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The greatest portion of your medical scheme contributions was again last year spent on private hospitals’ and medical specialists’ bills, the Council for Medical Schemes’s latest annual report shows.
And the amounts spent on these healthcare providers continue to increase at rates higher than Consumer Price Index (CPI) inflation, the report for 2011/12 states.
Hospitals were paid R34.1 billion, or 36.6 percent of all healthcare benefits paid. Of this amount, R33.8 billion was paid to private hospitals – an increase of 9.7 percent on the R30.8 billion paid in 2010.
There has been a real (after-inflation) increase of 129.9 percent in the amount spent on private hospitals since 2000, the report states. Private hospital expenditure in 2000 accounted for less than 30 percent of all the benefits paid by schemes.
Last year, medical specialists were paid R21.3 billion, or 22.8 percent of the healthcare benefits, an increase of 13.5 percent on the 2010 amount.
Benefits paid to medical specialists have increased by 121.9 percent in real terms since 2000, the report notes.
The percentage of all benefits spent on medical specialists has been increasing since 2003, when the amount spent on these practitioners was less than 20 percent.
Earlier this month, the Hospital Association of South Africa commissioned Econex, which consults on health economics, to analyse the increase in hospital costs.
Econex reported that only 40 percent of the increases in what medical schemes spend on private hospitals can be attributed to price inflation.
It said an analysis of data from the three largest hospital groups showed that there was an increase in the utilisation of hospital services – both in terms of the number of admissions and the length of stays in hospital.
The consultancy also reported an increase in the number of patients over the age of 65 who were admitted to hospital. The average cost of treating older patients is almost 50 percent higher than the average cost of all admissions, Econex says.
In addition, Econex found there was an increase in the number of people admitted to private hospitals for chronic diseases.
It says the increase in admissions and in the length of hospital stays could be related to the worsening disease burden in general, but could also be a result of members being free to join medical schemes at any time and therefore joining schemes only when they need health care.
Econex says private hospital data also show a change in medical products and services demanded over time. It says this stems from new health technologies and treatments for previously inoperable conditions.
The reasons hospital price rises are higher than inflation include above-inflation increases in health professionals’ salaries, scarce skills, capital expenditure and maintenance, food and electricity, Econex says.
The Department of Health has said it intends to set up a pricing forum at which fair prices for healthcare ser-vices can be established.
However, the department plans to await the outcome of a Competition Commission inquiry into the healthcare sector before putting the forum in place. This means it could be some years before prices for healthcare tariffs are established based on the cost of providing services and the price that you, through your scheme, can afford to pay.
The average age of medical scheme beneficiaries increased again last year, from 31.5 years to 31.6 years, the council’s 2011/12 report shows.
The pensioner ratio (ratio of over-65s to under-65s) also increased marginally, from 6.5 percent in 2010 to 6.6 percent in 2011.
Generally, as the average age of medical scheme members increases, the cost of their claims increases.
The only way schemes can counter this is by attracting younger members who can subsidise the cost of the older members’ claims.
According to the annual report, the growth in the principal members of schemes slowed from 3.6 percent in 2010 to 3.3 percent last year.
The number of principal members of schemes at the end of last year was 3.7 million, and the number of beneficiaries reached 8.5 million.
Discovery Health chief executive Dr Jonathan Broomberg responded to the Econex research, saying Discovery’s data also shows that members overall are getting older and sicker, and that the increased utilisation of healthcare services is a key reason for medical inflation rising faster than the CPI rate. These changes inflate claims by two to three percent each year, over and above the increases that result from healthcare providers increasing their tariffs and the costs of new technology and procedures. Broomberg says.
LOW RESERVES A COMMON PROBLEM
The number of members of medical schemes that have not achieved the required solvency ratio remains high despite an improvement in the average solvency ratios of schemes and a drop in the number of schemes that have not achieved solvency (from 19 to 14, partly due to amalgamations and liquidations).
Sixty percent of all medical scheme beneficiaries in open schemes were in schemes that did not meet the required solvency level, while 49.5 percent of the beneficiaries in restricted schemes were in schemes that did not meet the required solvency level, the Council for Medical Schemes’s latest annual report shows. This is because the country’s two largest medical schemes – Discovery Health Medical Scheme and the Government Employees Medical Scheme (Gems) – have reserves below the required level.
Discovery Health’s reserves reached 23.5 percent at the end of last year (down from 24.7 percent at the end of 2010), while Gems increased its solvency ratio from 7.1 percent at the end of 2010 to 8.6 percent at the end of last year, the annual report shows.
Other schemes that the Council for Medical Schemes is monitoring because they do not have the required reserves are: Altron Medical Aid Scheme, Community Medical Aid Scheme, Hosmed Medical Aid Scheme, Keyhealth, Minemed Medical Scheme, Momentum Health, National Independent Medical Aid Society, Pharos Medical Plan, Resolution Health Medical Scheme, Thebemed and Transmed Medical Fund and Umvuzo Health Medical Scheme.
Schemes have only two options for raising funds to meet the required reserves: increase your contributions or cut your benefits.
MANY BENEFIT OPTIONS RUNNING AT A LOSS
Despite the good overall operating results, many medical scheme options did not fare well.
At the end of last year, there were 306 medical scheme options, of which 156 (or 51 percent) incurred operating losses, the Council for Medical Schemes’s annual report for shows. Out of these 156 options, 91 were in open schemes.
Many of the loss-making options – 74 in total – had less than 2 500 members, and the losses in options with less than this number of members were 2.2 times greater than those in options with more than 2 500 members, the annual report says.
“It appears that loss-making benefit options with fewer than 2 500 members generally have higher contributions and claims than other options and also attract higher non-healthcare costs,” the report notes.
Medical schemes are by law expected to ensure that all benefit options break even, but this is often difficult to achieve, because raising contributions in a loss-making option may cause members to move to another option that is not priced for the risk those members pose.
MOST COMPLAINTS ABOUT PMBs
The biggest source of complaints about medical schemes is their failure to pay claims for prescribed minimum benefit (PMB) conditions.
The Council for Medical Schemes’s latest annual report shows that members and healthcare providers lodged 6 138 complaints in the 2011/12 financial year – a small increase of 0.04 percent per 1 000 beneficiaries over the number of complaints lodged in 2010/11.
A total of 5 963 complaints were resolved, and of these 2 370 related to the non-payment or short payment of PMB benefits and 1 697 related to the non-payment or short payment of non-PMB benefits.
The PMBs cover all medical emergencies, some 300 life-threatening conditions and 25 chronic conditions. Schemes are obliged by law to pay PMB claims in full and may not pay them from your medical savings account.
The council received 260 complaints about membership status – for example, where schemes terminate membership due to a member’s alleged non-disclosure of material information.