Med­i­cal schemes are keep­ing a lid on non-health­care costs

Med­i­cal schemes have, in af­ter-in­fla­tion terms, slightly re­duced the per­cent­age of your con­tri­bu­tions used to cover non-health­care ex­penses. re­ports

Saturday Star - - INSIGHT -

MED­I­CAL schemes are do­ing a good job in con­tain­ing non-health­care ex­pen­di­ture, which is mainly on ad­min­is­tra­tion, and the reg­u­lar above-in­fla­tion in­creases in your con­tri­bu­tions are largely to cover rock­et­ing med­i­cal costs, ac­cord­ing to the 2016 an­nual re­port of the Coun­cil for Med­i­cal Schemes (CMS), which was re­leased last month.

Ac­cord­ing to the re­port, med­i­cal schemes have, on av­er­age, main­tained their non-health­care ex­penses within rea­son­able lim­its, even de­creas­ing them in real terms slightly over the past few years. In other words, the in­creases in th­ese ex­penses per ben­e­fi­ciary have been in line with or slightly be­low the Con­sumer Price In­dex in­fla­tion rate (see graph). The rea­son an­nual con­tri­bu­tion in­creases are above CPI in­fla­tion is that med­i­cal in­fla­tion (in­creases in the cost of medicines, med­i­cal equip­ment and health­care ser­vices) is sev­eral per­cent­age points higher than general con­sumer in­fla­tion.

The ac­com­pa­ny­ing graph shows that in 2016 the av­er­age ben­e­fi­ciary of a med­i­cal scheme paid just over R1 400 a month in risk con­tri­bu­tions (this ex­cludes amounts paid into med­i­cal sav­ings ac­counts). Of that, about R1 300 cov­ered med­i­cal claims, and about R150 (or just over 10%) went to­wards non-health­care costs. Ten years pre­vi­ously, in 2006, non-health­care ex­penses were over 17% of the av­er­age ben­e­fi­ciary’s monthly risk con­tri­bu­tion (see ta­ble for funds with the high­est ex­pen­di­ture on ad­min­is­tra­tion).

Med­i­cal schemes re­ceive other rev­enue, mainly in the for m of in­vest­ment in­come, and they have cash re­serves to fall back on if claims ex­ceed con­tri­bu­tion in­come. The per­cent­age of an­nual con­tri­bu­tion in­come a scheme has in re­serve is known as its sol­vency ra­tio – the statu­tory re­quire­ment is 25%.

The CMS an­nual re­port states that for 2016 schemes’ in­come and ex­penses were as fol­lows:

• Gross con­tri­bu­tions in­creased 8.1% to R163.9 bil­lion as at De­cem­ber 2016, from R151.6bn in De­cem­ber 2015. Risk con­tri­bu­tions (ex­clud­ing med­i­cal sav­ings ac­count con­tri­bu­tions) in­creased 8.1% to R147.8bn from R136.7bn in 2015. Gross con­tri­bu­tions per ben­e­fi­ciary per month rose 7.2% to R1 543 from R1 439 in 2015.

• To­tal gross health­care ex­pen­di­ture in­curred by schemes in­creased 8.9% to R151.2bn from R138.9bn in 2015. Health­care ben­e­fits that med­i­cal schemes cov­ered from their risk pools amounted to R135.98bn in 2016, com­pared with R124.54bn.


The re­port also con­tained the fol­low­ing in­for ma­tion about South Africa’s med­i­cal schemes:

• The to­tal num­ber of med­i­cal schemes reg­is­tered as at the end of De­cem­ber 2016 was 82, down from 83, as a re­sult of the amal­ga­ma­tion of LMS Med­i­cal Fund and Boni­tas Med­i­cal Scheme on Oc­to­ber 1, 2016. There were 22 open schemes and 60 re­stricted schemes. (Open schemes are those such Dis­cov­ery and Boni­tas, whose mem­ber­ship is open to all. Re­stricted schemes are re­stricted to spe­cific em­ploy­ers, em­ployer groups or busi­ness sec­tors, such as the Govern­ment Em­ploy­ees’ Med­i­cal Scheme.)

• The 82 med­i­cal schemes had a to­tal subscription of 8.879 mil­lion ben­e­fi­cia­ries (mem­bers and their de­pen­dants) at the end of last year. This was up from 8.809m in De­cem­ber 2015.

• The av­er­age med­i­cal scheme ben­e­fi­ciary in 2016 was 32.5 years of age com­pared with 32.3 years in 2015.

• Fe­male ben­e­fi­cia­ries were, on av­er­age, older than male ben­e­fi­cia­ries: the av­er­age fe­male ben­e­fi­ciary was 33.4 years of age and the av­er­age male ben­e­fi­ciary 31.5 years of age.

• The pen­sioner ra­tio in­creased slightly to 7.9%, with a general rise in the ra­tio for both men and women.

• The net health­care re­sults (con­tri­bu­tions to­wards health­care ver­sus health­care ex­penses) for all med­i­cal schemes re­flected a deficit of R2.390bn in 2016 (in 2015 there was a deficit of R1.208bn). Eigh­teen of the 23 open schemes and 37 of the 60 re­stricted schemes showed net health­care deficits for 2016.

• The sol­vency ra­tio of the in­dus­try as a whole de­creased to 31.6% in 2016 from 32.6% in 2015. The sol­vency ra­tios of open med­i­cal schemes de­creased, on av­er­age, by 2.1% to 28.6% in 2016 (2015: 29.2%). Re­stricted med­i­cal schemes had a de­crease of 4.5% in their sol­vency ra­tios, to 35.8% from 37.5% in 2015. Th­ese de­clines in sol­vency ra­tios mean schemes had to delve into their cash re­serves to fund higher ex­penses.


All med­i­cal schemes are obliged by law to cover a range of life-threat­en­ing con­di­tions from their risk pools, and th­ese are known as the pre­scribed min­i­mum ben­e­fits (PMBs).

Ex­pen­di­ture by schemes on PMBs amounted to R73.1bn in 2016, which was 54% of the to­tal risk ben­e­fits paid by schemes in 2016 (R136bn). In 2015, PMBs con­sti­tuted 51% of to­tal risk ben­e­fits paid.

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