Against the backdrop of a stagnant medical-scheme growth environment, escalating costs of care and government dragging its feet on low cost medical aid options, the Board of Healthcare Funders (BHF) this week proposed the setting up of a special fund to cover the most expensive medicines.
The proposal, which has apparently been well received, will cover 25 of the most costly drugs, pay-outs for which could threaten the survival of small medical schemes, and comes amid the ongoing tussle between medical aid schemes and the regulator over the establishment of more affordable medaid options, notes MedicalBrief.
Delegates at this year's BHF conference discussed a proposal to establish a special fund to share the risk of covering expensive drugs, like those used to treat Gaucher’s syndrome and Cushing’s disease, to protect schemes from financial shocks that could result in increased premiums.
This would also provide patients with a standardised approach to costly treatments, regardless of which scheme they belong to, reports BusinessLIVE.
Under the “cell-captive arrangement”, participating medical schemes would collectively own an insurance fund created to cover a defined list of medicines, polling both funds and risk, BHF head of research Charlton Murove said.
At the beginning of each year, schemes would pay an annual contribution from which eligible claims would be paid, and at year-end, any remaining money would be redistributed among the participants.
The proposal is that the initiative would cover 25 of the most expensive medicines per beneficiary per year, costing upwards of R100 000 per patient annually.
Murove said BHF’s proposal had received a “very positive” response from schemes.
The financial impact of covering treatment for just one patient with Gaucher’s syndrome means very small schemes, those with fewer than 20 000 beneficiaries, would have to heft premiums by up to 10 percentage points – more than their routine annual increase, he said.
Gaucher’s syndrome is a rare genetic disorder affecting the body’s metabolism of fats: treatment can cost up to R5m per patient a year.
Covering treatments that cost more than R100 000 per patient per year could cost schemes as little as R13 per beneficiary per year, he said.
At the BHF conference, the Competition Commission urged the Health Department to implement the private-sector reforms recommended by the Health Market Inquiry, saying they are vital for the government’s plans for National Health Insurance (NHI).
The HMI spent five years investigating the dynamics in the private healthcare market and determining whether there were barriers to competition that hampered patients’ access to care, BusinessLIVE reports.
It published its final report in late 2019, but so far none of its recommendations have been implemented. Its report included a detailed assessment of the problems in the private healthcare market and said the state needed the sector to be well regulated if it was to purchase services from private healthcare providers under NHI.
“I struggle to imagine a seamless transition to NHI if we don’t address these challenges,” said the Competition Commission’s divisional manager, Mapato Ramokgopa, who was previously the director of the HMI.
Ramokgopa said many of the HMI’s recommendations did not require legislative reform and could be done within the ambit of the National Health Act, the Medical Schemes Act and the Competition Act.
The commission had initiated discussions with the Health Department and the Council for Medical Schemes about establishing a multilateral tariff setting framework, which would allow medical schemes to negotiate prices with healthcare practitioners, she said. The Competition Commission had received three exemption applications on this issue, including one from the BHF, which represents medical schemes and administrators covering about half of SA’s medical scheme beneficiaries.
“We are working on a price determination framework and hope to have a position paper in the second half of the year,” she said.
The HMI concluded there was a “price vacuum” in the private healthcare sector after the commission banned collective bargaining between medical schemes and healthcare providers in 2003. While the decision was in line with the Competition Act, which prohibits collusion on pricing, it created uncertainty and gave bigger schemes more bargaining power than smaller ones.
Financial Mail editor Rob Rose writes that, fingers crossed, the country’s largest medical aid scheme, Discovery, will launch its low-cost health insurance product this year at a monthly premium of between R300 and R350.
“We’re ready to go, and if you were to answer my prayers, we’d be able to launch it this year, but it all depends on regulatory approval,” says Ryan Noach, CEO of Discovery Health.
There’s much to say about this, but perhaps the most curious piece of the puzzle is that the government regulator, the Council for Medical Schemes (CMS), is blocking low-cost medical aids.
Which is odd: you’d think the government would want low-cost medical aid options out there, taking the pressure off overstretched public health facilities. Instead, the CMS dragged its heels to such an extent that last August, some providers took it to court to force it to greenlight these programmes. The case is expected to be heard next month.
The BHF, which represents medical aids, said in its founding affidavit that the government’s resistance has been political, in a perverse bid to boost its plans for National Health Insurance (NHI).
“The overwhelming inference is the reason low-cost benefit options have not been developed and implemented is either because of a lack of political will or another political agenda … It does not suit the (Health Department), tasked with implementing NHI, to have increased membership of medical schemes, or for the private sector to deliver a viable low-cost product at the same time as it tries to sell NHI,” said the BHF’s head of research Charlton Murove.
It seems absurd: the government blocking something consumers want, while the medical aids – which you’d think would resist low-cost schemes for fear members would downgrade to them – are begging for it.
