No end in sight to groundless healthcare litigation
South Africa’s 100 medical schemes face near insurmountable obstacles in matching member premiums to escalating healthcare costs. Many industry stakeholders pin the blame for today’s rampant healthcare inflation on the private sector. They finger hospital
Medical schemes responded to this regulatory intervention by introducing scheme rules to limit their financial exposure in complying with PMB requirements. They stipulated that members use scheme-appointed Designated Service Provider (DSPs) or incur self-funded co-payments, and also set maximum limits for provider charges. Any hopes the schemes had of managing expenses in this way were dashed when the High Court ruled that they had to “pay in full” for PMBs. The problem is compounded due to the absence of a Reference Price List (scrapped in July 2010) and the Health Professional Council of South Africa decision to withdraw its ethical price list. Add to this the fact that competition regulation prohibits medical schemes from entering into collective bargaining arrangements with healthcare providers and the stage is set for providers to charge whatever they choose.
Going from bad to worse...
PMB-related costs no doubt contributed to the medical schemes industry’s R2.6 billion 2009 healthcare deficit (CMS 2010/11 Annual Report). The “loss” narrowed slightly to “only” R459.6 million in 2010 and it is hoped the deficit will narrow again in 2011. But medical schemes and their members cannot breathe a collective sigh of relief just yet. It appears that the National Consumer Commission (NCC) is readying another anti-scheme broadside. A report in The Sunday Independent said the NCC was appalled by what they believed to be “discriminatory” medical schemes’ rules. The paper reported that the commission wanted to haul four of the country’s top medical schemes and the CMS before the Equality Court.
In what must be described as the most bizarre example of gender-based political correctness ever, the commissioner suggested that medical schemes were discriminating against women by imposing waiting periods on pregnant women wishing to join a medical scheme. By Tuesday, 17 July 2012, the Board of Healthcare Funders (BHF) rallied against this insanity. “The BHF will be taking legal advice which may result in legal action against the Consumer commissioner for statements made regarding medical schemes,” they said. “We find the commissioner’s statements to be misguided and damaging to the medical schemes industry.”
The NCC statements show scant regard for how medical schemes (and most insurance arrangements for that matter) work. Medical schemes are cooperatives where members’ monies are pooled to pay for healthcare expenses as they are incurred by existing members. To allow a new member to join a scheme months, weeks or days before an expensive medical procedure would severely prejudice existing members. Such behaviour would result in medical schemes’ reserves being depleted in record time.
A word from the trenches
What is going on here? We thought waiting periods were standard practice in medical schemes worldwide. We approached Liberty Medical Scheme (LMS) to shed some light on the matter. “LMS applies similar late joiner penalties [to those highlighted in the article] where it feels it is necessary,” they said. “Medical schemes are allowed to apply these penalties as they are prescribed in the Medial Schemes Act.”
“Waiting periods are there to protect members of medical schemes against those who do not join a medical scheme when they are younger and healthier, but only join at a later stage as they age or when they fall sick. Waiting periods are among the few measures schemes can put in place to protect against anti-selection and help to maintain a healthy solvency ratio.”
LMS is of the opinion that imposing late joiner penalties is non-discriminatory and protects the interests of the scheme’s existing members. They believe that the court action should be challenged.
When approached for comment, Damian McHugh, head of marketing at Momentum Health said: “We have not received any summons to date and we will only be able to comment once it the same has been received and investigated.”
How to bankrupt a “not for profit” business
The Medical Schemes Act stipulates that medical schemes may not make profits. The funds which make up a medical scheme are provided solely from the members’ monthly premiums – and aside from maintaining a regulated 25% solvency ratio – schemes must use such funds to settle members’ healthcare and fund administration expenses. Changes implemented to the medical schemes environment over the past two decades have drastically altered both the risk pools and the level of cover afforded to members and their beneficiaries. Although most changes have been for the greater good, the net result is an ongoing upward spiral in monthly premiums with the result fewer members can afford their scheme’s top benefit option.
“A change such as that which the NCC is calling for would deplete medical schemes’ reserves and potentially bankrupt the system,” concludes the BHF. This in turn would result in a greater burden on an already stressed public sector as some 8.5 million existing medical scheme beneficiaries turn to the state for assistance.
Editor’s thoughts: The Board of Healthcare Funders (and others) has just emerged from a bruising High Court encounter with the Council for Medical Schemes. Now they may have to join hands with the CMS in a battle against a non-medical consumer body, the National Consumer Commissioner, in the Equality Court. It seems as if South Africa’s medical schemes are hostage to legislation and enforcement. Are you concerned with how often medical schemes are drawn into protracted court battles? Add your comment below, or send it to [email protected]
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