Managed healthcare: changes and choices

01 October 2008 Lee-Ann du Toit, Momentum Health

Current managed healthcare initiatives are not successful in curbing inflation. What is needed is a bold new approach.

Managed healthcare was introduced in South Africa in the mid 1990's to curb high medical inflation. The aim was to provide high quality medical care, while controlling costs through interventions like hospital pre-authorisations and controlling in-hospital length of stay.
Although most medical schemes are applying managed care initiatives, there has been widespread criticism that these initiatives are denying medically necessary services to patients and more importantly, has failed in containing rampant medical inflation.

In its recently released annual report, the Council of Medical Schemes identified cost containment as one of three strategic priorities for 2008-9, since uncontrolled cost escalation leads to the devaluation of medical scheme benefits and out-of-pocket payments for medical scheme members.

Bold changes

The industry needs to make bold changes to the current managed healthcare initiatives to ensure success.A medical scheme is only as healthy as its members. Medical schemes should not only support their members in times of illness, but should actively assist them in preventing illness and detecting it as early as possible.

By improving the health of current members, fewer claims are processed every year, thus the lower contribution increases need to be and the more sustainable the scheme becomes.

Competition at the right level

Medical scheme structures that only focus on price differentiation through provider discounts is a step in the right direction as it may reduces the cost per claim. However, but these agreements do not address the other main drivers of medical inflation. These drivers include which is escalation in utilisation often driven by as well as an incentive from providers to increase volumes of claims. The key focus from a medical scheme perspective should be on shifting from pure price differentiation to an outcomes based rewards system.

An example of this is where a medical scheme bases provider incentives on quality and not merely on price. The provider incentive takes into consideration the health of patients, avoiding unnecessary admissions, referrals and procedures as well as cost – while still offering the highest quality outcome for members.

The next level

According to the World Health Organisation, unhealthy diets and physical inactivity are two of the main risk factors for raised blood pressure, raised blood glucose, abnormal blood lipids, overweight/obesity, and for the major chronic diseases such as cardiovascular diseases, cancer, and diabetes. Around the world, many countries are using this information in formulating managed care strategies to address obesity and chronic illness.

Using the "stick"

Japan recently introduced a law to enforce mandatory obesity checks, where employers are fined if obese employees don't slim down. In another example in Indianapolis, USA, a hospital will start 'fining' employees from 2009 for raised cholesterol, blood pressure and glucose levels, higher body mass index (BMI) and smoking. The fines will be deducted from employees' pay checks on a monthly basis.

The "carrot" approach more ideal

The ideal approach would rather make use of the proverbial 'carrot' than the 'stick', by providing members with some sort of incentive for complying with their management programmes and increasing their activity levels. The vital requirement is to incentivise healthy members to remain healthy, and for unhealthy members to improve their health. This will reduce medical scheme expenses over time.

Members need to recognise the importance of knowing their current state of health, what they need to do to optimise their future health and providing them with incentives to drive the correct behaviour.

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