He was announcing the Council for Medical Schemes' 2007/8 annual report in Pretoria on Tuesday. The council is an independent body that oversees the schemes, watching out for consumers. Although the medical scheme industry ended the financial year a billion rands in the red, this was a huge improvement on the R2-billion deficit of the year before. We are encouraged by the reversal of the downward trend, said Matshidze. When the schemes' surplus funds were added in, the industry showed a surplus of well over R2-billion. The schemes are legally required to have a solvency level of 25 percent (the minimum accumulated funds to be maintained), and although some schemes were below these levels, the industry as a whole had a solvency level of 37,8 percent. Matshidze called this a significant improvement.
The schemes could thus afford to cover claims for up to five months. There are 122 medical schemes, offering 282 different packages. Discovery Health is the biggest, with 1,8-million beneficiaries. It reported a solvency level of 23 percent, up from the previous year's 18 percent, and expects to reach the 25 percent solvency limit by the end of 2008. The number of principal members went up by 6,5 percent to 3,2-million and, adding their dependants, means total beneficiaries increased 6,7 percent to 7,6-million. The growth of the Government Employees Medical Scheme (GEMS), registered in 2005, and Motohealth, formed last year from two motor industry funds, contributed significantly to this growth, said Matshidze. GEMS reported a solvency level of 8,3 percent, down from 36,6 percent in 2006, due mainly to a rapid increase in members in 2007. Across all schemes, the average age of beneficiaries is 31 years old and about 6 percent are pensioners. Total spending by members on medical aids was up this year by 12,3 percent to R64,7-billion, or R737 per beneficiary a month. The council urges schemes to keep annual increases to within inflation plus 3 percent.
The amount schemes paid out for their members' medical care was up by 10,2 percent to R56,3-billion, or about R642 per beneficiary per month. Contributions by members to medical savings accounts were up 2,1 percent to R6,3-billion, while claims to these accounts dropped by 0,2 percent to R5,9-billion. The council doesn't track how much extra the medical schemes members pay for themselves - the shortfall that the schemes don't cover. The council wanted more information on this, said Matshidze. This would give us an indication of the burden on members. But there are hints that members are feeling the pinch. The total spend by members on contributions doesn't indicate whether members are going for cheaper schemes or options, but Matshidze said some schemes talked of a buy-down phenomenon. Spending on general practitioners (GPs) is down while spending on hospitals and specialists is up - contrary to the industry's attempts to move the trend the other way.
The schemes spent R20,2-billion on hospital services, up 12,5 percent, another R12,2-billion on specialists (up 11 percent), R9,4-billion on medicines (up 8 percent), but payments to GPs dropped to R4,2-billion (down 1,5 percent). This means about a third of expenditure goes to hospitals - mainly private ones - another 22 percent to specialists, 17 percent to medicines, but only 8 percent to GPs. What we have here is a trend towards reduced utilisation of GPs and dentistry services, said Matshidze. Both the amount spent on visits to GPs and the number of visits dropped. This could be because some beneficiaries go directly to specialists, sometimes unnecessarily, without GP referrals. It's also possibly because members opt for hospitalisation (with higher benefit limits than GP visits) to ensure that schemes foot the bill. Matshidze said he would not be surprised if this was happening, and the council was concerned that the way benefits were presented could be promoting in-hospital over out-of-hospital treatment.
The schemes spent R8,3-billion on non-healthcare costs, including administration, up by 7,3 percent, although this rate of increase was nearly halved after membership and inflation increases were factored in. The restricted schemes (linked to specific employers) spent about R50 per beneficiary per month on admin costs, and the open schemes spent about R80. We remain extremely concerned about the high administration costs of some schemes, said Matshidze. Maybe, just maybe, there might be stabilisation of the non-healthcare expenditure, he added. Matshidze said there was no clear link between the size of a scheme and the admin costs, with no apparent economies of scale. In this game, size doesn't matter. Broker costs raised concern, with broker commission up 8 percent to R976,7-million, or nearly 14 percent of the non-health expenditure.
Matshidze said this was not related to the increase in membership, as GEMS and Motohealth don't use brokers, and the council was concerned about possible over-compensation for brokers and irresponsible allocation of members to brokers. The council also deals with complaints against schemes. Unpaid accounts still top the charts, said Matshidze.