Medical scheme members should brace themselves for steeper-than-usual increases next year, because the two largest medical schemes in the country have reported an unexpected increase in claims.
In separate presentations at a conference in Cape Town this week, the chief executive of the administrator of the largest open medical scheme in South Africa and the principal officer of the country’s largest restricted scheme revealed that their schemes are facing higher-than-usual claims, particularly hospital claims.
They attributed this to increases in hospital bed capacity and higher-than-normal anti-selection (people joining schemes only when they are facing high medical costs), and fraud and abuse.
Dr Jonathan Broomberg, the chief executive of Discovery Health, which administers Discovery Health Medical Scheme (DHMS), and Dr Guni Goolab, the principal officer of the Government Employees Medical Scheme (Gems), addressed delegates from schemes, administrators, managed-care entities and private healthcare providers at the Board of Healthcare Funders conference.
Their presentations focused on the increase in scheme members’ use of medical services and the increase in chronic diseases, both of which often result in above-inflation increases in contributions each year.
Recently, both schemes have experienced an unexpected increase in claims, and Broomberg said that, “as far as we are aware, most medical schemes in the country are experiencing similar trends”.
Hospital admission spike
Broomberg and Goolab said DHMS and Gems have seen a spike in hospital and hospital-related claims since the second half of last year. The increase seems due, in part, to the opening of several new private hospitals. Broomberg said 25 new hospitals with 2 653 beds have opened over the past eight years.
In 12 out of 18 regional case studies conducted by Discovery Health, it was found that new hospitals resulted in a significant increase in hospital admissions among scheme members, although the prevalence of disease had not increased. The increase in admissions cost the scheme R1.1 billion.
The administrator’s analysis of costs in Durban showed that the admission rate was 14 percent higher than the national average in 2010. In 2011, after a new hospital opened in Hillcrest, it was 19.8 percent higher, and in 2014, after a new hospital opened in Umhlanga, it was 29.7 percent higher.
Goolab presented evidence of an increase in hospital admissions among Gems members late last year and early this year. This showed how admissions in Polokwane and Pietermaritzburg had increased from less than three percent a year to more than 12 percent after hospitals opened in those areas.
Goolab said the increase in admissions was of particular concern, because hospital and related costs – for example, pathology and radiology – account for 62 percent of all the scheme’s claims.
He said that, over the past five years, there had been an almost 20-percent increase in hospital bed capacity, while medical scheme beneficiaries had increased by only six percent, yet private hospitals continue to report high occupancies.
Fraud on the rise
Broomberg and Goolab highlighted how a fair proportion of members’ contributions was wasted on fraud and unco-ordinated and unnecessary health care.
Goolab said the tough economic climate and the record level of unemployment had led to an increase in fraud and abuse, which results in all members paying more than they need to in contributions.
Since 2010, Gems had investigated 5 000 cases of fraud, he said.
The national average for psychologist consultations for patients admitted to hospital is eight percent, but at one hospital the utilisation of psychologists was found to be nearly five times the national average, indicating that fraudulent claims were being submitted, Goolab said.
The scheme’s data also uncovered a family practitioner who claimed to have treated 311 Gems members or beneficiaries in a day, which means that if the doctor had worked for 24 hours, he would had to have seen one patient every four minutes.
The scheme has been able to detect ambulance claims that do not correspond with hospital admissions in areas where fraud syndicates are known to be operating.
Another trend is the abuse of hospital cash-back plans offered by life assurers and short-term insurers. Medical scheme members are admitted to hospital, but no pathology tests are conducted during the members’ stay in hospital, which is highly unusual, Goolab said.
It is suspected that members are admitted under false pretences, often after being approached by a fraud syndicate. The scheme pays the hospital bill, and the member collects the cash payout from the insurance policy, which is shared with the syndicate.
Broomberg said Discovery had recovered R1.04 billion in fraudulent claims between 2013 and 2015. In 2013, the scheme recovered R288 million, and by 2015 this had increased 21 percent to R394 million.
Broomberg said international studies estimate that fraud accounts for between three and 15 percent of healthcare funders’ costs.
Anti-selection
Goolab and Broomberg presented evidence of anti-selection, which is accelerating the cost of claims.
Anti-selection is when someone joins a scheme only when he or she is ill and needs to claim. It is possible to do this, because open medical schemes must admit anyone who applies to join and may impose only limited waiting periods, during which new members cannot claim certain benefits. Restricted schemes are obliged to admit anyone who is eligible for membership and typically do not apply any waiting periods.
Broomberg said DHMS statistics show that, over the eight years to the end of 2015, the average age of its members increased by 6.9 percent, from 31.51 years to 33.68 years. This indicates that young people are waiting until they are older and sicker before joining a medical scheme.
Over the same period, the scheme had a 59-percent increase in the prevalence of chronic illnesses. In 2008, 13.9 percent of beneficiaries had chronic illnesses; by 2015, this had increased to 22.1 percent.
Broomberg said that, on average, a member with a chronic illness claims four times more than a member who does not have one.
In addition, the scheme relies on members who do not claim anything in a year to fund a surplus that carries the costs of those who do claim.
Broomberg said, that over the eight years to 2015, the percentage of DHMS members who did not claim anything in a year decreased from 60 percent to 50 percent.
Another indication of anti-selection is the increase in the number of members claiming for rare diseases, such as multiple sclerosis and rheumatoid arthritis. Broomberg said the incidence of people who claim for these illnesses should be random, but the scheme has noticed a large increase in the number of people who claim for these illnesses in the first year of membership. This indicates that they were advised to join a scheme at any cost, because their claims were likely to be high.
On average, the claims of a member with multiple sclerosis exceed his or her annual contributions by four to five times. In other words, a scheme needs five healthy families to cover the costs of that one person, he said.
Goolab said anti-selection was not confined to open medical schemes. Restricted schemes, such as Gems, had found that principal members enrolled family members as beneficiaries only when they needed to claim.
Gems’s statistics show that in the first year – in particular, within the first three months – of members joining the scheme, hospital admissions are 53.4 percent higher than in subsequent periods.
Broomberg says these statistics provide an indication of the uphill battle that medical schemes are waging in trying to keep contribution increases in line with increases in salaries and wages.