As we contemplate the first newsletter for 2010 FANews Online would like to take a moment to wish all of our readers a happy and prosperous New Year. We trust you’ve returned from holiday refreshed and invigorated, ready to make the best of every opportunity and to successfully negotiate every challenge 2010 has in store! As a provider of news relevant to the financial services industry our major headache through holiday periods is to find newsworthy items. Fortunately, while the rest of us enjoyed our December 2009 vacation, the Council for Medical Schemes (CMS) went into overdrive.
We arrived back at the office to find a barrage of press releases from the medical schemes regulator. It makes sense to take a quick look at the main announcements over the December period. In a 21 December 2009 release the CMS confirmed that the Department of Health had announced a 7.9% tariff increase for the reference price list (RPL) for 2010. Minister of Health, Dr A Motsoaledi announced the tariff adjustment as “an interim and temporary measure” for the RPL. On the same day, the CMS alerted the medical industry to a new “therapeutic algorithm for the management of bipolar mood disorder.” Details were published in the Government Gazette of 21 December 2009.
Brokers score a small increase
Medical scheme brokers were apprised of their 2010 increases. Circular No 38 of 2009 declared an increase in fees payable to brokers with effect from 1 January 2010. The CMS confirmed that the Minister of Health had “approved an increase in the maximum amount payable to brokers in terms of Section 65 of the Medical Schemes Act, 1998” to R65.65. The circular states:
The maximum amount payable to a broker by a medical scheme in respect of the introduction of a member to a medical scheme by that broker and the provision of ongoing services or advice to that member shall not exceed:
- R65.65 plus value added tax (VAT) per month, or such other monthly amount as the Minister shall determine annually in the Government Gazette, taking into consideration the rate of normal inflation;
- 3% plus value added tax (VAT) of the contributions payable in respect of that member, whichever is lesser…
Regulated prices have a huge impact on service providers in the healthcare space. In a release titled: How Medical Schemes will manage the Cost of Pharmaceuticals in 2010? Profmed Medical Scheme assessed the impact of the 13.2% increase in the Single Exit Price (SEP) of medicines awarded by the Minister of Health on 24 December 2008. According to Mathew Dijkstra, Clinical Operations Director of Medikredit, the increase “caused a knock on effect of between 8% and 10% percent on the price of private healthcare between January and October 2009!”
Schemes take strain due to ‘late’ announcement
The above-inflation increase was felt hardest by the country’s medical schemes. “The 13.2% increase was awarded long after medical schemes were required to submit proposed increases in premiums to the CMS,” said Graham Anderson, Principal Officer of Profmed. “While we would have made provision for a 6% increase or so, the 13.2% took everyone by surprise!” Profmed’s price and utilisation trend experiences were in line with those experienced by other medical schemes.
To make matters worse, the cost of medicines to medical schemes increased in excess of the regulated price increase. Profmed says acute medicines increased by 17% and chronic and prescribed minimum benefit (PMB) medicines by 15% over the 10 month beginning January 2009. “2009 was a heavy year in terms of pharmaceutical spend and consumption for medical schemes,” said Dijkstra, adding that 2010 would be tough too. Medical schemes would have to actively manage the costs associated with medicines by considering generic alternatives or cheaper medicines in similar therapeutic groups
Management of members and scheme benefits is another way to place a cap on soaring medicine costs. “We will be presenting our members with more pharmaceutical-related choices in our benefit design next year. ‘Reference pricing’, a broad term which allows medical schemes to contain costs by favouring cost effective choices, encourages members to be active participants in their health management. From a scheme management point of view, it allows for cost containment, while giving members choice of the medicine they prefer to use,” said Anderson.
Can generic drugs really curtail medicine costs? It seems not! Despite generic medicines making up 44% of chronic drugs prescribed in 2009 (20% in 2002), total medicine costs are still climbing at rates in excess of inflation year after year...
Editor’s thoughts: Hospital, medicine and medical practitioner costs remain of major concern to all stakeholders in the healthcare industry. Following President Jacob Zuma’s comments at the ANC’s 98th birthday celebrations we expect government will redouble its National Health Insurance implementation efforts through 2010. Will government insist on a hasty NHI implementation, or will commonsense prevail? Add your comments below, or send them to gareth@fanews.co.za
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