You could pay less for med­i­cal scheme cover

There are ways to re­lieve the bur­den on ex­ist­ing med­i­cal scheme mem­bers and in­duce more low­in­come earn­ers to join schemes – all while help­ing gov­ern­ment to im­ple­ment Na­tional Health Insurance, an ac­tu­ary says. Laura du Preez re­ports ‘NHI will ad­dress mand

Weekend Argus (Saturday Edition) - - GOODPOSTER -

Med­i­cal scheme mem­bers could pay lower con­tri­bu­tions, more low-in­come earn­ers could af­ford to join schemes and much­needed funds could be freed up for use in the pub­lic health­care sec­tor if a few re­forms were in­tro­duced, an ac­tu­ary told a con­fer­ence this week.

Barry Childs, a health­care ac­tu­ary with Light­house Ac­tu­ar­ial Con­sult­ing and CareGauge, told del­e­gates at the Hos­pi­tal As­so­ci­a­tion of South Africa’s an­nual con­fer­ence that there is a rel­a­tively quick way to bring relief to users of both the pri­vate and the pub­lic health­care sys­tems while wait­ing for Na­tional Health Insurance (NHI) to be fully de­vel­oped.

Childs says the re­forms in­clude mak­ing med­i­cal scheme mem­ber­ship manda­tory for peo­ple in for­mal em­ploy­ment and in­creas­ing in­come cross- sub­sidi­s­a­tion among mem­bers. He says th­ese re­forms, to­gether with other re­forms that were pro­posed ear­lier but have been ig­nored since the fo­cus turned to NHI, could:

◆ Re­duce by 15 per­cent the av­er­age cost of med­i­cal scheme mem­ber­ship for high­in­come earn­ers;

◆ Re­sult in another 13 per­cent of the coun­try’s pop­u­la­tion be­com­ing scheme mem­bers at con­tri­bu­tion rates that are less than half the cur­rent av­er­age; and

◆ Ben­e­fit the pub­lic health­care sys­tem, be­cause it would have to treat six mil­lion fewer peo­ple. This would have the ef­fect of in­creas­ing by 19 per­cent the an­nual amount spent on each per­son who uses the pub­lic health­care sec­tor.

Not only would th­ese re­forms bring short- term relief to med­i­cal scheme mem­bers while gov­ern­ment pur­sues the longer-term goal of in­tro­duc­ing uni­ver­sal cov­er­age through NHI, but they would also help to bring about the con­ver­sion to NHI, Childs says.

On av­er­age, R11 395 a year (R949 a month) is paid in con­tri­bu­tions for each med­i­cal scheme ben­e­fi­ciary, whereas gov­ern­ment spends R2 835 a year (R236 a month) on each per­son who uses pub­lic health­care fa­cil­i­ties, he says.

The av­er­age amount spent on med­i­cal scheme con­tri­bu­tions could be re­duced to R9 686 a year (R807 a month) – a de­crease of 15 per­cent – for high-in­come earn­ers, while low-in­come earn­ers whose con­tri­bu­tions are cross-sub­sidised by high-in­come earn­ers could be brought in at a con­tri­bu­tion rate of R5 854 a year (R487 a month).

Childs says this would en­cour­age about 13 per­cent of the pop­u­la­tion to join low­cost med­i­cal scheme op­tions, which, in turn, would in­crease from 17 per­cent to 30 per­cent the per­cent­age of the pop­u­la­tion cov­ered by schemes. This would re­duce the num­ber of peo­ple who rely on the state for health care and en­able gov­ern­ment to in­crease the av­er­age amount it spends on users of pub­lic health­care fa­cil­i­ties from R2 835 per per­son a year to Manda­tory mem­ber­ship of med­i­cal schemes will be ad­dressed through Na­tional Health Insurance, Dr Mon­wabisi Gantsho, the Regis­trar of Med­i­cal Schemes, said in re­sponse to the pro­pos­als from in­de­pen­dent ac­tu­ary Barry Childs.

