Health insurance

Health plan under scrutiny

A Superb healthcare system catering for all its people, may benefit South Africans before the decade is out, says a medical aid representative. The Department of Health has prepared a comprehensive report on the future of medical care and has invited comment from interested players. According to Mr Jerry Bryant, chief executive officer of the National Independent Medical Aid Scheme (Nimas), the report is critical of the current two-tier model of public and private healthcare. This model, it says, wastes scarce financial and specialised resources. He says the report highlights the need to achieve a balance between those who can afford to pay for their healthcare, and those who cannot. It recognises that, while the state will have to remain responsible for those who cannot afford to pay, ultimately everyone who is employed will have to contribute, to either a state-sponsored or a private medical scheme. All these schemes, it says, will have to provide a basic set of guaranteed benefits at a set contribution rate. Bryant says the government envisages greater control over medical schemes, administrators and brokers. The state is also proposing the establishment of a single civil service scheme for its one million civil servants. Many of the reforms, says Bryant, will require legislative change and the report envisages a time-frame of about six years to achieve all its goals. The sheer size of the pool of patients and the financial resources that these patients generate, he says, makes the medical aid industry irresistible to the policymakers in government. (Patrick Leeman: The Sunday Tribune,8 September2002)

Adoption of bill ends long dispute about health brokers

Financial Services Board and Council for Medical Schemes finally agree Health brokers will be required to submit to dual regulation in terms of an agreement between the Financial Services Board (FSB) and the Council for Medical Schemes. The agreement ends the long dispute about whether health brokers will be incorporated under the Financial Advisory and Intermediary Services Bill that aims to protect consumers in the financial services sector. Parliament’s finance committee finally adopted the bill yesterday after a long delay, though complex subordinate regulations that contain the heart of the proposed new legislation are still being finalised. An impasse over the position of health brokers led to a stinging rebuke of the finance committee late last year by Health Minister Manto Tshabalala-Msimang who insisted that they remain under the jurisdiction of the council. This was so that the council could control their conduct relative to medical schemes and in meeting health policy goals. The FSB, on the other hand, argued that as health brokers sold other types of insurance besides health insurance, they should meet the same requirements imposed on other financial service intermediaries. Health brokers supported the FSB, saying that compliance with a dual regulatory regime made no regulatory sense but the council was insistent. It was only after agreement was reached at ministerial level that the deadlock was broken. The FSB said yesterday that health brokers would fall under the bill in terms of their market conduct, but would still have to be licensed and accredited by the council under the Medical Schemes Act. The criteria for accreditation under the act would have to correspond with the criteria prescribed in the bill. A broker losing his licence in terms of the bill would automatically lose his or her accreditation under the act. The agreement, the FSB said, was sensible in that health brokers would like intermediaries in the insurance sector and investment managers to be subject to the common framework provided by the bill, thereby establishing an integrated approach to market conduct regulation. It has resolved an impasse which has unfortunately delayed the progression of this very important bill, the FSB said. Another contentious area is the interaction between the bill and policyholder protection rules, which will be dealt with by means of ministerial notice. The notice will exempt financial service providers or their representatives from compliance with those provisions of the rules dealt with in the notice. The FSB has rejected concerns of the Life Offices Association that this will result in dual regulation, uneven playing fields and uncertainty. The bill has been a long time in coming and was the subject of lengthy parliamentary hearings towards the end of last year. Democratic Alliance finance spokeswoman Raenette Taljaard welcomed the adoption of the bill that she said was critical for consumer protection. However, she stressed the need for a balance to be struck between consumer protection and the regulation of the industry. Taljaard said she was worried that much of the regulation would be beyond Parliament's scope to amend. (Source: Business Day, 14 June 2002)

