Your contributions could be ‘30 percent cheaper’

Your medical scheme contributions could be nearly 30 percent cheaper if government completed its reform of the regulations that govern the industry and if schemes were more proactive about combating fraud and chose cost-effective healthcare providers, a medical scheme conference heard this week.

Barry Childs, a healthcare actuary with Lighthouse Actuarial Consulting, told the Board of Healthcare Funders (BHF) conference that he had shown last year that, if it were compulsory for all employed people to belong to a medical scheme, schemes’ costs could be reduced by 14 percent.

Schemes could save up to 15 percent if they profiled providers, such as doctors and hospitals, and designed scheme benefits so that use was made of providers that offered the best-quality services at the lowest cost, Childs says.

When schemes profile providers, they use data supplied by their administrators to understand how providers’ practices affect their costs.

Medical schemes could save a further estimated 10 percent if they collaborated to tackle fraud, he says.

Christoff Raath, an actuary and the chief executive of the Health Monitor Company, says it is estimated that providers and members defraud medical schemes of between R3 billion and R22 billion a year.

Raath says that examples of fraud and abuse are:

Anaesthetists who bill for more time than, according to hospital records, they spent in theatre;

Providers, such as psychologists, who bill for services for more hours than there are in a day; and

Doctors who order tests for every patient they see or bill every consultation as an emergency.

Childs says that fraud is like a

The problem is that, because schemes are obliged to pay PMB claims in full, some providers are inflating their tariffs for PMB services. Raath says this is now a very real and significant problem.

Recently, the Government Employees Medical Scheme disclosed that, had it been able to pay for PMB services at its scheme rate rather than in full, it would have saved R1.1 billion on PMB claims last year.

The spiralling cost of PMBs is a systemic issue and someone, be it the Department of Public Service and Administration, public servants themselves, taxpayers or National Treasury, should take note that the figures are so high, Raath says.

Health Monitor has collected data that explicitly show that practitioners are progressively charging iceberg: schemes and their administrators are dealing with the tip of the problem through their fraud detection units, whereas most of the fraud goes undetected.

Unless schemes pool their data, they will not detect the massive fraud that is “below the surface”, which may be far more than the two to three percent of claims that schemes are detecting currently, he says.

SOLVENCY RATIOS

In addition to making scheme membership mandatory, Childs says the reforms should include equalising the cost of claims across schemes (an initiative that has since been scrapped), proper guidelines on the difference between the business of medical schemes and that of health insurance, and the introduction of risk-based solvency.

Currently, medical schemes are obliged by law to hold 25 percent of the contributions as reserves (their solvency level) to protect schemes against large claims.

Many medical scheme industry experts say this percentage is unnecessarily high and that schemes’ reserves should be aligned to their exposure to risk. This would free up reserves, which schemes could use to provide you with better benefits.

However, a change to the solvency requirements is not expected to be included in the Medical Schemes Amendment Bill, which the Council for Medical Schemes has proposed to the Department of Health.

Registrar of Medical Schemes Dr Monwabisi Gantsho told the BHF conference that his office had received many submissions from schemes that have large reserves.

However, none of the arguments put forward have convinced his office that it is necessary to change the solvency level, he says. more for PMB claims relative to nonPMB claims.

Van den Heever says it would be “suicidal” to wait for the outcome of the Competition Commission’s inquiry before regulating the tariffs for healthcare services.

A regulated framework in which schemes and healthcare providers can negotiate tariffs – and that includes proper disclosure about the costs of healthcare providers’ services – should be implemented before the commission completes it work, Van den Heever says. This would enable the inquiry to test the efficacy of that mechanism.

The BHF conference heard that another key issue that has yet to be addressed is the threat that health insurance products pose to medical schemes (see page 4).