Noach argues low-cost schemes would be good for the country, and the industry. “Our actuarial calculation is that there’s only a slight risk of people buying down on the margin,” he said. “What we see is a much bigger gain from the low-cost options, as it could draw millions of new people into the market.”
A glance at the accounts of the Discovery Health Medical Scheme – which has 2.8m beneficiaries – shows why this is so vital.
Last year, the scheme collected R79.5bn in medical aid contributions, but still clocked up a R1.49bn loss. (Technically, it’s a “deficit”, since medical schemes are nonprofit companies.)
The scheme’s principal officer, Charlotte Mbewu, says this was intended.
“In 2022, we deferred our contribution increase by nine months, since we’d built strong reserves during Covid [due to] lower utilisation and health-seeking behaviour. By using the excess reserves, we wanted to help members who were under financial strain,” she says.
Despite the deficit, the scheme remains strong, with R28.9bn in reserves – a solvency level equal to 35% of annual contributions.
The oldest member is 110-years-old, though the average age of beneficiaries is 36½ – and the red flag is that this is ticking upwards.
In the appendices of the scheme’s annual report, Discovery warns: “In the absence of mandatory membership and a continuous inflow of young, healthy lives, the average age of lives covered by the medical scheme is expected to increase year on year.”
That’s not ideal, since medical aids are structured so that younger, healthier members cross-subsidise the older ones.
“It’s an industry-wide concern, and absolutely a matter of sustainability,” says Noach.
This is partly why the new low-cost plans are so critical for medical schemes, as they could woo younger members – estimates suggest there are 5m to 8m formally employed South Africans who don’t have health insurance and could be enticed.
Murove tells the FM that in the absence of the green light for low-cost medical aids, there’s been a proliferation of “medical insurance” products. But they are not the same as a medical aid scheme.
“Medical schemes are tightly regulated, there are clear guidelines on what benefits must be paid and how medical aid is sold. And no matter how sick you are, a medical scheme can’t deny you cover, which is better for society and offers more protection for consumers. Medical insurance provides no such protection,” he says.
Craig Comrie, CEO of Profmed, says the CMS must either approve these low-cost options, or properly regulate health insurance. But doing neither is threatening the sustainability of medical schemes.
Bizcommunity reports that theme of this year's BHF conference, held in Cape Town this week, was, “Convergence to a person-centric health ecosystem – leaving no health citizen behind”, whichsaw the industry turn the spotlight on itself in reflection; and the picture painted was dire.
One of the continent’s largest convenings in the healthcare ecosystem, this year saw 350 organisations that represented nearly 20 countries, and which had more than 1 000 in-person delegates.
Providing an economic perspective on issues within the industry, Azar Jammine, director and chief economist of Econometrix said: “The proportion of society (South African) covered by medical aid has increased from 15.9% in 2002, to just 16.1% in 2021. In other words, hardly any change… the proportion not covered has remained at 83.7% and we cannot carry on that way indefinitely.”
At the heart of patient coverage is also the patient journey – which too is often diminished in the way patients are treated within the ecosystem.
One breast-cancer survivor provided a poignant account of her journey navigating her journey through the industry’s continuum of care in the 12 years since her diagnosis, her despair at the often cold and dismissive care at both the levels of the health professionals’ conduct, and the frustration of the tiresome administrative processes, evident.
“When you have health, you have hope. And when you have hope, you have life. When you have life, you have everything,” she declared, in a veiled challenge to the sector representatives present to increase accessibility to life-saving health services and improve patient treatment.
This point was underscored by award-winning political journalist and anti-corruption activist Hopewell Chin’ono who spoke about Zimbabwe’s dire and failed health state to provide a regional perspective. “Many Zimbabweans are dying because of a lack of access to treatment and diagnostics… two state hospitals don’t even have paracetamol,” he said.
“There are no X-ray machines, no radiotherapy machines – and if you have cancer, without this critical diagnostic equipment, you will die. Most Zimbabweans have a funeral policy over a medical aid, as though they are just preparing to die.”
He said there was only one working maternity theatre in the country.
“Every year, 2 500 women die giving birth in Zimbabwe, resulting in the mass exodus of women who run to Messina Hospital in Musina (in Limpopo) out of fear. The post-colonial government has failed to create just one maternity theatre in all these years, which has created some of the tensions we see between SA and Zim.”
Rajesh Patel, BHF head of health systems strengthening, said: “The business of medical schemes is not simply that of a health short-term insurer and should not be mistaken for one. The business … is to ensure the health of beneficiaries, to protect, promote, maintain, and improve their health.”
Financial Mail – Dismay as state blocks cut-price medical aids
BusinessLIVE – Health-ministry-must-implement-market-inquiry-findings-says-competition-body/
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