Big changes loom for healthcare environment
There are numerous proposed legislative changes that will impact on the medical schemes and healthcare environment in coming years. The Medical Schemes Amendment Bill, Insurance Laws, National Health Act and changes to Prescribed Minimum Benefit (PMB) and the NHRPL were among the items mentioned at the Absa Health Care Consultants’ Annual Client Seminar 2008 at Gallagher Estates, 9 September 2008. Dr Brian Ruff, Head of Clinical Risk Management at Discovery, spent half an hour discussing the Health Care Outlook for the next three to five years.
“There’s a great deal of regulatory work going on at the moment. There’s lots of debate and the emphasis is very much on expanding access to healthcare and controlling the cost of healthcare,” said Ruff. He noted that a number of the proposed changes would get ‘stuck’ between proposal and implementation as a result of position changes during the 2009 elections. He also said it was clear that government was firmly on the path to a social healthcare system.
National Health Insurance versus Social Health Care
In fact, recent developments from the ruling party’s December 2007 Polokwane conference suggest government is getting ready to implement a National Health Insurance (NHI) system. This inclusive system would include all income earners on a pay-as-you-earn basis. Ruff warned that NHI would be unaffordable in the short-term. He estimates that approximately 30% of GDP would be required to extend current private healthcare to the entire population!
“The essential difference between NHI and SHI is that it provides cover for everyone, whether they are employed or not,” said Ruff. There was, however, no danger of the nationalisation of the demand side (funds) and the disappearance of supply side (the private healthcare sector).
To implement NHI government will have to find solutions to revenue collection, risk pooling and the purchasing function. Ruff says we might end up with a single revenue collection under NHI with all those funds going into a single risk pool. This same organisation would then become the healthcare purchaser. An alternative to this solution would be for the purchasing body to split up into a number of different purchasing bodies.
Challenges facing medical schemes
Daunting changes in the regulatory environment aside, the entire medical industry remains under fire to keep costs to a minimum. Ruff noted that the challenges include “rampant medical inflation, adverse membership movements and the international phenomena of managing new technologies.” This was made more difficult by government’s icy reception of any increase in the premiums charged by medical schemes. Ruff said it was unlikely the 2009 premium increases would be as low as those seen in 2007 and 2008.
He mentioned three major developments that would drive medical costs higher. The first problem is inflation. Costs are rising across all sectors of the South African economy – and while medical inflation is under control where medicines, general practitioners and medical scheme administration is concerned, private hospitals and specialists remain areas of concern. Ruff observed that medical inflation in an unregulated environment would probably be in the region of CPI plus 10% to 15%. Can you imagine a 20% or greater increase in medical schemes cost?
The second influence on medical scheme premiums relates back to solvency ratios. A number of schemes have fallen behind the regulatory requirement of a 25% solvency ratio and will have to cover the shortfall from premium increases. And the third factor is that a number of medical schemes are now in a position where they have to recover operating losses recorded in previous periods.
Factors for success
Critical factors for medical schemes success remain “size, prudent financial management, a balance of cost and quality of care and a focus on wellness.” Provided a medical scheme is run along these lines it should succeed. Ruff used examples from Discovery Health Medical Scheme to show how various interventions had resulted in savings to the scheme of as much as R1.4bn per year. Money could be saved by moving hospitals to generic medicines, by reducing the average length of hospital stays and by correctly identifying emergencies.
Editor’s thoughts:
While the financial services industry grapples with the implications attached to a National Social Security System, government is busying itself with another financial services intervention. They have ambitious plans to spring National Health Insurance on the struggling population. Do you think that government’s shift from a social-based healthcare solution to National Health Insurance is the right way to go? Add your comment below, or send to [email protected]
