Tackling healthcare issues in South Africa
In South Africa, private and public health systems exist side by side. The public system serves the vast majority of the population, but is underfunded and understaffed. The wealthiest of the population use the private system and are better served than the poor.
FAnews spoke to Mike Marshall, General Manager of Healthcare Professional Relations and Contracting at Medscheme, and Dr Elsabé Conradie, General Manager of Stakeholder Relations at the South African Council for Medical Schemes (CMS) about the developments that are vital to reform healthcare in South Africa.
According to Marshall, achieving effective low-cost healthcare is only possible if a number of challenges affecting the industry are tackled.
Developments to reform healthcare
Marshall said that one issue facing the industry is that the current low cost plans in the South African healthcare market are typically loss-making and the industry is struggling to remain sustainable. “A key driver should be to provide a package that is affordable and in line with the target market’s ability to pay,” he said.
“Some developments we have seen in the industry that need to be addressed include standardised coding and reference prices, the scope of current Prescribed Minimum Benefits (PMBs) packages, subsidies and underwriting,” continued Marshall.
Dr Conradie also said that high medical scheme inflation, high administration costs, healthy risk pools, cross-subsidisation and perhaps the lack of employer subsidies need to be addressed. In her view, the focus of healthcare should also be on health quality outcomes. “High administration costs might play a role, as well as affordability, even for the low cost plans. Buy-in or support from employers is another factor that plays a role,” she said.
She added that the issue of the lack of ownership of the National Reference Price List (NRPL) and price regulation has an impact on managing costs within the healthcare sector.
“There is a major need for the Regulator to set up an independent industry coding authority. This authority should take the responsibility of governing standardised coding structures and should also set up a Minimum Reference Price List (MRPL) to provide a reference price list as a benchmark for the private healthcare industry. Service providers’ fees and medical scheme benefits need to be clearly defined in relation to the MRPL to improve transparency and therefore, empower consumers to select providers whose fees best match their benefits,” said Marshall.
He says the current scope of the existing PMBs in South Africa has to be limited in order to lower the cost of the PMB package. “Ideally, hospital-centric packages should be altered towards a primary care based package. Allowing for these PMBs to be paid at a cost without benefit limit is also unsustainable for the industry. Medical schemes should be allowed to set a scheme rate and this should apply to all services including PMBs, but this approach would require regulatory changes in the sector,” he said.
Marshall said that increased government or employer subsidies should be implemented in order to help achieve consumer affordability.
Underlying consequences
The CMS suggest that late joiner penalties are not applied in the low cost benefit option framework. As a proposed solution, Marshall recommends that late joiner penalties should be waived for a temporary period upon introduction of the low cost benefit option framework, after which medical schemes are able to charge these penalties. “In addition, the late joiner penalties should be increased to reflect the true underlying claims costs of such late joiners,” he continued.
He explained that if the regulatory framework is incomplete, as is the case in South Africa, increased claims expenditure due to anti-selection can be expected, even with optimal provider network arrangements.
Marshall said that in a private healthcare environment with limited underwriting and without compulsory membership and risk equalisation, the consequences include risk management indirectly, but intentionally extended to benefit design (either including benefits more attractive to the young and healthy and / or limiting benefits more likely to be used by the older and sicker), as well as marketing initiatives targeting the young and setting broker commission levels to favour the attraction of good profile lives. Another consequence is that of anti-selective behaviour, such as people not joining schemes when they are healthy, increasing claims experience. On the other hand, schemes may end up in an ‘actuarial death spiral’, where contributions are too high, resulting in healthy members leaving which results in even higher contribution requirements. Schemes then need to amalgamate or close.
Dr Conradie made similar comments and added that, “In addition, young people should be encouraged to enter the private healthcare sector as early as they can to improve the distribution of risk within medical schemes and to build up sufficient reserves to be viable in the long-term. The absolute number of individuals covered by medical schemes must increase to sustain viability and growth in the private healthcare sector. The low cost benefit option is a start to enhance private healthcare accessibility.”
Thinking three steps ahead
Dr Conradie further added that the healthcare focus should move to more preventative and primary care instead of hospital-centric care. “It is very difficult to provide the full spectrum of treatment on low cost benefit option plans. Therefore, the needs of the people who are willing to buy these products have to be understood. It is also necessary for providers to be able to cut the administration cost to the bone; and numbers (volumes) are needed to ensure success of these low cost option plans,” she said.
“A tax reform is probably required, if one wants to implement a National Health Insurance (NHI) as envisaged in the Green Paper. In the absence of a NHI, consideration should be given to tax incentives for employers when they subsidise their employees’ medical scheme contributions,” concluded Dr Conradie.
Editor’s Thoughts:
As medical scheme tariff increases for 2016 are being published, and changes on options are made, the CMS has stated that the registered medical schemes in South Africa are in a healthy financial state and continue to provide sufficient financing for private medical care. So let’s see what 2016 holds for your client when it is time to advise your clients on the options available and the best choices for them.Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]
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