists if the centre refers them.
“There is resistance to these centres, but mainly from the top-end users,” says Taylor. “If people want choice, they must be prepared to pay more. If they want cheaper medical care, they must be prepared to sacrifice some freedom of choice.”
Discovery is also concerned with cost-cutting, says Ruff. He points out that hospitals consume the biggest slice of the private schemes’ pie. For this reason, Discovery directs its members to Afrox and MediClinic hospitals only.
“We have an alternative reimbursement agreement with these hospitals,” says Ruff. “This is a risk-sharing agreement, in which we negotiate a predictable rate before the patient is admitted. This changes the incentive for the hospital and ensures that they do not use unnecessary medication or procedures.”
Discovery also encourages the use of generic drugs, especially for chronic care.
However, Ruff says that the prescribed minimum benefits (PMB) introduced by government in 1999 have acted as a barrier to lower income members.
“We need to dilute the 269 benefits guaranteed by the PMB to about 100, or introduce a tiered approach to PMB in order to attract lower income members,” says Ruff.