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Creating an uncontrollable dangerous beast

03 November 2014 Peter Jordan, Fedhealth

There is a common thread of conversation and concern when you corner any group of individuals related to the medical scheme industry. One of these themes is the question of sustainability for schemes in South Africa.

When you consider that 65 medical schemes have closed their doors in the last ten years, this is certainly a legitimate concern. In South Africa, we often take it for granted that our private healthcare expenditure far out strips the public healthcare system, but this is an anomaly exclusive to South Africa and not something seen in other parts of the world.

Looking at different hymn sheets

We are out of sync with the rest of the world when it comes to social services and public health expenditure. The majority of our population hardly get any healthcare service coverage at all. Of the 52 million people in South Africa, only nine million are covered by private health care. And of the 12 000 registered specialist doctors in the country, only three thousand are contracted to State hospitals, meaning that three thousand doctors are being expected to service 52 million people.

How does one correct this huge imbalance when service providers and hospitals are in fact increasingly stretching the chasm between private and public healthcare by their escalating costs, thereby making private healthcare more and more unaffordable?

Resource fragmentation

This disproportionate health expenditure manifests itself in resource concentration in the private health sector, where private hospitals continue to be the biggest expenditure for scheme providers.

In other words, the largest portion of benefits paid by scheme providers is assigned to private hospitals. The South African Medical Council’s 2012 breakdown of the three biggest expenditures for providers showed private hospitals are getting the biggest part of the expenditure pie at 40.5%, followed by specialist services at 23% and medicines at 13.9%. These unregulated prices and increases are of great concern for the sustainability of medical schemes. The cost of healthcare is rising above the inflation rate, and this cost drives up the cost of medicines and any and all new technology.

The great tariff impasse

Due to hospitals not having rate structures, or set minimum tariffs, medical schemes have to bargain with hospitals for price discounts just the same way as tour operators and travel agents have do to with airlines and game lodges. Perhaps a better solution would be a system where schemes were able to join together to bargain, instead of going at it alone. They would all be able to get better rates for their members.

Medical schemes in fact continue to be caught in a strangle hold and have to play a gambling game when it comes to keeping their rates affordable while also having to keep up with increasing hospital costs.

Similarly, challenges and limitations imposed on schemes with Prescribed Minimum Benefit (PMB) payments and solvency ratios often inhibit schemes and restrict innovation.

The crux of the matter

The bottom line is the fact that the playing fields are not equal, and that restricts the industry. Until all service and healthcare providers and hospital tariffs are regulated, the costs will continue to run away from us. The funders have funding now, but how long will this last? Something has to give.

Going forward, the future of medical care lies in preventative wellness treatment rather than just funding curative procedures. We need to focus on promoting and rewarding people for being healthy and on finding ways to use technology that will better empower members to monitor their health.

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