Competition body to probe 'clubby' healthcare industry

The Competition Commission is set to probe tariff setting by the Hospital Association of South Africa, various independent practitioner associations representing doctors, and the Board of Healthcare Funders (the body that represents the medical scheme industry), says Advocate Menzi Simelane, commissioner of the Competition Commission. The Board of Healthcare Funders sets tariffs as a guideline but the upper end of these parameters tends to become a minimum. Service providers charging less are often ostracised, and relationships between parties in the industry perpetuate inefficient allocation of resources, not to mention spiralling costs. Many of these issues were highlighted at the Board of Healthcare Conference held this week in Swakopmund. Price setting between large provider groups - hospitals and medical practitioners - and healthcare funders remains clubby, with restricted competition, high profits and little incentive to reduce costs. The fee-for-service reimbursement model, whereby patients pay for every medical service at market-related rates, encourages over-servicing by providers. The more you do for a patient, the more you earn. Pharmaceutical costs make up a large part of the healthcare spend and these continue to rise. Branded pharmaceutical groups seek to protect their turf and oppose the use of generics. Groups lobby together when faced with the threat of discounts. Pharmacists, for example, boycott medical schemes when they try to impose discounts. Healthcare professionals cry foul when funders seek to restrict costs by imposing restrictions on choice. The objectives of the government's health policy are to broaden access to affordable healthcare and address growing inequities between the public and private sector, but progress has been negligible. In addition to private sector participants fighting for a larger chunk of the turf, the public and private sectors blame each other for not broadening access. Jonathan Broomberg, a director of Praxis Capital, points to problems in both government policy and the private sector as contributing to these trends. He says public policy has been unfocused and too broad in scope. For example, prescribed minimum benefits have had the unintended effect of raising the cost of entry for the employed and uninsured. In the private sector, there are few examples of genuine innovation such as provider risk-sharing models and similar mechanisms used overseas. Providers and funders remain comfortable with the present arrangements. This entrenches cost inflation and lack of access by uninsured people, says Broomberg. Partnerships between the private and public sectors have also been slow to get off the ground. Meanwhile, the system faces other challenges. Most doctors and dentists work in the private sector, providing services to a small, affluent minority and leaving most of the population out of the net. The population is ageing, which means there are fewer young people entering the system to cross-subsidise the older and more sickly. Health insurance makes up a rising proportion of payroll costs and employers are reluctant to increase their contribution levels. There is consensus that the industry needs a more effective mechanism to deliver healthcare to the consumer. Talks are taking place between some of the larger funders and providers in this regard. The overall impression from the conference is that the industry needs an overhaul to focus on containing costs, and that a more trusting relationship between providers and funders is needed. If this cannot be achieved, role players will continue to fight to obtain a larger slice of the pie as parties protect their own stakes at the expense of the long-term interest of the system. (Source: Business Times, 12 May 2002)

Committee of inquiry proposes dramatic healthcare shake-up

The Committee of Inquiry into a Comprehensive Social Security System has proposed that SA move towards a national health insurance (NHI) system in which everyone, except the poor, contributes to the cost of providing universal healthcare. Presented to Cabinet last month, the committee's report covers many social security issues, including the idea of a basic income grant. Cabinet will consider input from relevant ministries before making the final decision on the report. Rather than advocate a big bang approach, the health subcommittee proposes that change be achieved gradually in four phases, starting in 2003. In phase one, the reforms involve containing costs in the private sector and raising the quality of public hospital services. Both are huge undertakings that are likely to take many years, but the model allows only one year before beginning phase two. This phase proposes a closed, compulsory medical scheme for all 1m civil servants, compared with 450 000 at present. Phase two should see the establishment of a risk-equalisation fund to redistribute funds from schemes that have a good risk profile (many young and healthy members) to those with a poor risk profile. The aim is to reduce the cost of medical aid by eliminating any residual risk selection from the market. With this proposal goes the transformation of the current tax subsidy to employers and employees with medical aid (worth R7,8bn/year for 7m people) into an income and risk-adjusted subsidy. Government spending on health (about R33bn/year) plus this R7,8bn subsidy will be pooled in a central fund and disbursed on a per capita basis to the whole population. The rich, young and healthy will receive a smaller subsidy than the sick, old and poor. Those using the public health system will receive the subsidy in kind and those belonging to medical aid schemes will receive discounts on their medical-aid contributions. The report recommends the tax system be restructured in this way to allow for the greater pooling of risk. Phase three (starting in 2005) focuses on creating a contributory, voluntary scheme for those with jobs but no medical aid. It will help to establish the institutions in government that will ultimately manage a public sector contributory scheme within an NHI framework. It will give members an enhanced public health benefit. The poor will receive a basic health benefit for free. In phase four (starting in 2006), low-income earners will be compelled to make contributions to an NHI fund as will all middle- and high-income earners. The latter will also pay contributions to schemes, which they will be compelled to join. Health economist Alex van der Heever, who chaired the health subcommittee, says this proposal should not worsen unemployment by increasing the cost of labour. He says about 70%-80% of this group already belong to schemes and only large employers will be targeted. Also, medical aid will be cheaper because of the reforms made in the earlier phases. Employers of low-income earners will not be affected as, unlike in previous social health insurance proposals, this group will not be compelled to take out medical aid. Like other employees, low-income earners will contribute to the NHI fund from personal income tax. The NHI fund will be funded through earmarked taxation, rather than general taxation, the current source of public health finance. (Source: Financial Mail, 17 May 2002)

