The law of un­in­tended con­se­quences

More reg­u­la­tions drive up costs

Finweek English Edition - - Employee benefits -

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

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