Cost containment – does it always have to be at the peril of medical scheme members?

Costs have long been a hot button in the healthcare environment. However, in recent years and specifically since 2006, it has become more important than ever before.

“A great deal of emphasis is being placed on containing costs in order to ensure the sustainability of medical schemes,” says Martin Rimmer Acting Managing Director of Full Circle Health. “While the erosion of member benefits have resulted in short term financial gains for schemes proper product development and risk management protocols have fallen by the wayside. In the process service levels have declined.”

Rimmer says that the healthcare funding industry is rightfully placing a great deal of emphasis on getting more South Africans into the medical scheme net and on making medical scheme options as affordable as possible. “While these are laudable goals it often comes at the peril of benefits thereby negatively impacting on new and existing members, particularly those who rely heavily on their medical scheme for essential cover. Product development initiatives appear to be occurring in a vacuum - often as a result of legislative changes instead of being driven by research and development strategies. ”

“Because of declining benefits and service levels existing members feel that they are getting poor value for money. Many members are dissatisfied with their medical cover and are laying the blame for increasing costs and decreasing benefits at the door of healthcare administrators who are merely enforcing the rules. In the process medical scheme members are unfortunately either scheme hopping, buying down to hospital plans or even leaving the industry to self-insure.”

Many would argue that rising costs are entirely to blame and that there is very little that can be done to change this. Full Circle Health however has some good case studies on hand that tell a very different story and point to a noteworthy set of solutions.

“One particular scheme - with a membership base of 30,000, and approximately 85,000 beneficiaries that have been subject to our risk management processes since 2001, have historically kept it’s increases to single digits, well beyond the industry norm, while improving its benefits each year. More important still is the fact that this scheme has steadily grown its reserves from a considerable deficit to the legally required solvency level. It is gratifying to note that the success of this scheme was not at the cost of the members and this is fairly rare in today’s market,” adds Rimmer.

Rimmer cites innovative and independent research and development, hard work, prudent management and healthy business principles as some of the reasons why schemes under the management of Full Circle Health have shown such good results. “As a long standing and member-centric administrator and risk manager, we have continued to work towards initiatives that do not necessarily result in reduced benefits for members. Over many years we have introduced a number of effective managed healthcare principles to eradicate fraud, over-utilisation and over-servicing while maintaining quality and effective healthcare. Tighter governance and control, as implemented under the aegis of experienced and informed Trustees, have furthermore paid handsome dividends for all the schemes under our care”.

The 2006/2007 Annual Report of the Council for Medical Schemes (CMS) cites non-healthcare expenditure as one of the greater challenges of the industry, with non-healthcare expenditure having increased by 472.1 percent over the past 10 years. Since 2000, non-healthcare costs have seen a 101.7 percent increase and, according to the latest CMS annual report, it has grown by 3.7 percent to R8.3 billion in 2006.

“With preciously few schemes reporting single digit non-healthcare expenditure, the average figure achieved for schemes under Full Circle Health’s auspices is among the lowest in the industry and well worth highlighting. It clearly demonstrates the excellent return on investment achieved on behalf of Full Circle Health’s customers,” says Rimmer.

“Of great significance also is the fact that benefits are highly favourable when compared to that of other schemes. In all instances schemes under the administration of Full Circle Health have been able to afford significant benefits to members of all income levels, across a wide range of options in a market hard pressed by benefit cuts.”

Provider accessibility remains important to a prospective member decision making process. Medical Schemes that are customers of Full Circle Health have the luxury of choosing between closed or open networks of providers for their members, thereby affording them the freedom of choice. Good benefits hold great appeal to members particularly when they are coupled with fair increases and a healthy, sustainable medical scheme.

“The business philosophy of Full Circle Health is that good corporate governance is directly proportional to good performance. This, along with a total dedication to meeting the needs of the schemes under our management has been our driving force and the reason why we have continuously reflected excellent results for our clients,” concludes Rimmer.