Social health care a step closer

During this month (April) new proposals will be released by Cabinet which could alter the entire foundation of South Africa's healthcare system by changing the way health is financed. The proposals for a social health insurance scheme, which will be part of a wider plan for social security, will be released for wider consultation before the final recommendations are made, said Fezile Makiwane, deputy DG for Social Development and a key member of the committee of inquiry into social security. The Ministers of Health, Social Development, Transport, Labour and Finance have all been briefed by the committee and, as their sectors are all affected by these proposals, they are taking the process forward and making a joint submission to Cabinet. Cabinet will release the proposals in early April, said Makiwane. Social health insurance is seen as one component of a potential future social security system. In addition to health, the committee considered how to provide social security benefits in relation to unemployment, retirement and old age, disability, poverty and social assistance, injuries and diseases arising from employment, and road accidents. A social health insurance scheme is regarded by its proponents, mostly health economists, as the answer to the crisis in South Africa's overburdened state hospitals and it is being eagerly awaited by the medical aid industry which will double its business if the proposals go through. But the unions are against the plan and are ready to fight it. Nearly a decade after social health insurance was first proposed as a mechanism for extending health care coverage and promoting equity in South Africa - and after investigation by three government committees since 1994 - the plan could finally be coming to fruition. Its proponents are confident it will have a better chance of getting through this time because for the first time it is part of a wider social security plan. The proposal is that everyone in South Africa who is in formal employment, but who is not already on medical aid, should become part of a compulsory social health insurance scheme. It will be an earmarked tax which will go into a state fund, but it may be administered by the medical aid schemes. Also, by reducing the number of people whose health care has to be funded out of the public budget, or by contributing to the public budget through fees paid directly to public services, it has the wider effect of improving equity across the entire health care system. Professor Di McIntyre, director of the University of Cape Town's Health Economics Unit, said the plan rested on the ability of medical aids to contain costs. McIntyre said the original proposals were that everyone who is insured, including those who currently have medical aid, would fall under the social health insurance scheme - which would promote a wider distribution of resources. But under the present proposals, the medical aid schemes and the state fund will be completely separate, which rules out cross-subsidisation between high income and low income groups. She said this would limit the extent to which the original objectives of the social health insurance proposals could be met - it was envisaged that the social health insurance could extend health insurance cover in South Africa, as there would be substantial cross subsidisation and lower income groups would pay relatively little in contributions to the fund. The other potential landmine, said McIntyre, is that government would now have to pay for the contributions of all civil servants. At present, government spends a considerable amount of money on the medical scheme contributions of civil servants. However, only half of all civil servants are currently covered by medical schemes, and if the new fund is introduced, then government spending on contributions for health insurance cover could double - and questions are being raised as to whether this is affordable. (Source: Health-e, 3 April 2002)

