Image
Icon

Directory

IconAssociations and Institutes
IconBBBEE Consulting and Verification Agencies
IconCompare Medical Scheme Benefits
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconEmergency Medical Rescue
IconExpatriate Cover
IconHealthcare Consultants
IconMedical Aid Brokers
IconMedical Aid Schemes
IconMedical Schemes Trustees Liability Insurance
IconMedical Service Providers
IconOmbud
IconOnline Quotes
IconPublications
IconRegulatory Authorities
IconWellness Programs
Image
  Subscribe To »

Why are private healthcare costs rising?

Published

2017

Fri

17

Feb

It’s no secret that healthcare costs are on the rise. At a medical scheme conference  in August last year, it was announced that it will only get worse. However, a number of factors were identified, and at Cape Medical Plan, we will be doing our best to combat the problem.

Issues brought to the fore included the growing use of healthcare services, Prescribed Minimum Benefits (PMBs), increased prevalence of chronic illnesses, rising costs of medication and technologies, age and gender profiles, anti-selection, fraud, and abuse of the system.

Increased use of healthcare services

It was identified that medical scheme members’ increased use of healthcare services was the biggest culprit when it came to the rise in annual contributions.

When the cost of medical scheme claims increases by more than the inflation rate, it translates into high contributions for the member – so your scheme has to find ways to contain these costs.

At Cape Medical Plan, we have various procedures in place to protect the Scheme. This includes pre-authorisation, waiting periods, limitations and Preferred Providers, for example.

Chronic illness and how it affects utilisation

One of the reasons members are using their benefits more than they used to is the increase in the prevalence of chronic illness. As you know, chronic diseases are considered a PMB, which medical schemes have to cover in full by law.

The average cost of the claims of a member with a chronic illness is generally 1.5 times more than the average cost of a member without a chronic illness. Also, if a member has more than one chronic illness, the cost increase is up to six times more.

Prescribed Minimum Benefits

The Medical Schemes Act requires that all medical schemes in South Africa cover PMBs. This includes a list of 270 conditions (some of which are very expensive to treat) and 25 chronic diseases.

Because the PMB list is so extensive, this makes even the most basic hospital plan offered by a medical scheme in South Africa an expensive option.

Rising cost of new medicines and technologies

Treatment of illness and disease can be very expensive. Although medication is evolving and becoming more effective, it is not becoming any cheaper so it’s an ongoing challenge to find a balance. Cancer medication, for example, can be very costly.

Hospital admission spikes

Many of the larger medical schemes in South Africa have seen a spike in hospital and hospital-related claims. The same has been experienced by Cape Medical Plan.

Studies have shown that new hospitals result in a significant increase in hospital admissions among scheme members. This is a serious concern, as hospital and hospital-related costs (for example, pathology and radiology) account for more than half of all scheme claims.

Anti-selection

Anti-selection, also known as adverse selection, refers to people who buy medical aid because they are sick or know they will need treatment, and seek to claim the maximum from the scheme whilst paying in the minimum. This is often in contrast to the number of healthy people who don’t join schemes because they are less likely to use it.

This is human nature, but unfortunately, in order for medical schemes to work, they require healthy people to contribute so there is enough money to pay for the needs of those who are sick. It’s important to remember that nobody is immune to illness or accident.

An indication of anti-selection can be seen in the increase in the number of members claiming for rare diseases. The prevalence should be random, but many schemes have noticed a spike in the number of people claiming for these types of illnesses in their first year of membership. This indicates anti-selection.

In South Africa, there are two types of anti-selection that contribute to why medical aid is expensive, and these are age and gender selection.

Age and gender selection

There is a big gap in membership of those between the ages of 19 and 35. This is because they are less likely to be sickly at that age.

Additionally, there is often an influx of women between the ages of 20 and 35 who join schemes, and this can be attributed to the fact that women during child-bearing ages are more likely to need medical aid for maternity benefits. This number drops drastically from the age of 40.

The problem with not enough young people being on medical aid and too many women dropping their medical aid after having children is that it increases the cost of medical aid for everyone else. If people were to join medical schemes early and stay on them for their whole lifetime, the cost would reduce for everyone.

Fraud and abuse in the medical industry

Medical scheme fraud is on the rise. At the conference, it was highlighted that a fair portion of members’ contributions were wasted on fraud and unnecessary healthcare.

Another trend is the abuse of hospital cash-back plans offered by life assurers and short-term insurers. Medical scheme members are sometimes admitted to hospital under false pretenses – which is another reason why we insist on pre-quotes and the pre-authorisation process – the scheme then pays the hospital bill and the member collects the cash payout from the insurance policy as well.

At Cape Medical Plan, we have instituted safeguards that help us manage the above difficulties. Often, members wonder why we are insistent on using Preferred Providers or obtaining pre-authorisation, for example. If we did not have anything in place to cushion the blow, contributions would be sky high and our reserves would likely be depleted.

We hope this gives you a better understanding  of what we, and other medical schemes, are facing at the moment.

 
Source: Cape Medical Plan
 
« Back to previous page Print this page » |
 

Breaking News »

Rare Disease Day puts the spotlight on research and awareness

Approximately 50% of the people affected by rare diseases are children. [i] Of these young patients, 30% will not live to see their 5th birthday. [ii] Furthermore, rare diseases are responsible for 35% of deaths ...
Read More »

  

Self-injury taking its toll

In an ever-changing world where teenagers and young adolescents are increasingly confronted with new challenges, peer pressure, demanding relationships and the like, the growing phenomenon of self-harm as a means ...
Read More »

  

New eMalahleni water crisis and electricity put pressure on hospitals

Early last night, 21 February, the Directorate of Technical Services at eMalahleni Municipality announced that the power breaks effected by Eskom which is in dispute with the local authority have affected its water ...
Read More »

  

Update on Eskom power cuts to hospitals in Mpumalanga

Hospital Association of South Africa (HASA) update on statement issued last week regarding power cuts to hospitals in Mpumalanga   The hospitals potentially affected by the power cuts include: eMalahleni ...
Read More »

 

More News »

Image

Investment »

Image

Life »

Image

Retirement »

Image

Short-term »

Advertise Here

Quick Survey »

  Sponsored by
Image
Does your company plan on hiring additional employees in 2017?


|Results »
Image
Image
Advertise Here

From The Glossary »

Icon

Subrogation:

The statutory or legal right of an insurer to recover from a third party who is wholly or partially responsible for a loss paid by the insurer under the terms of a policy. For example, when an insurer has paid the insured for loss sustained to his car as the result of a collision, the insurer may collect, through the right of subrogation, from the person whose car caused the damage.
More Definitions »

 
 
By using this website you agree to the Terms of Use.
Copyright © Stoker Risk & ICT (Pty) Ltd 2004 - 2017.
All Rights Reserved.
Icon

Advertise

  Icon

eZine

  Icon

Contact IG

Icon

Media Pack

  Icon

RSS Feeds