Medical aid costs spike

2016-09-25 06:03


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The country’s medical schemes are finalising premiums for next year and, judging from this week’s announcement by the biggest medical scheme in South Africa, Discovery Health, members should expect a double-digit increment of at least 10% on contributions.

Discovery Health, which has about 2.6 million members, announced on Tuesday that member contributions would increase by an average 10.2%. Momentum Health, the fifth-largest scheme with more than 221 000 members, announced on Thursday that member contributions would increase by 11%. Discovery members on the executive and comprehensive plans could expect an 11.9% increase, while those on the coastal core plan faced an even higher 14.9%.

Healthcare management company PPO Serve’s CEO, Dr Brian Ruff, warned that the hefty hikes would hit already struggling consumers hard. He said the primary driver of the hikes was the growing number of private hospital beds, especially in metropolitan areas.

The head of Discovery Health, Dr Jonathan Broomberg, in March put the blame for costly premiums in private hospitals on inexperienced emergency room doctors’ overreliance on specialists.

“We are finding an increasing pattern where young, recently qualified locum doctors are doing after-hours work in casualty. And, typically, for anyone who arrives with anything even vaguely complex, the casualty officer will phone a specialist. The specialist then advises that the patient be admitted to be seen in the morning.”

Broomberg said that specialist doctors were direct shareholders in some of the newer hospitals and increasing admissions were in their interest.

“Anecdotal evidence suggests that the incentive payment for some hospital managers is linked to volumes, so there is pressure on the doctors working at these hospitals to ensure there is an adequate volume of admissions,” Broomberg said.

He said premium increases were due to patients being admitted to private hospitals more often, costing medical schemes R46.4 billion in 2014 alone.

Ruff said: “We are now approaching four private hospital beds per 1000 medical scheme members.

“In some parts of the country, we have as many as six beds per 1000 people. This is twice or three times higher than the ratio seen in efficient systems with good community-delivered healthcare services.

“Unlike other goods where costs go down if there is an oversupply, oversupply in healthcare leads to cost increases. When an insurer pays, it is just too easy to spend money without worrying about the value.”

South African medical aid subscribers are seeing dramatic, above-inflation growth of premiums every year: from 2005 to 2014, medical aid contributions jumped by 50%, far higher than the inflation rate. This year and last year, the average premium rate hike of South Africa’s seven largest schemes ranged between 7.26% and 10.92%, exceeding the inflation rate of 6% over the two-year period.

“This year’s increases will be worse and there are likely to be even further benefit cuts,” Ruff said.

Underlying the inflated premiums are deeper systematic problems, he said, adding that private healthcare in South Africa was structured so that doctors worked alone rather than in teams and were “remunerated for the quantity of services they delivered rather than for quality of the outcome”.

“Rather than competing with individuals, teams should compete with teams, with the goal of avoiding unnecessary hospitalisation,” Ruff said.

Earlier this year, City Press published a story indicating that the cost of private healthcare had increased by more than 300% in the 12 years prior. This was based on presentations made by World Health Organisation representatives Francesca Colombo, Tomas Roubal, Sarah Barber and Luca Lorenzi at the Competition Commission’s health market inquiry in February.

Their presentations showed that private healthcare spending in South Africa was six times higher than the international average, and the highest among Brics (Brazil, Russia, India, China and South Africa) countries. South Africans stayed in hospital for an average 3.9 days compared with 5.1 days in Organisation for Economic Co-operation and Development (OECD) countries, and some common surgical procedures had increased by 14.7% between 2011 and 2013, forcing funders to increase medical aid premiums.

The Hospital Association of SA, which represents major hospital groups such as Netcare, disputed the figures, saying: “The study compares South African private hospital prices with a basket of OECD countries’ public health systems, but fails to note that public sector prices in some of these countries are insufficient to cover costs, and that these public health systems are therefore running at deficits.”

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