No health insurance for 84% in SA

The fact that 84% of the population is not covered by medical aid or health insurance, indicates the importance of the public sector health services. This is according to the National Treasury's Intergovernmental Fiscal Review. The National Health Accounts Projects reports that in 1999, less than 20 % of the population was covered by private institutional financing intermediaries. These include medical schemes - covering 16% of the population - health insurance products, and workplaces' health services provided by private firms. However, according to the Review, as many as 30% of non-scheme members may use private services on a direct payment basis. Another indicator is the number of private sector hospital beds compared with the public sector. Private hospital beds increased from 16 415 to 24 537 in 2000. Public sector hospitals have over 110 000 beds. Private healthcare expenditure increased at a rate double that of inflation between 19960 and 1998, from R24,7-billion to R33,3-billion. There have also been steep rises in medical aid rates, as gross contributions per member increased by 20,1 % in 1997 and 12,9% in 1998. By 1999, only 16,4% of the population belonged to medical AIDS, leaving a bigger proportion of the population to rely on the public sector. (Source : The Star, 17 October 2001)

Insurers blast new medical law

The Medical Schemes Act Amendment Bill will drive up the costs of belonging to a medical scheme and deny you the opportunity of buying health insurance to supplement your medical cover, the insurance industry says. Both the long-term and the short-term insurance industries this week spelt out a number of serious repercussions for consumers if the latest round of medical legislation is implemented. Gerhard Joubert, the executive director of the Life Offices Association (LOA), says the cost of healthcare is increasing at an alarming rate for South African consumers. He says there is no doubt that the Medical Schemes Act and its regulations are the main culprits. Costs to members will continue to increase if schemes cannot prevent opportunistic scheme-hopping, impose exclusions for known pre-existing illnesses, and charge more if people join schemes only when they are already sick. If costs continue to increase, healthy people are going to opt out of medical schemes because they will not be getting value for money. The insurance industry's chief concern is that health insurance could be outlawed if the amendments are accepted. Caroline da Silva, an executive of the South African Insurance Association - which represents the short-term insurance industry - says medical schemes cannot provide for all the financial losses that you could face as a result of sickness or injury. Yet the proposed amendments stipulate that you may not buy additional cover for medical costs via health insurance. The need to keep membership affordable has resulted in many schemes cutting their benefits to retain their members. This has meant that comprehensive benefits - for example, the loss of income after an accident - are only available through supplementary cover. Da Silva says the hospital cover of millions of policyholders would become illegal if the Medical Schemes Act Amendment Bill was signed into law, as would travel insurance policies, which provide for emergency healthcare and ambulance services to travellers outside South Africa. Hospital policyholders include many old people and people who will never be medical scheme members because of their low income levels. The net effect is that the best schemes would cost more, because they offer the best benefits. These schemes would be the most attractive to members, who would inevitably claim more than they pay. To counter this, schemes would either have to increase premiums or decrease benefits, which is exactly the opposite of what the legislation sets out to achieve. (Source: Personal Finance, 4 August 2001)

Escalating costs can't be blamed on legislation

The Medical Schemes Act and its regulations are not the cost drivers of medical schemes, even though the legislation has been made the scapegoat, Patrick Masobe, the chief executive of the Council for Medical Schemes and the Medical Schemes Registrar, says. Escalating costs: The Medical Schemes Act of 1998 came into effect after a 10-year period of deregulation. During this period contribution levels escalated and dubious practices - such as basing contributions on members' risks - became rife. To single out the Act as the driver behind the high costs is to take a narrow view, Masobe says, as it conveniently chooses to ignore the cumulative years of a deregulated environment and its effects on the present scenario. Prior to the Act, schemes were never given an incentive to contain medical costs or to manage the health of their members. They were run more to benefit particular entities, and the interests of members were not paramount. Health insurance: Masobe says the council's position on the different roles of the medical scheme business and that of health insurance, as agreed with the Financial Services Board, remains unchanged. The council believes that the published amendment is consistent with that agreement. Reinsurance: The council is determined to stick to its guns on the need to examine medical schemes' reinsurance contracts. Reinsurance contracts have been abused to the detriment of many medical schemes and their members. It is also important to highlight that the council is not against reinsurance and will allow it in many cases. (Source: Personal Finance, 4 August 2001)

District health expenditure review, Taung Health District, North West Province

Published by: 
Health Systems Trust
The District Health Expenditure Review (DHER) aims to paint a picture of how district resources are used and distributed. The review involves an integrated look at financial, service and population data, thereby establishing it as an important source of information for population-based health planning. This report documents the first DHER in the North West Province, conducted in the Taung Health District. The financial year under review stretches from 1 st April 1999 to 31 st March 2000.