What are the driv­ers of pri­vate health­care costs?

Weekend Argus (Saturday Edition) - - LIFE -

Med­i­cal scheme mem­bers’ in­creas­ing use of health­care ser­vices is a big­ger con­trib­u­tor to claims in­fla­tion than in­creases in the tar­iffs charged by doc­tors, hos­pi­tals and other providers, a med­i­cal scheme con­fer­ence heard this week.

When the cost of med­i­cal scheme claims in­creases by more than the in­fla­tion rate, it typ­i­cally trans­lates into high con­tri­bu­tions for you, the scheme mem­ber, un­less your scheme finds ways to con­tain costs or has suf­fi­cient re­serves to cush­ion the higher cost.

Con­tri­bu­tions to the coun­try’s largest open scheme, Dis­cov­ery Health Med­i­cal Scheme (DHMS), would be 27 per­cent lower than they cur­rently are if the av­er­age mem­bers’ use of med­i­cal ser­vices had not changed over the past eight years, Dr Jonathan Broomberg, the chief ex­ec­u­tive of Dis­cov­ery Health, which ad­min­is­ters the scheme, told the Board of Health­care Fun­ders con­fer­ence in Cape Town. If health­care providers’ tar­iffs had stayed the same over the past eight years, con­tri­bu­tions would be only 2.8 per­cent lower than they are.

He told del­e­gates to the con­fer­ence that if they be­lieved that ris­ing health­care provider tar­iffs were the main rea­son for higher scheme costs, they had mis­di­ag­nosed the prob­lem.

“The an­nual rate of price in­creases is not the is­sue, but how we get a grip on the ram­pant an­nual in­creases in util­i­sa­tion,” he said.

Dr Guni Goolab, the prin­ci­pal of­fi­cer of the Gov­ern­ment Em­ploy­ees Med­i­cal Scheme (Gems), the coun­try’s largest re­stricted scheme, said both the cost of health­care ser­vices and the util­i­sa­tion of these ser­vices were a prob­lem, and to fo­cus on one of these is­sues would not solve the prob­lem of above-in­fla­tion con­tri­bu­tion in­creases.

Goolab said the Coun­cil for Med­i­cal Schemes, in a cir­cu­lar on the con­tri­bu­tion in­creases that schemes im­ple­mented at the be­gin­ning of this year, stated that, of the av­er­age in­crease of nine per­cent, 3.1 per­cent­age points was a re­sult of the in­creased util­i­sa­tion of med­i­cal ser­vices.

Broomberg said that, over the past eight years, DHMS’s claims per life cov­ered had, on av­er­age, in­creased by 11.4 per­cent a year (see graph). Of this in­crease, 6.3 per­cent­age points were the re­sult of in­fla­tion as mea­sured by the Con­sumer Price In­dex.

A to­tal of 4.6 per­cent­age points of the an­nual av­er­age in­crease was a re­sult of an in­crease in the use of med­i­cal ser­vices. Dis­cov­ery Health at­tributes this in­crease to mem­bers de­mand­ing more ser­vices (de­mand­side util­i­sa­tion) – a re­sult of mem­bers be­com­ing older and sicker (2.9 per­cent­age points) – and to providers mak­ing more ser­vices avail­able (sup­ply-side util­i­sa­tion) (1.7 per­cent­age points).

Broomberg says a fur­ther 0.5 per­cent­age points was a re­sult of an­nual in­creases in the tar­iffs charged by health­care prac­ti­tion­ers.


Broomberg de­scribed the in­crease in the preva­lence of chronic ill­nesses world­wide as a “tsunami”, and said 60 to 70 per­cent of deaths glob­ally were the re­sult of four dis­eases: res­pi­ra­tory dis­ease, di­a­betes, can­cer and car­dio­vas­cu­lar dis­ease.

Dis­cov­ery has seen a 60-per­cent in­crease in the preva­lence of chronic dis­eases among its mem­bers, and Gems sta­tis­tics also show a dra­matic in­crease in chronic con­di­tions.

Goolab said that, five years ago, one in ev­ery six mem­bers of Gems suf­fered from a chronic con­di­tion, but now the ra­tio is one in four. Many of these mem­bers had two or more chronic con­di­tions, he says.

The av­er­age cost of the claims of a mem­ber with one chronic ill­ness is 1.5 times the av­er­age cost of a mem­ber who has no chronic ill­nesses.

If a mem­ber has more than one chronic ill­ness, the cost in­crease is up to six times the cost of a mem­ber who has no chronic ill­nesses, Goolab said.

Apart from the preva­lence of chronic dis­eases, the age and gen­der pro­file of a scheme’s ben­e­fi­cia­ries af­fected its claims ex­pe­ri­ence, he said. For ex­am­ple, el­derly ben­e­fi­cia­ries with more chronic con­di­tions were ex­pected to have higher claims.

The av­er­age age of med­i­cal scheme mem­bers has in­creased slightly each year over the past decade, from 31.7 years in 2005 to 32.1 years in 2015, ac­cord­ing to the Coun­cil for Med­i­cal Schemes’s 2014/15 an­nual re­port.

Goolab said that, for ev­ery one per­cent in­crease in the av­er­age age of the mem­bers of a scheme, its costs in­crease by 1.5 to two per­cent.

Another fac­tor that con­trib­utes to above-in­fla­tion con­tri­bu­tion in­creases is the ris­ing cost of new medicines and tech­nolo­gies.

For ex­am­ple, Broomberg said, a new medicine for the treat­ment of lym­phoma (can­cer of the lymph nodes) now costs R2.2 mil­lion for a eight­month course, while a new medicine for treat­ing melanoma or lung can­cer costs R1.4 mil­lion for a six-month course.

Broomberg said the in­ci­dence of high-cost cases (those with an av­er­age cost of about R1.2 mil­lion) has in­creased from 13 a year in 2008 to 89 in 2015.

Gems’s sta­tis­tics show that high claims from just five per­cent of its mem­bers ac­count for half of all the claims paid by the scheme, Goolab said. – Laura du Preez

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