Large medical schemes have announced average contribution increases of more than 10 percent for 2017, despite a circular from the Council for Medical Schemes (CMS) in July asking them to keep in mind that above-inflation increases are a burden for members.
The private healthcare sector is under enormous pressure, because members are claiming more benefits and the cost of health care is rising.
Personal Finance asked the 10 largest (by membership) medical schemes, which collectively represent 70 percent of people who belong to a scheme, how they intend to save costs in 2017.
Their responses indicate that schemes are pinning their hopes on two strategies:
• Channelling members into using particular healthcare providers. This is done in one of two ways: either the scheme’s rules compel members to use particular providers or members pay lower contributions if they agree to use particular providers.
• Better management of the treatment of “high-risk” members, particularly those who have two or more medical conditions.
Channelling includes:
• Requiring members to use designated service providers (DSPs) when accessing treatment for the prescribed minimum benefits (PMBs);
• Requiring members to use participating providers (what the Medical Schemes Act calls managed-care arrangements); and
• Offering efficiency-discounted options (EDOs), which enable members to pay lower contributions in exchange for agreeing to use particular healthcare providers.
EDOs are sub-options of medical scheme options. Some schemes, such as Momentum Health, offer members the choice of more than one EDO per “parent” option. The sub-options are designed around members’ willingness to limit their choice of provider. A healthy person, for example, might agree to use the public healthcare sector for chronic care, because he or she is unlikely to use this benefit.
You should understand the implications if your scheme requires you to use a DSP, or if you join an EDO.
A DSP means you must use certain hospitals or networks of doctors when you are treated for a PMB, if you want the scheme to cover the total cost of the treatment. If you use a non-DSP, or are treated by a doctor who is not part of the network, the scheme is entitled to demand a co-payment from you (unless you did not use the DSP or the network because it was an emergency).
Members of EDOs agree to pay lower contributions (relative to the parent option) in return for having their choice of hospitals and doctors restricted when they are treated for all medical procedures, not just the PMBs.
In addition, the scheme may demand a co-payment for certain elective procedures.
The principal officers of the seven open schemes interviewed by Personal Finance, including Discovery Health Medical Scheme (DHMS), Bonitas Medical Fund, Momentum Health, Medshield, Bestmed and Fedhealth, and the largest closed scheme in South Africa, the Government Employees Medical Scheme, said their schemes already have, or will introduce, EDOs.
Momentum Health’s principal officer, Toni van den Bergh, said all of the scheme’s options, except one, have EDOs.
If, for example, the principal member on the Custom Option agrees to use a hospital on the scheme’s list of hospitals and the state healthcare sector when being treated for a chronic condition, his or her contribution will be reduced by R793, or 39 percent of the monthly premium, Van den Bergh said.
DHMS’s principal officer, Milton Streak, said his scheme has six EDOs, which can save principal members between R300 and R350 a month, or between 10 and 25 percent, compared with the “parent” plan. He estimated that nine percent of DHMS beneficiaries belong to EDOs.
Limitations of DSPs
How schemes select DSPs is controversial, because the Medical Schemes Act does not oblige schemes to justify to members or the CMS why they chose certain providers and not others.
Earlier this year, Personal Finance was contacted by the chief executive of a private hospital who said his employees belong to a medical scheme that had decided to introduce a hospital DSP. He was concerned that the scheme had not approached his hospital to bid to become the DSP, even though it had won the right to treat members of other large schemes.
“Our experience points to a system that would benefit from greater transparency,” he said.
Earlier this year, the Competition Commission’s inquiry into the private healthcare sector heard many complaints from hospitals, laboratories and doctors about the abuse of the DSP contracting process. Complaints included that certain providers are excluded from the process and that contracts are onerous.
The chairman of the inquiry, Chief Justice Sandile Ngcobo pointedly asked a number of hospitals whether they would be willing to display their prices publicly, and they agreed, albeit somewhat reluctantly.
Debbie Pearmain, a former legal adviser to the Minister of Health, says the controversy over how medical schemes select DSPs is symptomatic of the power imbalances between schemes and healthcare providers.
“The outcome of these power imbalances is two-fold: in some cases, smaller, sometimes more cost-effective providers are ignored by larger schemes, and, in others, smaller schemes are able to negotiate less-favourable prices with larger providers.”
Discounted options
EDOs may cut through the stalemate in transparent medical scheme contracting.
Schemes must obtain permission from the CMS to launch EDOs, because, technically, EDOs violate the Medical Schemes Act. The Act states that members who belong to the same option must pay the same contributions. The only grounds for charging a different contribution is the number of dependants a member registers on the scheme, or if a member is a low-income earner.
The CMS will allow a scheme to launch an EDO if the scheme proves that it followed a transparent process when selecting service providers for the EDO, and that cost savings will be passed on to members in the form of lower contributions.
According to the council’s latest annual report, 487 659 beneficiaries belonged to EDOs at the end of 2015, an increase of 12.6 percent since the end of 2014.
Paresh Prema, the general manager: benefits management at the CMS, says most EDOs save costs by contracting with selected hospitals, but some also negotiate discounts with general practitioners, chronic-care service providers, medicine courier services and dispensaries.
Most schemes manage to negotiate discounts of between 15 and 30 percent, he says.
Before the CMS will allow a scheme to launch an EDO, the scheme has to provide the CMS with information about how the providers were chosen and demonstrate that it followed a transparent selection process, he says.
The CMS also insists that schemes show that providers are conveniently located in relation to where members of an EDO live or work.
The CMS checks the marketing material to ensure that it makes it clear that members will have to use providers in a network and may be liable for co-payments, Prema says.
ADVICE FOR MEMBERS
• If your medical scheme option requires you to use a designated service provider (DSP), or doctors or hospitals that belong to a network, and you don’t like the providers chosen on your behalf, you can at year-end change to an option that gives you greater freedom of choice. But this will result in you paying higher contributions.
• If your family doctor does not belong to the network that you are required to use, ask him or her why. Some doctors are opposed to networks, because they allegedly interfere with the autonomy of medical practitioners. Although your doctor may be unwilling to negotiate tariffs with your medical scheme, he or she might be willing to negotiate a lower fee directly with you.
• Most members do not have the data or insight to second guess whether their scheme has selected the most appropriate DSP. However, you can complain to the Council for Medical Schemes (CMS) if the DSP is a long way from your home or place of work. The CMS may ask your scheme to add a provider that is more convenient for you.
• If your scheme changes its DSPs in the middle of the year, you can complain to the CMS, because it is a material change to the terms of the contract between you and your scheme, particularly if the change adversely affects your ability to access health care. The CMS can order the scheme to ensure that you are not denied access to healthcare services.
• Paresh Prema, the general manager: benefits management at the CMS, says members should be proactive. If a surgeon recommends that you or a family member undergo an elective procedure, ask your medical scheme how much of the cost it will cover before you ask for pre-authorisation. You can use the information to negotiate with the surgeon over his or her fee. In most cases, surgeons are prepared to be flexible over the fee if it is certain what the scheme will pay, he says.