Gantsho says the med­i­cal scheme in­dus­try has in­di­cated on nu­mer­ous oc­ca­sions that it is ham­strung in do­ing more to im­prove ac­cess and af­ford­abil­ity, and med­i­cal schemes mem­ber­ship is grow­ing at a “dis­mal” 1.8 per­cent a year. This may be a func­tion of un­af­ford­abil­ity, and thus a call for an al­ter­na­tive and in­no­va­tive health­care fund­ing model.

The Com­pe­ti­tion Com­mis­sion’s 2003 rul­ing pro­hibit­ing ne­go­ti­a­tions to set tar­iffs and the ab­sence of guide­line tar­iffs have left a vac­uum within the pri­vate health­care sec­tor, where providers are now charg­ing at rates as much as 700 per­cent above what med­i­cal schemes can af­ford, he says.

Con­cern­ing Childs’ call for reg­u­la­tory re­forms, the regis­trar says the Coun­cil for Med­i­cal Schemes has pro­posed amend­ments to the Med­i­cal Schemes Act to the Depart­ment of Health. How­ever, th­ese R3 377 per per­son a year (R281 a month) – an in­crease of 19 per­cent, he says.


In or­der to achieve all th­ese things, gov­ern­ment should com­plete the re­form of med­i­cal scheme reg­u­la­tions that was pro­posed when it was pur­su­ing a so­cial health insurance sys­tem (SHI) for South Africa, Childs says.

In terms of SHI, ev­ery­one who could af­ford to do so – typ­i­cally those in for­mal em­ploy­ment – would be ex­pected to join a med­i­cal scheme.

How­ever, the move to SHI was halted in 2005, and in 2007 gov­ern­ment an­nounced its in­ten­tion to pur­sue NHI.

Childs says that mak­ing scheme mem­ber­ship com­pul­sory for peo­ple in for­mal em­ploy­ment would pre­vent anti-se­lec­tion (peo­ple join schemes only when they need health care and leave there­after) and re­duce con­tri­bu­tions.

Mak­ing mem­ber­ship manda­tory would also re­duce the av­er­age age of the lives cov­ered by med­i­cal schemes, he says.

It is es­ti­mated that util­i­sa­tion of health­care ser­vices by med­i­cal scheme mem­bers in­creases by 2.5 per­cent a year, and this amend­ments do not ex­tend to manda­tory cover, a risk equal­i­sa­tion fund or in­come cross-sub­sidi­s­a­tion.

In re­sponse to the sug­ges­tion that more should be done to elim­i­nate fraud, Gantsho says the coun­cil is con­cerned about the lack of good gov­er­nance in schemes and has been con­duct­ing train­ing for trustees.

He also re­ferred to the coun­cil’s op­po­si­tion to un­reg­u­lated gap cover and hos­pi­tal cash plans and said it was en­gag­ing with Na­tional Trea­sury on th­ese mat­ters. can, in part, be at­trib­uted to the age­ing, and wors­en­ing risk pro­file, of the med­i­cal scheme pop­u­la­tion.

The ab­sence of manda­tory mem­ber­ship for those in for­mal em­ploy­ment is a no­table con­trib­u­tor to med­i­cal scheme con­tri­bu­tion in­creases each year, and Childs es­ti­mates that in­tro­duc­ing manda­tory mem­ber­ship could save ex­ist­ing mem­bers be­tween nine and 14 per­cent of the con­tri­bu­tions they cur­rently pay.

Another re­form that was pro­posed pre­vi­ously, a risk equal­i­sa­tion fund that will equalise the cost of pro­vid­ing ben­e­fits to mem­bers across med­i­cal schemes, will en­cour­age schemes to com­pete on ef­fi­ciency rather than on their mem­ber­ship pro­file, Childs says.


One of the ob­sta­cles to mak­ing med­i­cal scheme mem­ber­ship manda­tory is the high cost of con­tri­bu­tions rel­a­tive to house­hold in­come, Childs says.

The high cost of pro­vid­ing the pre­scribed min­i­mum ben­e­fits (PMBs) – the ben­e­fits that all schemes are re­quired by law to pro­vide – is a ma­jor hur­dle to mak­ing con­tri­bu­tions more af­ford­able. On av­er­age, it costs R1 064 per fam­ily to pro­vide the PMBs to scheme ben­e­fi­cia­ries.

In­come cross-sub­si­dies are needed to en­sure that med­i­cal scheme mem­ber­ship is af­ford­able for lower-in­come house­holds. Cur­rently, wealth­ier house­holds spend a far lower pro­por­tion of their in­come on med­i­cal scheme con­tri­bu­tions.

He says that the in­tro­duc­tion of greater in­come cross- sub­sidi­s­a­tion in med­i­cal schemes could make con­tri­bu­tions more af­ford­able, which would en­cour­age more low-in­come earn­ers to join schemes.

Re­stricted schemes (those that limit mem­ber­ship to a group, such as em­ploy­ees of a com­pany) use in­come cross-sub­sidi­s­a­tion ef­fec­tively to en­sure that low-in­come earn­ers can af­ford the con­tri­bu­tions, but open schemes (those that must ad­mit any­one) tend to dif­fer­en­ti­ate con­tri­bu­tions by in­come band only for their low- cost op­tions, Childs says.

Em­ploy­ers also achieve in­come cross­sub­sidi­s­a­tion by giv­ing higher sub­si­dies to lower-in­come em­ploy­ees, he says.

For open schemes to make greater use of in­come-rated con­tri­bu­tions, all schemes would have to be com­pelled to in­tro­duce such bands, he says. Ways would have to be found to ver­ify mem­bers’ in­comes, he says.


A sav­ing of be­tween 20 and 30 per­cent in con­tri­bu­tions could be achieved if the reg­u­la­tions were re­formed, while, at the same time, more co-or­di­nated strate­gies were im­ple­mented to man­age fraud and schemes adopted a “smarter” ap­proach to choos­ing the health­care ser­vices they pro­vide for their mem­bers, Childs says.

If med­i­cal schemes, ad­min­is­tra­tors, man­aged care en­ti­ties and health­care providers col­lab­o­rated more, they could do more to elim­i­nate fraud, which, by con­ser­va­tive es­ti­mates, costs schemes five per­cent of your con­tri­bu­tions.

Schemes that use data col­lected about health­care providers in or­der to con­tract with those that have been iden­ti­fied as pro­vid­ing ser­vices cost- ef­fec­tively have achieved a sig­nif­i­cant sav­ing on claims pay­outs, and more schemes should be en­cour­aged to fol­low suit, Childs says.

Schemes could make greater use of al­ter­na­tive re­im­burse­ment meth­ods, which in­cen­tivise health­care providers to take some of the fi­nan­cial risk of pro­vid­ing ser­vices to mem­bers. Cur­rently, providers charge for each ser­vice, which can re­sult in the over­ser­vic­ing of mem­bers.

If schemes passed on to their mem­bers only half of the po­ten­tial sav­ing of 30 per­cent in con­tri­bu­tions, mem­bers’ con­tri­bu­tions could be 15 per­cent lower. The re­main­ing sav­ing of 15 per­cent could be used to sub­sidise the con­tri­bu­tions of low­in­come earn­ers, Childs says.

The health­care sys­tem must be re­formed to bring about af­ford­able health­care cover for all, he says. But im­ple­ment­ing pre­vi­ously pro­posed re­forms for med­i­cal schemes will keep con­tri­bu­tions af­ford­able in the mean­time, while in­creas­ing the amount avail­able to spend on pub­lic health care. This, in turn, will fa­cil­i­tate the de­vel­op­ment of NHI, he says.

This is how the health­care sys­tem could look: Manda­tory mem­ber­ship of med­i­cal schemes, as well as other mea­sures, could save higher-in­come mem­bers 15 per­cent of their con­tri­bu­tions, while re­forms to the reg­u­la­tions, to­gether with in­come cross-sub­sidi­s­a­tion, could bring another 13 per­cent of the pop­u­la­tion on to schemes at a con­tri­bu­tion rate 50 per­cent be­low the cur­rent av­er­age per ben­e­fi­ciary. The relief this would bring to the pub­lic health sec­tor could in­crease the amount spent per per­son by 19 per­cent.

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