Why are increases in the medical scheme environment so high?
One needs to compare medical scheme contribution inflation and medical care and healthcare expense inflation trends to consumer price index (CPI) inflation, Janssens says. Over the past 18 years, CPI inflation has been 5.7 percent a year, medical care and health expenses inflation 7.5 percent a year, while medical scheme contribution inflation has tracked at 7.6 percent a year, Janssens says.
Over this period, medical scheme increases exceeded CPI inflation by at least 1.9 percent a year, Janssens says. The gap between medical scheme contribution inflation and CPI inflation has reduced in recent years, most likely as a result of efforts by medical schemes to manage costs charged by providers; buy-downs to lower cost benefits; changes to family size, possibly removing dependants due to affordability constraints; new entrants joining low-income options.
The general observation in the industry is that medical inflation will be about 2 to 3 percent higher than CPI over the long term, Janssens says. Increases in a particular year may be significantly higher due to adverse claims experience. The deviation from CPI is mainly due to: