Brokers, scheme members face tough questions as NHI looms
As the Minister of Health continues his obfuscation around the cost of implementing the recently enacted National Health Insurance (NHI) Act, the Council for Medical Schemes (CMS) quietly released its 2023 Industry Report to the media. The lack of fanfare is not surprising, given that the NHI Act, if implemented in its current form, may well hasten the demise of both the regulator and the medical schemes it oversees.
Brokers contemplate the future
As local healthcare brokers contemplate the future of the industry and try to assure clients that they will continue to benefit from comprehensive medical schemes coverage over the coming decade or so, your writer tore into the 56-page report for any informed predictions.
The foreword by the Acting Registrar was short and to the point, with no mention of NHI. “This report evaluates the industry’s evolving landscape, highlighting key trends, challenges and opportunities,” wrote Mfana Maswanganyi. Is the NHI not part of this landscape? Well, yes, but you have to trawl the CMS Annual Report for additional insights.
The 2023-24 report lauds NHI as “a systematic shift” towards universal health coverage, with the CMS affirming its vision of “ensuring that all medical scheme members realise their fundamental rights to quality healthcare at an affordable cost.” It then offers the clearest indication to date that the CMS is comfortable with the repurposing of medical schemes to serve the NHI’s whim. Specifically, it notes: “As the first phase [of NHI] progresses, the CMS will shepherd the medical schemes industry and support the establishment of frameworks that clarify the extent of complementary cover to services not reimbursable by the NHI Fund.”
Being shepherded is mostly good, for sheep
Hmm. Your writer Googled ‘shepherded’ for clarity and found, ‘To make a group of people move to where you want them to go, especially in a kind, helpful and careful way.’ Reading between the lines, the CMS has simply confirmed what FAnews readers already knew; you are passengers on a healthcare journey to a place you do not necessarily want to go.
Readers may recall that the NHI Act prohibits medical schemes from funding healthcare procedures or services that will be paid by the NHI Fund without bothering to inform the public what the list contains. Your writer reckons the list will, at the very least, span the comprehensive set of Prescribed Minimum Benefits (PMBs) that today’s private medical schemes must provide. Restated cynically, if the NHI functions as expected, there would be virtually no need for a medical scheme other than funding elective procedures or perhaps running some or other form of ‘for profit’ wellness programme.
As recently as September 2024, the Minister of Health again evaded questions about how the government would fund NHI and how the burden would be divided across taxpayers and tax types. He was put on the spot by Freedom Front Plus MP Philip van Staden, who quoted private sector sourced cost estimates ranging from ‘a further R859 billion to fund the NHI solution’ to a staggering R3.5 trillion per annum.
Mathematical hooliganism and other catch-phrases
The minister reportedly responded along the lines of it being unethical to ask questions about costs when you have to treat people who could potentially die, and dismissed the higher of the two estimates as “mathematical hooliganism.” Your writer loved the phrase and perpetrated some numerical mischief of his own to get to around R975 billion per year at a conservative R15,000.00 per claimant by an equally conservative 65 million people. But enough of the whinging; let us return instead to the confirmed and published industry stats.
On 31 December 2023, the South African medical scheme sector spanned 71 medical schemes (16 open and 55 restricted), down from 144 schemes in 2000. According to the registrar, these schemes provided coverage to over nine million beneficiaries, including 1.7 million lives covered on so-called efficiency discounted options (EDOs). This was an interesting phrase and the first time your writer recalls hearing it. It is possible that EDOs are a new moniker for those low-cost benefit options (LCBOs) that have been promised for almost forever.
The report confirmed the ongoing above-inflation pressures in most medical scheme-related cost centres. Total healthcare expenditure incurred by the 71 schemes topped R239 billion, while the claims paid per average beneficiary per annum increased by 8.2% to R26 404,79. Schemes reportedly made substantial investments in hospital services, specialists and medicines over the 12-month review period. Aside from the impending (yet not mentioned) NHI, the main challenge to sustainable medical schemes was singled out as demographics, as schemes face the burden of “ageing memberships and increased healthcare spending on chronic conditions.”
Cost, complexity escalates with age
The age versus cost and complexity debate should be familiar to most financial advisers and healthcare consultants. Per figure 19 of the 2023 Industry Report, per capita expenditure for beneficiaries over the age of 44 years rises above the average cost per beneficiary and peaks for beneficiaries in the age band 80 to 84 years at over R90 000,00 per average beneficiary annually. “Expenditure on primary healthcare providers, general medical practitioners and dentists continues to be overshadowed by the expenditure on specialists, hospitals and medicines dispensed,” the report noted.
These costs are startling, but an argument could be made that the private sector has not been given enough room to improve things, going back decades. One of the core ironies in the South African healthcare paradigm is that the regulators, steered by the Department of Health, have worked relentlessly against sensible private sector proposals that could have mitigated healthcare inflation and increased access and coverage. Some glaring shortcomings include regulators’ continuous blocking of LCBOs, their refusal to consider any form of mandatory medical scheme membership, failure to maintain sensible price controls in a price-controlled market, and pushing for an exhaustive list of PMBs.
Even at this late stage, the CMS Industry Report listed a number of outcomes that “emphasised the need for [further] policy interventions that address gaps in disease management; improve access to essential tests; enhance maternal and reproductive health services; and promote cost-effective preventive care strategies to ensure better health outcomes.” These treatment demands will add costs to medical schemes which end up being shared across their member bases. One wonders, however, whether further tweaks are necessary given the NHI backdrop; the NHI Fund will surely pick up all the nice-to-have developed market screenings and treatments for all.
The proof is in the eating
Readers may not have that long to wait to sample the fruits of this universal health coverage solution. According to the CMS Annual Report 2023-24, the NHI will be implemented in a two-phase approach, with an effective date of implementation in 2028. Phase 1 (2023-26) sees “the establishment of the institution and acceleration of the implementation of a health platform and other basic instruments.” And Phase 2 (up to 2028) involves the “conclusion of implementation of contracting services” and the prioritisation of vulnerable groups.
Not sure about you, dear reader, but your writer is kind of anxious about healthcare on a five- to 10-year view. Can you tell him who picks up the bill for mental wellness again?
Writer’s thoughts:
The NHI is steamrollering ahead regardless of what opposition politicians or private sector doyens say. Is there anything healthcare brokers can do to protect medical scheme members from NHI uncertainties? Or are your clients prisoners of the process? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
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