The battle against rising healthcare costs continues
Looming National Health Insurance (NHI) or not, South Africa’s medical schemes have no choice but to adopt a “business as usual” stance. This means the letters advising scheme members of premiums and benefits for 2011 have already been posted. And – with few exceptions – the increases are likely to be well in excess of consumer price inflation (CPI) – while certain benefits will inevitably fall away. My medical aid (the largest open scheme in the country) didn’t even bother to include the percentage increase in this year’s letter. Come to think of it – they made no mention of last year’s premium at all – and simply blurted out: Your premium for 2011 will be…
Today’s newsletter isn’t a gripe about escalating medical scheme premiums, but rather a look at what schemes are doing to manage these costs. We asked three of the country’s open schemes to tell us how they keep annual increases to a minimum – and what they’re doing to keep members’ spirits up. Here’s what they said:
Balancing premium increases and scheme benefits
The big debate in healthcare circles centres on rising costs and what medical aid schemes do to ensure the extra premium offers (or at least appears to offer) improved benefits to consumers. Graham Anderson, principal officer at Profmed observes: “Many new generation medical schemes convolute their benefits, appearing to achieve a balance between extra premium and benefit.” But upon closer inspection members soon discover they’re paying more for less. It’s different at restricted scheme Profmed. “We have increased both contributions and benefits while maintaining an extremely competitive contribution to benefit ratio,” he says.
“Momentum Health’s approach to healthcare centres on choice and the value that our members can derive from having choices,” says Lee-Ann du Toit, chief marketing officer at Momentum Medical Scheme Administrators. The group recently introduced a “provider model” that allows medical scheme members to save 30% of their monthly premium by electing to use certain groups or networks of service providers. The good news for Momentum members is regardless of the choice of provider, the level of benefits covered per option remain unchanged, equating to better value for every rand paid. “In 2011, our members will be able to save any extra amount they require in terms of supplementing their healthcare day-to-day spending through Momentum’s Health Saver – and no administration fees will be imposed,” says Du Toit.
Apart from the “discounts” for responsible provider choice, this innovative medical scheme also offers cash back (as much as R3 600 per adult member) provided members undergo a health assessment, comply with certain treatment protocols and remain active through the group’s wellness program (Multiply).
Putting the brakes on escalating costs
It’s a known fact medical inflation outstrips CPI by quite some margin. The reasons include the fast pace of scientific development and resulting medicines and medical technologies and local skills shortages. Says Anderson: “It’s almost impossible for a scheme to bring costs down without compromising benefits.” He says medical inflation is largely driven by expensive medical technology – and since this technology saves lives medical schemes cannot ethically refuse appropriate new treatments.
Medical schemes have tackled rampant inflation from a number of angles. One is to keep a tight rein on non-healthcare expenses. “Momentum Health has managed to retain its administration fee increases to a level as low as 2% for the past three years,” says Du Toit. The Council for Medical Schemes (CMS) 2009/10 report shows an 8.7% average administration expenditure increase across the country’s open schemes last year.
A second is to increase membership, thereby creating economies of scale. Du Toit says Momentum Health has managed a continued trend in membership growth and has, for the year 2010, increased its membership by close to 25%! If a scheme can do this while reducing its age profile (Momentum Health now has the lowest average principal member age profile amongst the top 10 open medical schemes in South Africa) then claims exposure will continue to improve.
A third strategy increasingly employed by local medical schemes is to “buy” smarter. “Fedhealth’s strategy is to set up strong networks with suppliers in order to manage expenses for members,” notes Peter Jordaan, marketing executive at the company. “By contracting with providers, the scheme can negotiate affordable rates and often avoid member co-payments.” But the biggest ongoing savings seem to come from tackling member behaviour and educating consumers about the benefits of remaining active and taking steps to improve their quality of life. “People are looking at cost more than ever before and are opting for better value plans at more affordable prices,” says Jordaan.
Editor’s thoughts: Medical schemes are fighting a losing battle in a regulated environment that requires them to maintain a 25% solvency ratio regardless of escalating costs. If you want to remain “insured” by your medical scheme of choice then you’ve little choice but to soak up the annual increase and benefit contraction. Are you happy with the increase your medical scheme pushed through this year? Add your comment below, or send it to [email protected]
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