There is change afoot in South Africa’s healthcare environment. In its current form approximately 8.315 million individuals benefit from varying levels of access to healthcare thanks to their private medical scheme membership, while the balance of the country’s 50 million citizens rely on the public sector. Over the next five years the Department of Health (DoH) plans to implement a National Health Insurance (NHI) solution to provide basic access to healthcare services for all. Their hope is that the NHI will extend basic services similar to those currently offered to private medical scheme members! Whether this NHI solution is phased in or rushed through, South Africa’s medical schemes environment will look very different five years from now.
The Council for Medical Schemes (CMS) is aware of the pending changes, but seems nonplussed by the likely decimation of the private medical schemes industry. The reason – it seems – is that the body set up to regulate [the medical schemes industry] fairly and effectively in order to protect the interests of beneficiaries and to promote equity in access to medical schemes, now views itself a regulator of private healthcare providers too. “The healthcare landscape is undergoing some significant and exciting changes – changes which have implications for the way in which we regulate medical schemes and private healthcare in South Africa,” comments William Pick, Chairperson of the CMS in the organisation’s Annual Report 2010/11. Only time will tell what role the CMS plays in the future… But its certain a full-blown NHI implementation will lead to closures and consolidations in the sector it currently regulates. The CMS Annual Report provides a perfect snapshot of the pre-NHI medical schemes environment…
State of play, 31 December 2010…
The number of citizens covered by private medical schemes has grown at a snail’s pace over the past few years. By 31 December 2010 there were 3 612 062 principal members (up 3.6% on 2010) and 4 703 656 (up 3.1%) dependants – or a total 8 315 718 individuals covered by private medical schemes. This slow growth was confirmed in the CMS Annual Report, which also highlighted the declining trend in the number of active medical schemes. As we entered 2011 there were 99 registered medical schemes versus 105 a year previously. This decline exhibits in both open (down from 30 to 28) and restricted (down from 75 to 71) schemes.
The 2010/11 period saw a number of regulatory interventions in the market with the liquidation of the Gen-Health Medical scheme on 12 October 2010. Scheme members were given an opportunity to transfer to another scheme – the Medshield Medical Scheme. And on 29 October 2010 the Protea Medical Aid Society was placed under curatorship following an investigation that revealed irregularities relating to the running of the scheme. The High Court appointed a curator to ensure that the scheme remained solvent and regained its financial sustainability. This type of activity is likely to continue through 2011 as schemes come under increasing financial pressure.
A very expensive business
The DoH and other industry stakeholders have consistently raised concerns over the escalation in healthcare costs. As usual, the Annual Report 2010/11 reveals an inflation-plus escalation in monies spent by private schemes on service providers. The total healthcare benefits paid increased by 11% to R84.7 billion. The bulk of this cash went to hospitals – R30.8bn to private hospitals and a paltry R281.5 million to public hospitals. Incidentally, this figure indicates how much faith existing medical schemes beneficiaries place in the public healthcare system. Other expenditure included medical specialists (R18.8 billion), payments to non-hospital pharmacists and providers (R14 billion), general practitioners (R6.2 billion) and dentists (R885 million). The private sector points out this increase should be viewed in light of the additional members covered, increasing burden of PMB payments and inflation...
Approximately 90% of total expenditure was covered out of the so-called risk premium managed by the private medical schemes. Drilling down to the member level we find the following: The average open medical scheme beneficiary contributed R905.6 per month for risk premium and R137.2 per month for savings, from which an average R767.2 and R130.9 was paid out… The numbers for a restricted member are similar, with R860.3 and R62.6 being contributed versus R785.1 and R57.5 paid out.
The annual “whipping boy” – administration
Despite actual healthcare expenditures gobbling up the bulk of funding, the “whipping boy” for regulators inevitably becomes administration expenses. This year these grew by only 4.4% to R7.8 billion. Open schemes were impressive, with an insignificant 1.4% increase versus the 13.1% hike in restricted schemes… The CMS dismisses this hike as inevitable due to the massive increase in restricted schemes membership over the period, with the Government Employee Medical Scheme (GEMS) alone signing on 34.7% more beneficiaries.
Although broker costs (described as all commissions, service fees and other distribution costs) make up a mere 11.4% of total non-healthcare expenditures the CMS was quick to jump on this expense category. For schemes that pay broker commissions, the amounts paid on a “per average member per month” basis increased to R44.40 in 2010 from R41.20 in 2009, representing an increase of 7.7%. The CMS was however not happy with the increase in so-called broker service fees, which they felt were going up at a rate much higher than new member sign-on. “It is of concern that even while some of these schemes’ broker commission pampm exceeded the industry average, they also incurred additional distribution fees in respect of their broker network,” they say.
Going forward? Pick reckons: “The emergence of a National Health Insurance (NHI) system and its successful implementation depend on South Africa’s ability to regulate health service provision such that the interests of South Africans are both served and protected.” And he warns: “Unless the NHI is regulated efficiently and effectively, it will be yet another source of profit for a very creative, consumptive private sector, coming at the expense of the people of South Africa.” Is this the first sign that a failed NHI will be blamed on the private sector? We pored over the CMS report but couldn’t find any comment on levels of care in the public sector…
Editor’s thoughts: Over the past few years government has been hard at work to fight healthcare inflation… But despite initiatives such as PMBs the cost of provision creeps higher every year. Is regulation the answer – or should we be looking at other efficiencies? And do you think the CMS will play a direct role in price regulation among private healthcare providers (general practitioners, specialists and hospitals) in future? Please add your comment below, or send it to gareth@fanews.co.za
Comments
Added by Ernest, 14 Sep 2011