Photo: Pixabay
Photo: Pixabay

Medical schemes face ‘sustainability challenges’

By Georgina Crouth Time of article published Dec 15, 2020

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Medical schemes face “serious sustainability challenges” owing to stagnant membership growth, among other things. This emerged at the release last week of the Council for Medical Schemes (CMS) annual report for 2019/20.

The council, which lost two chairmen this year to Covid-19 – Dr Clarence Mini in May, then Professor Lungile Pepeta in August – has been wracked by staff shortages, internal probes into fraud and corruption, and a constrained budget. In mid-November, a new council was appointed as part of the CMS’s five-year planning cycle, headed by a new chairman, Dr Memela Makiwane.

The annual report shows that growth in beneficiaries (principal members plus dependents) in 2019 was relatively stagnant, with an increase of only 0.8% beneficiaries over 2018: from 8.92 million to 8.99 million.

There were fewer schemes too, dropping from 83 in 2014 to 78 in 2019. Poor governance and financial management of schemes resulted in a number of schemes being placed under curatorship in this period, the report said. The number of accredited administrators dropped from 28 in 2014 to 26 in 2019, while the number of accredited brokers decreased from 10 780 in 2014 to 10 144 in 2019. Accredited managed care organisations increased from 39 in 2014 to 44 last year.

At the launch of the report, the council noted that the number of efficiency discounted options (EDOs) – benefit options with network arrangements for healthcare provision – increased from 40 in 2014 to 69 in March 2019, and 25.8% more beneficiaries opted for these options in the past five years.

The council said the main conclusion that can be drawn from these trends is that the sector is faced with “serious sustainability challenges”.

“These challenges are characterised by low beneficiary growth, reduction in the number of registered regulated entities, increasing beneficiary dissatisfaction and an increase in the number of non-EDO scheme options.”

It said there have been products and players that entered the market without obtaining the necessary approval by the CMS, and the council “will spend significant time and effort ensuring that these entities are brought under its regulatory umbrella or declaring them illegal in terms of the Medical Schemes Act”.

A further concern was the increase in the number of complaints about diagnostic and procedure code disputes between schemes and service providers. The CMS said it plans to establish a mechanism to address these disputes, with the support of other regulators. The disputes between schemes and service providers in the management of alleged fraudulent transactions, it noted, are of great concern.

In 2019, R186.66 billion was collected in risk contributions from members, compared with R173.95bn the previous year, while expenditure on healthcare services was reported at R169.07bn, up from R156.94bn.

The average gross contribution increase for all medical schemes in 2020 was above inflation, at 7.6%. Restricted schemes instituted an average of 6.9% increase in contributions, while open schemes increased contributions by 8.1%.

Of concern to the council was the aging profile of members, the lack of membership in the young and healthy 30 to 34 age band, the increasing burden of disease, healthcare expenditure outstripping inflation, out-of-pocket benefits, quality of care, low rates of flu vaccinations, and claims values outstripping contributions. Growth in the sector came from the 40+ age group.

Expenditure on the Prescribed Minimum Benefits, benefits for the treatment of life-threatening diseases that all options must provide, exceeded R94.8bn. This comprised the biggest segment of expenditure.

Heart attacks constituted the highest in-patient cost, at R132 000, on average. Beneficiaries admitted for heart failure increased by 5.16%.

Noting positive industry trends that influenced the sector over the past five years, the council said solvency ratios have remained at 35.61%, on average, well above the statutory requirement of 25%. Only four schemes (one restricted and three open) failed to meet the 25% requirement between 2014 and 2019. These were Bonitas Medical Fund, Spectramed (now Health Squared after amalgamating with Resolution Health), Thebemed and Transmed.

The open scheme industry’s solvency level has been stable over the past decade, with a solvency level of 29.35% at the end of 2019, but the restricted industry’s level peaked in 2006 and declined from 2007 onwards, mostly due to membership growth – largely attributed to the “exceptional” growth of the Government Employees Medical Scheme (Gems), which is the largest restricted scheme in the country. Between 2016 and 2019, the restricted scheme solvency level improved subsequently, attributed to a turnaround in the financial performance of Gems, which has now reported an increase in solvency levels from 6.98% in 2016 to 31.53% last year.

PERSONAL FINANCE

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