Cape Town – The healthcare industry has again been criticised for the high increases in medical fees expected this year, which will drive up medical scheme contributions.
The Council for Medical Schemes (CMS) has anlysed the cost assumptions on which medical schemes base their contribution increases. This shows that most medical scheme members could be exposed to a 7% to 8% rise in medical costs.
“The council is concerned that most cost assumptions are significantly higher than those recommended,” said Paresh Prema, acting head of the CMS.
The CMS had recommended that cost increases and medical scheme contributions be kept under 5.3%.
“Higher-than-inflation contribution increases create affordability problems for consumers,” he said. Access to healthcare is eroded by increasing medical expenses, which for a considerable time have not only been higher than inflation, but higher than (consumers') income growth.
Private hospitals and specialists are singled out as major contributors to the increase.
Roly Buys, Mediclinic funder relations and contracting executive, said consumer price inflation (CPI) is already around 6%.
The CMS’s recommendations, based on an expected CPI of 4.3% to 5.3%, are therefore inappropriate, he said. That, and the reality that South Africa has a shortage of about 30 000 nurses, means continuous upward pressure on salaries in the industry. He reckoned price inflation in the industry this year could be about 7%.
Buys said the CMS also lacks proper information on usage in the medical industry and bases its recommended figures on the average age of medical scheme members to determine usage. The true effect of an increase in volume is therefore not taken into account.
Dr Jonathan Broomberg, chief executive of Discovery Health, which hiked premiums by an average 8.9% in 2012, said every medical scheme experiences unique inflationary pressures as a consequence of the difference in tariff increases by their suppliers.
He added healthcare providers’ tariffs almost always rise at a rate above CPI, inter alia because of high salary increases for nurses in hospitals.
Most schemes also experience a 2% to 4% annual increase in services used by members, said Broomberg. This means the average premium increase is almost always three percentage points higher than the CPI.
The cost analysis undertaken by the CMS was based on the statistics of almost 90 medical schemes, comprising 8.3 million members.
In the past a relationship has been noted between an above-inflation contribution increase and members who switched to cheaper options or removed some dependants.
“Young and healthier members tend to be very sensitive to price changes and will switch to cheaper options more readily than older and less healthy members – or leave the scheme,” said Broomberg.
Prema said this behaviour militates against the principle of spreading the risk, which is envisaged by the Medical Schemes Act.
Private hospitals and specialists to blameMarket forces are not working, said the CMS.
Private hospitals and specialists are again being blamed for the large increases expected in the cost of healthcare this year.
In an analysis of the cost assumptions that medical schemes have made to justify their contribution hikes, the CMS has also found that general practitioners, dentists and related health services are large contributors.
“These items contribute significantly to the rising costs in medical scheme environments,” said Prema.
This is what the CMS had to say about cost assumptions by medical schemes regarding the services:
- Cost assumptions for private hospitals are above CPI. The trend is not legitimate and cannot be explained by the problem of ageing, the burden of disease, the HIV pandemic or improvements in medical technology.
The council said the figures indicated a market failure in terms of price determination and placed the fault at the door of “excessive market forces”. Neglecting to tackle the trend would lead to a continuing loss of access to healthcare in the medical scheme environment, it said.
- The median cost increase of 6.1% and the highest increase of 16% among specialists is also ascribed to a failure of market forces.
This failure is attributed to an imbalance of power between schemes and specialists when prices are being negotiated, conflicts of interest because of specialists' shares in hospital groups, and the conflict between profit and care.
- Medical schemes' non-healthcare expenses range from 5.5% to 26.4%. This is also above the council's recommendation and is concerning, given that the population being covered has remained relatively stable.