Healthcare industry faces many challenges

01 October 2007 Dr Duncan Laurenson, Resolution Health

There is a wide range of key challenges facing the healthcare industry over the next few years. FAnews spoke to Dr Duncan Laurenson, managing director of Resolution Health, to find out how these challenges will impact the industry.

"The introduction of the Risk Equalisation Fund, the Council for Medical Scheme's 'Circular 8', hospital and general inflation, as well as the rising average age of general practitioners are just a few of the challenges facing the industry," says Laurenson. "I also believe that the Prescribed Minimum Benefits (PMBs) need to be revisited as they are simply costing medical schemes too much money."

The Risk Equalisation Fund will penalise schemes with younger members and benefit schemes with old members. Circular 8 will no longer allow schemes to offer standalone hospital plans – all options will have to offer some form of access to doctor and specialist visits. In addition, the average age of GPs in the country is around 50, causing concern for the industry in 10 to 20 years' time.

Driving up costs

"While we can see the need for some of the legislation and measures being introduced, there is no doubt that these are going to have the unintended consequence of driving up the cost of medical cover for millions of South Africans," says Laurenson.

He sees a major weakness of the current PMB structure being that hospitals and doctors can submit unlimited claims that medical schemes simply have to pay.

"I think the whole PMB situation needs to be carefully looked at to see how it can be restructured. The current model is not financially sustainable for medical schemes."

The churning challenge

Commenting on medical scheme memberships, Laurenson said the South African market is notorious for 'churning' with too many scheme members switching to other schemes as soon as they encounter an obstacle of some sort.

The major reasons people leave one scheme for another include managed care interventions by schemes, premiums, co-payments and broker recommendations.

He believes brokers need to be play a greater role in reducing this churn factor which undermines the reserves base of schemes. This includes educating members about schemes and their workings.

Solutions for pensioners

On the subject of what the future holds for pensioners, Laurenson says there are no easy solutions to this problem, which has become a major issue all over the world.

"Eating healthily and keeping fit are two of the main pro-active measures older people can take to limit medical problems. Prevention is better than cure in this case," he says.

Making memberships of a medical aid mandatory for everyone may enable changes to be made to the current situation where older people are subject to waiting periods and late joining fees when wanting to join a medical scheme.

"Quarantining extra cash for medical purposes is something that all people should do, no matter their age," says Laurenson.

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