No cure in sight: Why medical aid costs just keep going up
Medical aid cover is becoming more of a luxury for many South Africans, and rising premiums mean it’s not about to get any better
The 18% of South Africans who can afford private healthcare get excellent value – but already high medical aid membership costs will continue to rise as medical scheme overheads, and structural issues become increasingly difficult to manage.
A combination of an outdated regulatory environment well behind the global cost-efficiency curve, ineffective fee-for-service structures, high specialist and hospital costs, plus an ever-ageing medical scheme membership create what one funding expert calls a “death spiral”.
These facts emerged from a canvassing of several leaders in healthcare funding and regulation this week.
A Mail & Guardian review of 2021 membership hikes for the eight top medical schemes — excluding Discovery Health, the largest, which has deferred a maximum 5.9% increase to July this year — reveals an average cost increase of 5.94% (or R171.13) per month. This is despite medical scheme coffers having swollen recently due to two Covid-19 infection surges, causing people to defer elective procedures and avoid treatment.
According to experts, this will prove a short-lived respite for funders. For many scheme members, their medical conditions will worsen, with claims increasing in frequency and severity when the Covid infection threat abates. The average medical aid increase for 2020 was 8.2%, double the inflation rate.
Why you need gap cover
According to Paresh Prema, the immediate former general manager of benefits management at the Council for Medical Schemes (CMS), one of the biggest problems is that; “We’re not getting enough newer lives joining medical schemes to cross-subsidise the current member base. The average age of scheme members is increasing year on year. This principle of social solidarity is not being achieved, and with the constant increase in medical costs, schemes remain unaffordable to many new entrants into the market.”
Prema describes medical schemes as “price takers,” dependent on hospitals and specialists whose prices are uncapped and unregulated – hence the emergence of ubiquitous gap cover, which plugs the shortfall between what service providers charge and what schemes will pay. Some specialists charge 300% or more above the medical aid payment ceiling for a particular procedure or consultation.
Deon Kotze, the head of research and development for Discovery Health, argues that gap cover has given people the opportunity to cover the cost of procedures in full where the medical scheme does not.
“Sometimes it’s as blunt as a scheme putting a cap on what they pay a service provider (doctor or hospital). Schemes can’t fund unlimited amounts. It’s unaffordable. The value lies in one’s ability to insure the gap. That’s why it’s an additional cost. For the sake of affordability, medical schemes don’t cover that gap,” said Kotze.
No guidance as costs escalate
Asked why specialists and hospitals are permitted to continue charging such high fees, Prema said the Health Professions Council of South
Africa (HPCSA) – tasked with providing ethical guidelines — has “failed to give guidance to these healthcare providers”.
He said a complicating factor was that doctors were so varied in their qualifications and specialities that it was difficult to regulate prices or agree on a fair tariff. This has been considered in the hefty 2019 report prepared by the health market inquiry conducted for the Competition Commission.
The report recommended that a supply-side regulator be established to run a tariff negotiating forum to resolve this issue. The commission probed market failures and the rising cost of healthcare, as well as how to better manage the delivery of quality healthcare instead of payment depending mainly on patient volumes (as with the current fee-forservice system).
Prema argues that what’s lacking is that doctors are not being reimbursed for the quality or value they offer medical schemes or patients. The fee-for-service system does not incentivise value but rather the greater servicing of patients.
“This gradual upward pricing did not happen overnight. Medical schemes contributions increase every year because they have to pay for the increasing use of healthcare providers. In addition to the rising costs of healthcare services, medical schemes also have to deal with utilisation which further drives up the cost of healthcare and medical scheme contributions,” he said.
Prema added that there had to be a review of the regulatory system to provide healthcare coverage to the sector of the population that cannot afford the current level of medical scheme contributions.
“The schemes have been engaging with the regulator to explore alternative options that provide essential benefits at better value, but this process has not yet yielded any results.”
However, Dr Kgosi Letlape, the president of the Association of Medical Councils of Africa and the former president of HPCSA, rejected Prema’s claim that the association had failed to provide ethical costing guidelines.
Letlape said the HPCSA’S statutory role was to make sure healthcare professionals were competent, properly registered and licenced within the proper scope of what they were qualified to do.
“Issues of pricing have nothing to do with the HPCSA. When that debacle of price collusion happened some years ago, I told the health minister he should create statutory tariffs. The Competition Commission caused the problem and after destroying the private healthcare platform, they now finally understand and want to go back to what they stopped.
“You can’t leave healthcare to the market. People thought we were crazy — closet communists — when we said that. We shouldn’t now be surprised private healthcare is so unaffordable. Everybody is an agent, adding no value but increasing costs,” Letlape said.
He admitted that structural reform was critically needed but said that costing was not part of its remit. Letlape was president of the HPCSA until September last year.
The current president of the HPCSA, Professor Mbulaheni Nemuthandani, was unavailable for comment.
Medical aid in the cyber age
Clinician, academic and sometimes patient, Professor Marietjie de Villiers, the former deputy dean of the medical school at Stellenbosch University and former deputy chairperson of the Medical and Dental Professions Board, said medical aids have turned into a business science.
“The days are long gone when medical aids were to make it easier to pay and for doctors to collect money – they’re now entrepreneurial businesses, and a focus on the client or member is no longer the point,” she added.
She said medical aids seem to cover catastrophic diseases quite well, with options.
“But when you’re healthy, it all seems to come out of your medical savings plan. Gap cover seems to cover half the specialist fees, and when you ask the specialist, they often give you a hefty discount.”
Discovery Health recently tried to introduce a pre-paid voucher system to encourage the lower-income end of the market to access private healthcare — and have for years lobbied for cyber consultations. The prohibition against online consults ironically was relaxed due to the
significant impact of Covid-19 — potentially dragging South Africa into the modern cyber age.
“Our regulatory space hasn’t evolved in line with the requirements of not just medicine, but what our population needs,” said Prema.
Discovery’s Kotze said other factors driving high medical aid costs include expensive new medical technology and rampant civil litigation — with the public sector bill at R80billion — driving up doctors’ indemnity insurance costs. Gynaecologists, for example, pay R1-million in indemnity costs annually and need to deliver at least a baby a day to cover overheads.
Prema described the incipient National Health Insurance (NHI), where implementation has slowed due to Covid-19, as “an opportunity to restructure and fix things that have failed in our current system.”
His caveats to this included strong doubts about the affordability of an NHI, its implementation structure, benefit design and how to transition from the current system to the envisaged system.
“That’s if they can get above the politics and power positioning. There are currently many people involved with different agendas and plans which are not in the best interests of the majority of the population that needs access to healthcare,” he said.
Kotze’s said Discovery’s view on the NHI was that any attempt to address the quality of, and access to, healthcare in either sector was the correct approach.
Asked how South African medical aid contributions compared globally, Kotze said he only knew African figures that ranged between $100 and $200 (about R1 457 and R2 914) per month, depending on the country and chosen level of cover.
“But it’s not very useful comparing because you have to take into account what kind of public healthcare system each country has in place and consider what the taxpaying top-up component is, in addition to private healthcare premiums,” Kotze said.