Staying alive in SA is a costly business

Every year medical scheme members grimace and dig a little deeper into their pockets for their annual health insurance contributions. 

These increases have outstripped headline inflation by at least five percentage points for the past two decades, and this year will be no exception. Increases will range from 12% to 18%, according to the Board of Healthcare Funders, which represents medical schemes. 

The million-dollar question is whether patients in the private health-care market are paying more for less. The answer, in true SA style, is a resounding Ja nee. 

Yes, patients are paying more, says Roseanne da Silva, who chairs the actuarial society's health committee. And by and large they are getting less. 

As costs spiral, medical schemes are placing increasingly stringent limits on the benefits they are prepared to pay out, either instituting a ceiling on the amounts they will pay for specific conditions and procedures, or excluding them altogether. 

Many schemes, for example, will cover chronic medication on only more expensive comprehensive packages.

Industry players say health care takes an everincreasing slice of household budgets because medical costs are rising at a rate of between 14% and 17%, far in excess of headline inflation (projected to be 7% to 7,5% this year) and annual salary increases. 

Feeling the pinch, consumers choose to downgrade to cheaper benefit plans that offer much less in the way of day-to day medical expenses. 

But do not forget, says Da Silva, that SA offers some of the best medical technology in the world. So in some ways, they are getting more now than 10 years ago. 

All true, says Michael Eliastam, CEO of the Donald Gordon Medical Centre, but technology is driving medical bills ever higher. Not only is it expensive, as much of it must be paid for in dollars and euros, but some of it may be unnecessary. 

There is still little use of best-practice guidelines in SA and, as a result, doctors frequently order tests without clinical evidence to justify their use. 

Worse still, many doctors overservice patients for example, admitting them to hospitals overnight when they could readily be seen as outpatients. They also overprescribe, he says, giving patients prescriptions for several expensive brand-name drugs when one or two equally effective and cheaper generics would suffice. Hardly anyone in the health-care industry disputes that imported inflation, overservicing, fraud, salary bills, kickbacks to providers, and the legal requirement to retain a proportion of contributions as cash reserves all serve to drive up costs. 

More controversial, however, is the level of fees charged by scheme administrators. 

The Council for Medical Schemes, the statutory body charged with overseeing the industry, said last year that the nonhealthcare expenditure of schemes, mostly administration fees paid for servicing medical claims, was far too high, rising 41% during 2001 to R3,5bn. 

The Board of Healthcare Funders denies administration fees are that high. There is no lack of apportioning blame for rising costs. Funders (medical schemes), administrators, and service providers (doctors, hospitals, and the manufacturers of medical supplies) accuse each other of pushing up prices by raking in unreasonable profits. Regardless of how cost factors are weighted, however, the bottom line is that medical scheme members are being forced to fork out more. 

Some are using medical savings accounts built into their benefit packages. Many employers are moving towards a cost-to-company payment model, leaving it up to employees to decide what proportion of their salary to use for medical insurance. Long gone are the days when medical aid membership for most (overwhelmingly white) employees was compulsory, paid for in full by the employer and guaranteed almost unlimited medical cover. More and more patients, it seems, are opting out altogether. 

Norman Weltman, the executive director of Netcare, one of SA's three listed private hospital groups, says about 10% of the group's hospital admissions are now uninsured, up from just 4% in the mid-1990s. Those remaining with medical schemes are grappling with a system that seems to become more complicated all the time. Shaun Matisson, principal officer of SA's largest medical scheme, Discovery Health, readily acknowledges the complexity of the scheme's products, but says the firm makes every effort to simplify the information. 

Not everyone believes that individual consumers should have to decipher scheme rules. 

Alex van den Heever, an adviser to the Council for Medical Schemes, points out that it is precisely because medical insurance is so complicated that the industry requires the watchdog council. With a membership base hovering at the 7-million mark for several years, and getting older and more expensive to insure, observers such as Van den Heever warn that the private health-care industry is not sustainable in its present form. (Source: Business Day Jan 14 2003)