Tackling the medical schemes cost spiral

01 November 2011 Heidi Kruger, Board of Healthcare Funders

Most medical scheme members begrudge the amount of money they pay each month to their scheme, and schemes are accused of not paying out benefits or of pocketing the money. With the average premium at about R1 500 per main member per month their cynicism i

The answer is that there are number of contributing factors, ranging from legislation to fraud, all of which conspire to making private healthcare cover less and less affordable to the average working person.

No profit

Medical schemes are co-operatives or ‘stokvels’. Each scheme collects money from its members by way of monthly contributions, which in turn is used to pay out claims. Medical schemes are governed under social solidarity principles. These principles dictate that a scheme is not permitted to make a profit; that they are not allowed to apply risk rating to members, i.e. they are not allowed to charge a member more or less according to their health status; and, that every member on every option is entitled to receive benefits for a set of conditions called the Prescribed Minimum Benefits. So, while the medical schemeit iis not permitted to operate as a commercial entity, it is forced to contract must compete with commercial entities where profit is all important.

Change the focus

Regulations governing medical schemes outline a basket of conditions, called Prescribed Minimum Benefits (PMBs), which must, by law automatically be covered by schemes. This basket is made up of the type of conditions which require high-cost interventions, such as specialist and hospital care, with little emphasis on primary and preventative care, which could prevent the previously-mentioned high-cost interventions. This emphasis on high-cost interventions pushes up costs.

In order to address this situation, This must be addressed through a review of the PMBs s must be undertaken so that they offer members protection, but with a focus on primary and preventative (and therefore lower cost) interventions.

Up until 2004 the private healthcare industry was self-regulated in that industry stakeholders, such as the doctor groupings, hospital groupings and medical schemes collectively negotiated tariffs to provide arrive at tariffs which were affordable to medical scheme members and to provide some certainty on costs. However, this was judged anti-competitive by the Competition Commissioner and ironically, this ruling served to push up healthcare prices. Healthcare is unique in that it’s a non-negotiable. If you need to see a doctor, you have no alternative. So in the instance of healthcare, price fixing benefited and protected the consumer.Price benchmarking required.

Scrapping of all medical tariff guidelines has left the private healthcare industry with no pricing benchmark, the result of which is often an open-ended liability for medical schemes and their members. The fact that there are no tariffs in the marketplace is problematic and is almost unique in the world. It is especially problematic when it applies to health, which should not be subjected to uncontrolled commercialism.

Minister of Health, Dr Aaron Motsoaledi, has proposed a pricing negotiating commission which would include all role-players and would ultimately lead to a legislated process and a statutory pricing authority. Ideally, this process will result in fair and reasonable prices for the funder, the consumer and the healthcare provider.

Many challenges

Although there are some interventions, current and impending, to deal with the spiraling healthcare costs, there is are a host of other challenges facing the industry, not least of which is South Africa’s burden of disease.

The solution is not simple and requires a rethink on the way the system is structured. The NHI proposes to align incentives between the funder and the provider, and although it is not a quick-fix, it has the potential to ensure a much more equitable, accessible and affordable healthcare system for all South Africans.

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