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CMS Annual Report shows SA healthcare in strong shape, attracting new members

05 September 2012 Andre Jacobs, Business Unit Head: National Operations - Healthcare, at Aon Hewitt South Africa
Andre Jacobs, Business Unit Head: National Operations - Healthcare, at Aon Hewitt South Africa

Andre Jacobs, Business Unit Head: National Operations - Healthcare, at Aon Hewitt South Africa

South Africa’s medical scheme industry is in exceptionally positive shape, according to an annual report published yesterday by the Registrar of Medical Schemes, Dr Monwabasi Gantsho, for the period ending December 2011.

According to Andre Jacobs, Business Unit Head: National Operations - Healthcare, at Aon Hewitt South Africa, there are two positive themes that stand out in the report. “The private healthcare industry, which has been regulated for just over a decade under the New Medical Schemes Act, has had a positive contribution to the entire health system in South Africa and private medical schemes are more financially sustainable than before.”

Membership of medical schemes still increasing with fewer dependants covered:

Membership of medical schemes increased by 3,3% from 3612 062 to 3730 565 principal members. Open medical schemes grew marginally with only 9 839 principal members or 0,5%, whereas restricted membership medical schemes grew their membership by 7,5% from 1439 339 to 1548 003. “This was due in large part to further strong growth in the Government employees medical scheme, which added approximately 75000 principal members during the period, whilst the platinum mining industry contributed about 22000 new members.”

“Dependants on open medical schemes decreased with 1,9% and increased with 6,8% on restricted membership medical schemes. Affordability seems to still drive the reduced number of dependants covered in comparison to principal members,” says Jacobs.

“It is expected that the average age of medical scheme members will grow from one year to the other. However the average age stayed relatively constant and the private medical scheme industry has only aged one year since 2004. This is a very positive development, as this means that younger members are joining medical schemes whilst the private medical scheme industry has more pensioners (Older than 65 years) year-on-year.”

Benefit utilisation: Lifestyle related diseases drive up cost:

Healthcare expenditure relating to hospitalisation remains the largest portion of the total healthcare spend. The pure hospital cost (ward fees, theatre fees consumables and medicines) is responsible for 36,6% of the total healthcare spend. Contributing factors to the 9,7% increase in hospital expenditure are a larger number of members (3,3%), 5,3% more members being hospitalised, the length of stay when hospitalised is increasing and a continuous decreasing in the utilisation of public hospitals which now represents less than 1% of total hospital spend.

“In terms of Aon Hewitt’s own research, 8 lifestyle behaviours drive 15 chronic conditions that are responsible for 80% of healthcare costs. This research is supported by similar findings by the World Health Organisation (WHO) and is consistent with the burden of disease experienced by private medical schemes.”

Jacobs notes that more routine or day-to-day benefits are being provided for in the form of medical savings accounts. “This clearly indicates that a larger portion of the day-to-day risks are pushed away from the medical scheme’s risk component onto members.”

Financial health and sustainability:

Medical scheme contributions increased by 11,3% to R 107,4 billion whilst total gross relevant healthcare expenditure increased by 10,3% to R 93,6 billion. “This position clearly indicates that medical schemes collected more contributions than claims being paid out. Even if the cost of non-healthcare expenditure of R 12,1billion is added then there is still a surplus.”

The difference between the assets of a medical scheme and its liabilities represents the liquidity gap. A positive number indicates that a medical scheme has sufficient assets to meet its liabilities. The total-asset-to-liability ratio for open and restricted membership medical schemes increased from 3.5:1 to 3.7:1 and from 4.0:1 to 4.1: 1 respectively.

Peter Drucker reminded us that you cannot have a healthy business in an unhealthy society. South Africa is not immune to this business truth and the Dinokeng Scenarios established by the National Planning Commission identified that the future of our country is in a precious balance. Healthcare was identified as a key indicator and driver of success. Employers and members of medical schemes need to become less reliant on the curative medical scheme benefits and should actively design and engage in plans to change our lifestyle and become a healthier nation,” concludes Jacobs.

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