Medical scheme members’ increasing use of healthcare services is a bigger contributor to claims inflation than increases in the tariffs charged by doctors, hospitals and other providers, a medical scheme conference heard this week.
When the cost of medical scheme claims increases by more than the inflation rate, it typically translates into high contributions for you, the scheme member, unless your scheme finds ways to contain costs or has sufficient reserves to cushion the higher cost.
Contributions to the country’s largest open scheme, Discovery Health Medical Scheme (DHMS), would be 27 percent lower than they currently are if the average members’ use of medical services had not changed over the past eight years, Dr Jonathan Broomberg, the chief executive of Discovery Health, which administers the scheme, told the Board of Healthcare Funders conference in Cape Town. If healthcare providers’ tariffs had stayed the same over the past eight years, contributions would be only 2.8 percent lower than they are.
He told delegates to the conference that if they believed that rising healthcare provider tariffs were the main reason for higher scheme costs, they had misdiagnosed the problem.
“The annual rate of price increases is not the issue, but how we get a grip on the rampant annual increases in utilisation,” he said.
Dr Guni Goolab, the principal officer of the Government Employees Medical Scheme (Gems), the country’s largest restricted scheme, said both the cost of healthcare services and the utilisation of these services were a problem, and to focus on one of these issues would not solve the problem of above-inflation contribution increases.
Goolab said the Council for Medical Schemes, in a circular on the contribution increases that schemes implemented at the beginning of this year, stated that, of the average increase of nine percent, 3.1 percentage points was a result of the increased utilisation of medical services.
Broomberg said that, over the past eight years, DHMS’s claims per life covered had, on average, increased by 11.4 percent a year. Of this increase, 6.3 percentage points were the result of inflation as measured by the Consumer Price Index.
A total of 4.6 percentage points of the annual average increase was a result of an increase in the use of medical services. Discovery Health attributes this increase to members demanding more services – a result of members becoming older and sicker (2.9 percentage points) – and to providers making more services available (1.7 percentage points).
Broomberg says a further 0.5 percentage points was a result of annual increases in the tariffs charged by healthcare practitioners.
Broomberg described the increase in the prevalence of chronic illnesses worldwide as a “tsunami”, and said 60 to 70 percent of deaths globally were the result of four diseases: respiratory disease, diabetes, cancer and cardiovascular disease.
Discovery has seen a 60-percent increase in the prevalence of chronic diseases among its members, and Gems statistics also show a dramatic increase in chronic conditions.
Goolab said that, five years ago, one in every six members of Gems suffered from a chronic condition, but now the ratio is one in four. Many of these members had two or more chronic conditions, he says.
The average cost of the claims of a member with one chronic illness is 1.5 times the average cost of a member who has no chronic illnesses.
If a member has more than one chronic illness, the cost increase is up to six times the cost of a member who has no chronic illnesses, Goolab said.
Apart from the prevalence of chronic diseases, the age and gender profile of a scheme’s beneficiaries affected its claims experience, he said. For example, elderly beneficiaries with more chronic conditions were expected to have higher claims.
The average age of medical scheme members has increased slightly each year over the past decade, from 31.7 years in 2005 to 32.1 years in 2015, according to the Council for Medical Schemes’s 2014/15 annual report.
Goolab said that, for every one percent increase in the average age of the members of a scheme, its costs increase by 1.5 to two percent.
Another factor that contributes to above-inflation contribution increases is the rising cost of new medicines and technologies.
For example, Broomberg said, a new medicine for the treatment of lymphoma (cancer of the lymph nodes) now costs R2.2 million for a eight-month course, while a new medicine for treating melanoma or lung cancer costs R1.4 million for a six-month course.
Broomberg said the incidence of high-cost cases (those with an average cost of about R1.2 million) has increased from 13 a year in 2008 to 89 in 2015.
Gems’s statistics show that high claims from just five percent of its members account for half of all the claims paid by the scheme, Goolab said.