The real cost of med­i­cal aids

CityPress - - Business - JEANNE VAN DER MERWE jean­nevd­merwe@me­dia24.com

Any­one be­long­ing to a med­i­cal aid scheme has prob­a­bly felt they are pay­ing ever more in pre­mi­ums for ever shrink­ing cov­er­age. But although above-in­fla­tion in­creases in health­care costs is a world­wide trend, South Africa’s pri­vate health­care sys­tem has some unique fea­tures that drive up costs.

Leg­is­la­tion is ex­tremely pre­scrip­tive about how med­i­cal schemes raise and spend money. Si­mul­ta­ne­ously, costs have in­creased due to pa­tients liv­ing longer, go­ing to hos­pi­tal more of­ten and spend­ing more on treat­ment be­cause of new tech­nol­ogy and new drugs.

By law, med­i­cal aids are by law not al­lowed to charge older, sickly, “high-risk” pa­tients higher mem­ber­ship fees than young, healthy ones. It is also not manda­tory for em­ployed peo­ple to be­long to a med­i­cal aid.

The re­sult is that many peo­ple only join a scheme once they need ex­pen­sive health­care ben­e­fits: when they have chil­dren or be­come prone to chronic con­di­tions.

This means an ever higher pro­por­tion of older mem­bers who are more likely to claim for ex­pen­sive treat­ments, and fewer young, healthy mem­bers to cross-sub­sidise them. Med­i­cal aids then charge higher pre­mi­ums to cover their risks.

Heidi Kruger from the Board of Health­care Fun­ders, a rep­re­sen­ta­tive body for med­i­cal aid schemes, said there was also a grow­ing trend that em­ploy­ers do not sub­sidise their em­ploy­ees’ med­i­cal-aid con­tri­bu­tions, which shrinks the pool from which schemes can raise con­tri­bu­tions.

In ad­di­tion, the Med­i­cal Schemes Act re­quires schemes to pay in full for about 300 high-cost med­i­cal pro­ce­dures and chronic con­di­tions.

These spec­i­fied treat­ments, called pre­scribed min­i­mum ben­e­fits (PMBs), have ac­counted for a large pro­por­tion of the in­crease in med­i­cal costs in the past decade. Ac­cord­ing to the Coun­cil for Med­i­cal Schemes, PMBs in­creased from 39% of net health­care ex­pen­di­ture by med­i­cal aids in 2005 to 53% by 2012.

Alex van den Heever, an eco­nom­ics pro­fes­sor at Wits, notes in a sub­mis­sion to the com­pe­ti­tion com­mis­sion that med­i­cal schemes, un­der fi­nan­cial pres­sure from in­creased hos­pi­tal and spe­cial­ist costs, have shifted many day-to-day ben­e­fits such as GP and den­tist vis­its into med­i­cal sav­ings ac­counts to have more funds avail­able for ex­pen­sive, se­ri­ous med­i­cal con­di­tions.

This ex­plains why med­i­cal aid mem­bers fre­quently see their med­i­cal sav­ings ac­counts run out long be­fore the end of the year, forc­ing them to pay cash for most of their med­i­cal ex­penses while con­tin­u­ing to pay their monthly med­i­cal aid pre­mi­ums.

There have been no uni­form pre­scribed rates for doc­tors and spe­cial­ists since 2006, so there are no price codes on which doc­tors can claim for some pro­ce­dures. As a re­sult, schemes de­cide uni­lat­er­ally to only pay up to a cer­tain amount for spe­cial­ists to keep costs down.

Other pe­cu­liar­i­ties in the lo­cal health­care mar­ket in­clude a num­ber of vir­tual mo­nop­o­lies. Most of the pri­vate hos­pi­tals are owned by one of three groups – Net­care, Medi­clinic and Life.

There are claims be­fore the com­mis­sion that sup­pli­ers to pri­vate hos­pi­tals are forced to pay kick­backs. There are also claims that pri­vate hos­pi­tals over­in­vest in ex­pen­sive equip­ment to lure spe­cial­ists, and the cosy re­la­tion­ships be­tween hos­pi­tals and spe­cial­ists in­cen­tivises hos­pi­tals to ad­mit pa­tients rather than treat them as out­pa­tients.

But hos­pi­tals as­cribe ris­ing costs to in­creased staff costs – be­cause they have to com­pete with salaries paid to unionised govern­ment nurs­ing staff – and the fact that they are not al­lowed to em­ploy doc­tors and spe­cial­ists, who have to op­er­ate sep­a­rate prac­tices, which in­creases the costs of prac­tis­ing medicine.

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