The law of unintended consequences
More regulations drive up costs
THE LAST FEW YEARS HAVE SEEN medical aid funds and administrators coming under increasing regulatory scrutiny, largely driven by Government’s ambitious plan to make access to quality medical services both affordable and equitable.
However, many critics argue that this increasing regulatory burden is only serving to drive up the costs of healthcare, which quite possibly leads to access to comprehensive medical aid cover becoming even more elitist than ever before.
“That’s a distinct possibility,” says Janette Clark, principal consultant at Health Risk Management Consultants, a division of Glenrand MIB. “Regulation has simply driven up costs, and this is prejudicing the majority of people in South Africa who cannot afford access to medical schemes.”
Although Clark acknowledges that the more onerous legislative framework has improved the corporate governance of medical aid funds, she says the administrative cost burden is also proving counter-productive.
More pointedly, Clark says it’s the controversial legislation concerning prescribed minimum benefits (PMB) that’s been the true cost driver.
Unofficial industry estimates put the minimum cost of providing a PMB package at around R200 per beneficiary. Clark says although that may seem like a lowly amount
to your average suburbanite, to a working class breadwinner the cost can be prohibitive.
“If you earn say R4 000 a month and head up a family of four, then you literally have to decide whether your family gets food or whether it gets medical aid cover,” she says. “It’s not just a health issue, it’s an entire socioeconomic issue.”
This is largely why Derry Heron, Principal Technical Consultant at Glenrand MIB Health Risk Management Consultants says affordable private healthcare remains as elusive as ever.
Heron argues that Government’s regulatory gaze, which is falling disproportionately on non-healthcare expenditure issues by medical schemes such as claims, handling, managed care interventions, brokers fees etc, is entirely misdirected.
“This is particularly so when the medical practitioners of the land still feel that they can charge what they wish and ignore any form of agreed structured tariff,” he says. “Tackle that problem and you get one step closer to truly affordable private healthcare.”
Heron also says that though the basic intent behind initiatives such as Low Income Medical Schemes (LIMS), the Government Employees Medical Scheme (GEMS), the Risk Equalisation (REF) are laudable in practice, little has been achieved and there’s growing disquiet about their practicality.
Barring GEMS, none of the other initiatives has yet been implemented.
Heron says LIMS is probably South Africa’s best chance of providing medical cover to low-income families who do not currently enjoy any form of private health cover, but have some form of steady income from a reliable breadwinner.
“The problem is, the LIMS task team submitted its report to the ministry in April last year, but no further details have been forthcoming from the Department of Health,” says Heron. “It’s imperative that LIMS is successful and it would be unfortunate if it were to become bogged down by the weight of bureaucracy and inefficiency that seems to currently plague the department.”
Bureaucracy apart, the potentially prohibitive cost of LIMS is also a bugbear.
Clark says that in order to make LIMS a reality, the legislation surrounding PMB will have to be amended to make the scheme more cost effective.
“Either the prescribed minimum benefits
Bureaucracy apart, the potentially prohibitive cost
of LIMS is also a bugbear.
have to be watered down or the legislation must be amended to exempt LIMS from having to comply with PMB, but either way there has to be an amendment,” she says.
Clark also argues that the recent outlawing of top-up medical scheme insurance cover is simply another example of how legislation is driving up the cost of medical cover.
Top-up insurance effectively allows members to opt for lower cost medical schemes but to hedge against the possibility of one day facing unaffordable medical costs should they land up in hospital with serious health problems. For example, if a member’s medical cover did not allow for sufficient coverage over and beyond the National Health Reference Price List (NHRPL) requirements, he or she could take out top-up insurance in order to bridge the gap between the NHRPL requirements and private medical aid rates.
However, with the outlawing of these products by the Registrar of Medical Schemes, members are now unable to opt for lower cost medical cover while at the same time covering themselves with top-up insurance cover to hedge against potentially high private medical rates should they fall ill or suffer an accident.
It seems the Registrar’s main problem with the sale of medical scheme top-up insurance products is that these products do the business of a medical scheme but are typically provided by life insurers.
“The official view is that top-ups should be registered as a medical scheme, not licensed under the Short Term Insurance Act and should fall under the ambit of the Medical Schemes Act,” says Clark.
The background to this was a court interdict brought against Guardrisk, a short-term insurance company that sells this type of policy, by the Registrar of Medical Schemes. The hearing took place on 1 December 2006 with the ruling going in favour of the Registrar on 18 December 2006. The upshot of this is that these short-term policies could be outlawed and will have to be terminated within three months, leaving policyholders in limbo.
In the meantime though, the ruling remains subject to an appeal by Guardrisk, but in the interim the situation is causing uncertainty.
“The fact is, medical aid members are given the option of reviewing their choice of plan every December and once that choice is made, the member is locked in until the following calendar year,” says Clark.
“Many members buy medical scheme options on price and will elect in favour of a lower cost plan with top-up insurance, giving them, effectively, the same cover as, say, more expensive, top-of-the-line conventional medical scheme cover for hospitalisation at private rates.
“As matters stand in the courts, these members now stand to lose their top-up insurance and could be left without the option of buying up, admittedly at an increased price, to an option offering cover at private rates. That’s clearly prejudicial to members, the very people whose financial interests the Registrar is tasked to safeguard.”
Regulation has simply driven up costs. Janette Clark