Regulation 8 amendment – the balancing act

Does the amendment to Regulation 8 of the Medical Schemes Act balance the protection of medical schemes against the protection of medical scheme members in light of very high claims?

Despite divergent views, the above ambiguous question can only be answered with a “yes” with reference to the above two opposing and paradox opinions on this rather complex issue.

Rationale behind the draft

The proposed amendment, in a nutshell, provides that medical schemes must be liable for the payment of Prescribed Minimum Benefit (PMB) services in accordance with the billing rules and tariff codes of the National Health Reference Price List of 2006. Alternatively, schemes may negotiate tariffs for PMBs directly with healthcare providers without any co-payments or deductibles to its members.

The rationale behind the draft regulations is to protect medical schemes from its current open-ended liability in respect of the payment of PMBs. As a direct consequence, its members will be protected as well.

The question nobody asks

The critical issue and actual catalyst behind the extraordinary high cost of private healthcare in South Africa, and also the question that conveniently seems to escape the media, is why nobody is questioning the pay-in-full, blank cheque scenario that healthcare providers apply to claims for PMBs.

Speaking to City Press recently, after representatives from the World Health Organisation (WHO) and the Organisation for Economic Cooperation and Development presented their submissions about the high cost of private healthcare, Health Minister Motsoaledi said, “This is what I have been telling South Africans all along, but nobody wants to listen to us.”

According to Motsoaledi, South Africa has the highest private healthcare cost in the world. However, with only about 8% of the population that benefit from private healthcare, many may ask how is this possible?

Unpredictable expenses

According to the latest Annual Report from the Council for Medical Schemes (CMS), approximately 53% of total risk claims paid by schemes were PMB claims.

Within the South African private healthcare sector, there have not been any legislated tariffs for healthcare providers for the last decade or so. Coupled with this is a ruling by the Registrar of Medical Schemes that all schemes must pay in full (at whatever cost the doctor/specialist charges) for PMBs. This situation resulted in unlimited and unpredictable expenses for schemes that ultimately result in above average member contribution increases, year after year. Medical schemes are non-profit organisations and its members are essentially shareholders having to absorb these expenses by means of higher contributions.

An example would be the case of a member that had his appendix removed (a PMB). The private hospital account was paid in full. The surgeon that performed the operation charged R3 674. The anaesthetist, assisting at the same operation, however, charged R16 200, or 400% of the medical scheme’s tariff. The profound question to ask is if the anaesthetist charged a reasonable tariff?

Making it work

If medical schemes are to reimburse all astounding high claims in full, there may be a short-term benefit for the specific member concerned, but the next logical step would be that contributions will rise disproportionately to the perceived value (cost versus actual benefit) for the majority of those members who seldom claim and/or who subsidise the cost of the high-claiming members. In the current difficult economic climate they may choose to abandon their medical scheme, leaving the rest of the members to pay even higher contributions.

Currently the heated debates over the amendment of Regulation 8 are predominantly the result of the vested financial interests of the respective stakeholders, either overstating the benefit or the burden of such change in legislation. The existing regime is placing an undue burden on medical schemes which, in the process, undermine the accessibility to private healthcare for more than 90% of South Africans.

We need to focus on making it work for all role players; not on fighting it to the benefit of one party at the loss of another.