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SUB CATEGORIES General  |  HIV |  Medical Schemes | 

Council should shift focus to the real issues

17 September 2015 Dr Bobby Ramasia, Bonitas Medical Fund
Dr Bobby Ramasia, Principal Executive Officer for Bonitas Medical Fund.

Dr Bobby Ramasia, Principal Executive Officer for Bonitas Medical Fund.

Dr Bobby Ramasia, Principal Executive Officer for Bonitas Medical Fund, says that the Council for Medical Schemes’ (CMS) annual report highlights some of the major challenges facing medical schemes. However, he questions the Council’s priorities.

“Although Bonitas is in agreement with the need to contain non-healthcare costs, the Acting Registrar’s continued focus on peripheral issues, such as trustee remuneration, demonstrate that the Council is not tackling the issues that will have the greatest positive impact on the cost of medical scheme benefits,” he says.  

“According to the latest annual report, trustee remuneration accounts for just 0.6% of gross contribution income. This is a drop in the ocean compared to the real drivers of healthcare costs and medical scheme contribution increases. 

“Hospital and specialist costs, for example, account for 37.6% and 23.5% respectively of total claims paid, and both are increasing at rates that significantly outstrip the current inflation rate. By contrast, payments to general practitioners account for just 6.6% of total claims – an amount that is decreasing in real terms.” 

According to Dr Ramasia, General practitioners are the backbone of the healthcare system and act as gatekeepers in the context of healthcare costs. 

“The fact that their slice of the healthcare pie is diminishing should be a red flag to the healthcare system,” he says. 

The negligible growth in medical schemes – and particularly the industry’s lack of success in attracting younger people – is another area for concern.

While insignificant growth in membership is partly a reflection of the socio-economic realities of the country, the Council is responsible for setting up the legislative framework for medical schemes. Such legislation should encourage the development of more affordable medical scheme options to attract more people (particularly younger people) to join. Instead, current Prescribed Minimum Benefits (PMBs) legislation and the rising cost of providing for PMB-related claims have limited medical schemes’ ability to develop these options. 

According to the Council’s latest report, the cost of providing PMBs is R567 per member per month, which is already beyond the means of many South Africans.  

“Bonitas’ figures show that while the cost for non-PMB claims is rising marginally, the cost for PMB claims have more than doubled during the period from 2011 to 2014,” says Dr Ramasia. 

“The results above highlight the impact of a lack of reference prices and paying PMBs at cost - both issues that the regulators could have prevented had they heeded representations from medical schemes.  

“In fact, the CMS has not reviewed the PMB package since inception and continues to broaden the interpretation of PMBs, rather than review it.” 

Dr Ramasia applauded the Council’s recent approval of the framework and guidelines for low-cost benefit options. However, he points out that there have been discussions around this issue since at least 2006. 

“Indeed, the very fact that development of low-cost options will require exemption from certain sections of the Medical Schemes Act underlines the problem. Furthermore, these guidelines only apply to those earning below the tax threshold, while the existing members face affordability constraints,” he adds. 

Another fundamental issue is the incomplete manner in which the Medical Schemes Act was introduced. When the Medical Schemes Act became effective in 2000, medical schemes were required to adopt a community rating approach in which all members are charged the same contributions, irrespective of the their state of health. 

This exposes the schemes to potentially severe demographic risks, which are compounded by their inability to attract younger members. In addition, owing to the ‘open enrolment’ requirement, medical schemes are not permitted to decline any application for membership. 

“Open enrolment, in particular, allows members to selectively enter and leave the medical scheme system at will, subject to some penalties and limited underwriting,” explains Dr Ramasia.  

This legislative framework for what is, essentially, a solidarity system, requires two other essential pillars to operate effectively. These pillars - ‘mandatory membership’ and ‘risk equalisation’ - would significantly improve schemes’ ability to manage these demographic risks. 

“Their absence is an important factor driving the cost of medical scheme coverage and contributes to medical schemes remaining unaffordable to many South Africans.” 

Dr Ramasia points out that the Registrar concedes that mandatory membership and a risk equalisation mechanism are necessary. However, he says that medical schemes have been struggling with a lopsided legislative environment since 2000. 

“The industry has been meeting and submitting recommendations regarding a risk equalisation mechanism for over a decade, but we have yet to see any concrete progress in this area. 

“The Council should rather focus on issues that will make a meaningful difference to the cost of medical scheme coverage, rather than focusing on the peripherals,” he concludes.    

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