Category Healthcare
SUB CATEGORIES General  |  HIV |  Medical Schemes | 

Another tough year for medical schemes

14 September 2010 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

A couple of weeks ago the Council for Medical Schemes (CMS) published their Annual Report 2009/10. We paged through the detailed report to get the low down on healthcare stakeholder performance through some of the toughest economic conditions in recent history. This is what we found...

Consolidation remains the buzzword in the medical schemes industry. In the 2009/10 financial year the number of registered medical schemes reduced from 109 at January 2009 to just 105 a year later. The balance between open and restricted schemes was largely unchanged, with 30 open schemes and 75 restricted schemes. Benefit options under the schemes continue to decrease too, from 351 in January 2009 to 332 today.

Healthcare – an expensive pursuit

Rationalisation or not, it seems savings aren’t filtering through to medical schemes members. According to the CMS the average gross contribution (all schemes) surged 13% in 2010, with open schemes hiking premiums by 14.3% compared to the restricted schemes’ 12.4%. The abovementioned increases are based on the “actual increase” per family across all schemes for 2010. In rand and cents terms the average gross monthly contribution per principal member climbed to R1373, an adult dependent to R1177 and a child dependent to R413 per month. As a result, Gross Contribution Income (GCI) across all medical schemes increased 14.5%, from R74.1 billion in 2008 to R84.8 billion in the year ending December 2009.

But before you level accusations of profiteering at the medical schemes industry, consider the following. The inflation plus increases in premium are more than accounted for by runaway expenses in the product and service provider space. Despite the CMS’s best efforts, scheme expenditure on healthcare benefits jumped 17.9%! No amount of government intervention seems to be able to stem the tide. Medical schemes burned through R28.3 billion on hospitals (of which R28 billion went to private hospitals), R13.3 billion on medicines dispensed by pharmacists and non-hospital providers, R5.7 billion on general practitioners (GPs) and R2.2 billion on dentists. The final R6 billion went to supplementary and allied health professionals.

What about the “economies of scale” the schemes should be creating through consolidation and larger memberships? After a quick glance we could only conclude: “no such luck!” The so-called non-healthcare expenditure, measured across all schemes, crept 11.1% higher to R10.8 billion! Upon closer inspection we find out that the open schemes kept their administration costs in line with inflation, at 8.7%. Administration fees at the restricted Government Employee Medical Scheme (GEMS) caused all the damage, ending significantly up on the previous year due to an impressive 39.2% increase in beneficiaries covered by the scheme. Payments to managed healthcare companies climbed 15.5% to R1.7bn, though an inflation-plus increase would be expected from this category as more schemes make use of managed solutions.

Brokers stuck in commission limbo

There’s bad news for healthcare brokers. Although they’re often singled out as the “evil” in the medical schemes cost environment, their slice of the pie remained pegged at R1.2 billion, unchanged over 2008. Broker expenses – which include administrative expenses over and above broker commissions – remain a mere 1.4% of total collected premium.

The bad news for the healthcare industry is medical schemes suffered a R2.5 billion net healthcare deficit in 2009.

Government can do it better?

“We are here primarily for the beneficiaries of medical schemes,” writes the incoming registrar of Medical Schemes (and chief executive of the CMS), Dr Monwabisi Gantsho. “At the same time, and to be fair, we extend a hand of friendship to the medical schemes and the businesses affiliated with them…” BUT his next line seems to contradict the opening paragraph: “The CMS will do everything in their power to support the process aimed at ensuring universal access to quality care in South Africa.”

Despite the inability of the country’s private medical schemes providers to “make ends meet” as it were, the CMS stands 100% behind the ruling party’s desire for a National Health Insurance (NHI) solution. The conflict of interest here seems lost on the executive of the regulatory body – because in backing NHI at any cost – the long-term viability of medical schemes (and thus the beneficiaries the CMS claims to care about) – is in serious question.

Editor’s thoughts: The NHI debate has gone cold in recent months as the opinion testers in the ANC Youth League shift attention from healthcare to free education, restricted land ownership rights and mine nationalisation. But despite this shift in focus the topic enjoyed quite a few column inches in the latest CMS report. Do you think CMS support of a national healthcare solution would contradict its responsibility to private medical schemes beneficiaries? Add your comment below, or send it to

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