Category Healthcare
SUB CATEGORIES General  |  HIV |  Medical Schemes | 

The rampant bull the medical industry cannot capture

21 November 2019 [email protected]

One of the major rallying calls for the implementation of the National Health Insurance (NHI) is the fact that medical care in South Africa is excessively expensive.


The cost of medical care is mainly driven by the fact that there are no tariffs when it comes to pricing. However, the cost issue is partially being driven by Fraud, Waste and Abuse (FWA) which is something that medical schemes have long bemoaned as an industry scourge. 

Health Minister, Zweli Mkhize, said that the NHI will hopefully put a stop to FWA, or at least apply the brakes to it. But as Christoff Raath – Joint CEO of Inside Actuaries and Consultants – said at the Institute of Health Risk Managers seminar, this is not an easy bull to capture. 

Staggering magnitude

When assessing the FWA issue, Inside Actuaries and Consultants worked closely with a number of medical schemes which included the Government Employees Medical Scheme (GEMS) – the country’s largest private medical scheme – and Discovery Health – the country’s largest open medical scheme – to try and see what the industry is dealing with. 

“The level of FWA in the industry is staggering. If we look at the industry, 10% of the collective turnover of the medical industry (which is estimated to be R200 billion) is lost to FWA. That’s an estimated R22 billion a year. This is believed to cost an extra R192 to R410 per principle member of a medical scheme on a monthly basis,” said Raath. 

It is not easy to address the FWA issue when its actual cost to the industry is not easily quantifiable. 

Issues of morality

The next challenge that industry faces when it comes to FWA is issues of morality. 

While fraud – when detected – is punishable by law, there is no way to prosecute a supplier, doctor, or medical practitioner of waste or abuse. 

And it seems as if it isn’t even clear cut when it comes to prosecuting fraud. “There are a lot of instances in the industry where health practitioners wrestle with issues of morality and principle. A surgeon is performing surgery on a patient that they know won’t be able to foot the bill of the procedure if there is a co-payment. The surgeon takes pity on the patient and changes the code of the procedure to one which requires the medical scheme to pay for the procedure in full. Technically, this is fraud, but the surgeon justifies his actions by saying that he acted in the greater good,” said Raath.

There are even instances where this does not take place in life-or-death situations. South Africa currently has the highest rate of cesarean sections in the world. And medical schemes don’t have an issue with pre-approval of these procedures provided that a medical practitioner supplies them with a letter motivating the need for the procedure over a natural birth. 

If the procedure is not an emergency, then there would typically be a co-payment involved. Most medical schemes are complaining about the fact that nearly every cesarean section is now suddenly labelled as an emergency which means that they must pay for them in full, no question. 

Shooting fish in a barrel

The issues of morality place medical schemes in serious predicaments and makes them prime target for this kind of abuse. Like shooting fish in a barrel. 

If a medical practitioner always has a justification for their actions, and medical schemes take issue with it (labelling it as fraud), how long will it be before the public start (wrongly) accusing medical schemes of looking for reasons not to pay a claim? 

We always refer to the Nathan Ganas case with Momentum. The insurer was well within their rights to reject that claim because of non-disclosure. However, the public outcry was enormous and they (wrongly) questioned Momentum’s actions on a moral basis.  

“This is a legitimate concern,” said Raath when questioned on the matter. 

In fact, it is so bad that when medical schemes find that suppliers and practitioners are guilty of waste and abuse, schemes typically enter into agreements with offenders to pay back the money in the hope that it will not arouse to much public attention. This may be because reputations are at stake and there is a lot on the line in these instances, but it may also be because it is almost impossible to prosecute someone that is guilty of waste or abuse, so mediation is the only option. 

Additional concerns

In addition to the possibility of (wrongfully) becoming public enemy number one, medical schemes have other challenges when it comes to fighting FWA. 

Some medical schemes have large member bases, others have smaller. If 10% of a medical scheme’s claims fall within the concerns surrounding FWA, do schemes have the resources and skills to thoroughly investigate these claims? That depends, it will naturally be easier for a smaller scheme to go through 10% of their claims with a fine-tooth comb then it is for a scheme that has significant scale. 

The costing issue is also not always as clear cut as one may think. Surgeons work on the same basis as lawyers. The more experienced the surgeon, the higher their rate will be because you are paying for a highly specialized skill set. Further, if a surgeon is performing a procedure that takes ten hours to complete, is it not logical that they will charge more than a procedure that takes three hours to complete? 

I am by no means condoning the current pricing that is taking place in the industry. However, while there is a debate on costs in the industry, the above issue of experience and the nature of the surgical procedure in question needs to be considered. 

Writer’s Thoughts:
If the industry works hard enough to fight against FWA key battles can be won. However, is the NHI the secret weapon in this fight? That is a whole different debate. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].


Added by Andre Kotze, 22 Nov 2019
There should be zero tolerance if anybody commits fraud as it is in the financial services sector.
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Added by cynical simon, 21 Nov 2019
NHI s incapable of solving anything.
Thinking that NHI will solve the FWA problem is like trying to save a patient from mamba bite by refusing him /her treatment until it is clear that the patient will die from the snakebite.
The article makews it sound like Medical Aid Insurers are keen to have NHI rid them of something they dont know how to deal with.Furthermore it sounds like NHI is all about the patient's getting reduction in theoir medical aid premiums whilst this argument is rubbished by the reality that under NHI all will be equal and all will suffer the same neglect and all will die a terrible death before even getting out of the passage into the hospital ward.
There is simply not one good reason for introducing this socialist pipedream into a society like ours.
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Added by Paul Reed, 21 Nov 2019
The medical aid industry cannot be regulated by an NHI.
The NHI and its variations globally, are failed models.
The medical aid industry and the related suppliers and service providers will ensure that.
Its just not in their interest.
The actual problem is the human factor.
Enter socialism and communism,oh dear, oh dear.
Oddly enough, we(humans) respond well to "corrective surgery' in this regard.
However the aftermath is not worth it.

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Added by Graham, 21 Nov 2019
The Medical Services Industry should be questioned on what so-called Defensive Medicine is costing the schemes.
A large number of medical tests, largely unnecessary, are called for by doctors just to protect themselves against being sued by the patient.
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