Category Healthcare
SUB CATEGORIES General  |  HIV |  Medical Schemes | 

It does work

18 May 2004 Angelo Coppola

The advent of the Risk Equalisation Fund in 2005/6 has placed renewed focus on managed healthcare as one of the major areas for cost differentiation amongst medical schemes in the future.

Medscheme CEO, Andre Meyer, explains: “Up until now, some schemes have used clever marketing techniques and add-ons to attract young people into their schemes, in order to cherry-pick good risk. 

The Risk Equalisation Fund (REF) will neutralize this, and force schemes to compete on cost-management techniques, not cost avoidance.

Managed healthcare has come a long way since emerging into the local health funding market as a clone of the aggressive US-based system. 

Initial high profile failures, such as the Southern Health JV and Sanlam Health rocked the domestic scene, spawning a generalized view that managed care doesn’t work.

It does work”, says Meyer, “and there are several medical schemes with very encouraging savings to prove it.  These savings have been verified by external actuaries and consultants, and a meaningful portion of the wastage in our system has been addressed through utilization management programmes.”

Today’s managed healthcare programmes are making serious inroads into the vilified “fee-for-service” system which perpetuates the perverse incentive for providers to over-service our medical aid patients. 

Because patients are not medically qualified, true free market consumerist principles cannot operate effectively. 

This is why managed healthcare is touted as third-party consumerism, where the managed care administrators employ qualified medical personnel to ensure that treatment is cost-effective and appropriate.
A recent extension to managed healthcare programmes has been price interventions by the major funders on behalf of their members. 

The buying power of the major players is possibly a negotiating tool which can still be exploited further, in the interest of consumers.

One of the other likely implications of the REF could be the re-entry of employers into Restricted Membership schemes.  No longer subject to the danger of being left with the higher risk (and cost) of pensioners, employers would probably prefer to have greater influence over benefit design, and reconsider in-house schemes.

This could in turn signal a further investment by these employers in managed healthcare and wellness programmes. 

Now that employers could benefit directly from the effect of these programmes on their risk pool, it would make more sense for ROI purposes than in large open-membership schemes, where employers do not easily participate in initiatives which are diluted in the general risk pool.

Finally, at the far end of the cost-management spectrum, is the unpalatable issue of fraud.  This unquantifiable scourge is too often masked by platitudes and lip service. 

Praise must go to the Health Professions Council for its recent action against doctors who received over R1 million in kickbacks from a Radiology practice.  However, even tougher action should be encouraged, and suspended sentences should not be the norm.

Medical aids should also not confuse good provider relations with ruthless efforts to stamp out fraud amongst the unethical minority.  Schemes should be judged and maybe even compared on their track record in recovering fraud payments and prosecuting offenders.

“SA cannot afford to have its healthcare system sliding into third world status.  At the same time, access to quality care cannot only be the domain of just 16% of the population. 

“The balancing act will be a difficult one for all stakeholders, but the alternative is just not acceptable.”

Quick Polls


There are countless articles written about South Africa’s poor retirement outcomes. Which of the following would you single out as the biggest contributor to local savers not accumulating enough to buy an adequate and sustainable pension?


Lack of personal accountability
Poor participation in formal retirement funds
Reluctance to seek financial advice early on
SA’s high unemployment rate
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