Women’s health, men’s health, chronic disease management, innovative plans, catching criminals and a digital revamp – Bonitas reflects on 2018 and launches its 2019 plans and strategy.
Gerhard van Emmenis
“The past 12 months have been extremely trying, with a number of uncertainties and changes anticipated. In addition, consumers have been heavily impacted by the increase in VAT and escalating prices which resulted from this.”
In July Bonitas announced its financial results for 2017, the best in its 35-year history, with a solid surplus of R730.20 million, having recouped a deficit of R16.9 million from 2016. “This turnaround was due to several key cost saving strategies, says Van Emmenis, “and it bolstered our reserves from R3.1 billion to R4 billion which means that we are able to invest back into the Scheme and offer our members access to healthcare of the highest quality.”
The Fund has announced a number of additional benefits for its members for 2019, while keeping increases as low as possible. “We know that it’s not only the monthly premiums that affect the consumer’s pockets but the value they get out of their medical aid plan,” says Van Emmenis. “Some of the benefits have been tweaked, others increased, one plan has been discontinued and two new options have been introduced, all aimed at helping members take control of their health and lead better lifestyles.”
Working together to reduce healthcare costs
“We continue to seek partnerships with healthcare providers to ensure we are part of the same value chain, rather than being part of the supply and demand of the healthcare economy,” says Van Emmenis. “In addition, we are focused on educating role players to balance the triangle of affordability, quality and cost efficiencies. We are developing an incentive model to motivate service providers to eliminate activities that do not add value to members.”
Over the past few years, Bonitas has taken a multi-pronged approach to cost saving, focusing on:
Hospital claims account for half of Bonitas’ annual claims, around R6 billion a year. For this reason we negotiated a pricing structure with the main hospital groups, to deliver a savings of R242 million last year. We project that this saving will increase to approximately R550 million over the next two years in present value terms.
We place great emphasis on our Managed Care initiatives to help members, with chronic conditions, manage their health better. It takes into account the best clinical and treatment protocols while containing costs. Our back and neck, oncology, hip and knee and HIV/AIDS programmes respectively, continue to offer our members emotional, clinical and financial support.
The Council for Medical Schemes (CMS) cites chronic conditions – with diabetes in particular, as one of the key contributors to a rising disease burden in South Africa and escalating healthcare costs. 80% of the Scheme’s diabetic patients have associated chronic conditions such as high blood pressure and cholesterol, heart disease and depression which need to be managed on a unique basis. “Through our Diabetes Programme, hospital admissions related to diabetic patients having reduced by 11.6% year-on-year,” says Van Emmenis.
Prevention is better than cure
We have a keen focus on preventative care as early detection is a critical factor in ensuring our members get the support they need to manage any serious conditions timeously.
Last year, we kept a firm focus on women’s health introducing cover for pap smears on all our plans. Since cervical and breast cancer continue to be most prevalent, we have continued our efforts towards early detection by ensuring mammograms for women over 40 will be covered once every two years on all our plans from 2019.
In addition, we have placed the spotlight firmly on men’s health, especially in light of a prevalence of prostate cancer, by adding the prostate screening antigen test to all options for men aged between 45 and 69.
We have South Africa’s largest GP network which ensures our members get value for money and stretch their benefits. Our online provider locator tool has been enhanced so that members can find network hospitals, doctors and specialists in their area quickly and easily.
Fraud, waste and abuse (FWA)
Our ongoing efforts to reduce FWA have been successful, with a number of convictions and sentencings. This significant focus delivered recoveries of R31.2 million with a potential preventative savings of R75 million. We will continue to ensure that all outstanding money is successfully recovered and repaid to the Fund, so that it can be put to better use to benefit our members.
Digital remains a key driver for member and broker communication with Member, Broker and a newly introduced Corporate Zone available on the website. The online application has been revamped, we’ve introduced an electronic membership and a live chat function has been added to assist current and potential members with any questions they may have.
Besides enhancing the Member Zone as from January 1, 2019 members will have access to the Bonitas App – a revolutionary cell phone application that will offer the full benefits of the Member Zone. Making it easier for them to view their benefits and claims as well as submit claims, obtain authorisation, find a network provider, resolve queries and so much more while on the go.
As a value-add for members, Bonitas has aligned itself with strategic partners to offer a comprehensive and holistic solution to help members take care of their financial health and wellness, without paying anything extra. “This is not another loyalty programme,” explains Van Emmenis, “but rather real added value aligned to member needs, with no fee or points scoring.” The model includes a Multi-Insurer Platform offering Medgap, exclusive gap cover with a discount of up to 48% discount for Bonitas members and a wide range of life, funeral, disability cover products through Sanlam Indie with exclusive benefits in the form of free investments up to 110% of monthly contributions. And finally, a variety of free monthly discount vouchers from 30 participating partner retailers through Electronic Line.
In conclusion, Van Emmenis says, “Our plans have been restructured to meet market demand, consumers are looking for options that offer attractive benefits at a more affordable rate.”
Summary of key changes for the year:
- A weighted increase of 8.9%.
- A new multi-insurer platform with exclusive deals and offers for Bonitas members including gap cover.
- Two new plans introduced – Primary Select and BonEssential Select. These use dedicated networks and are both are priced around 15% lower than the Primary and BonEssential options respectively.
- The Hospital Plus plan has been discontinued.
- Mammograms for women over 40 will be covered once every two years across all the plans.
- Prostate screening antigen tests for men aged between the aged of 45 and 69 have been included across all plans.
- Childhood immunisations according to the EPI schedule, are now offered to members on BonClassic, Standard, Standard Select, BonComplete, BonSave, Primary, Primary Select and BonFit – paid from risk.
- The introduction of the My Family Model which contains a full suite of care – such as maternity consultations, 2D scans, antenatal classes, newborn hearing screening – all paid from risk.
- The day-to-day benefits on Primary has been increased by 15% for 2019.
- A family benefits of R31,500 has been introduced on BonEssential for internal prosthesis, it is also included on BonEssential Select.
- BonClassic has been re-aligned to fit in with other options with radiology and pathology combined into one benefit.
For more information on the range of medical plans available from Bonitas, or to compare options, go to www.bonitas.co.za.
An alternative reimbursement model has been launched that will benefit patients and encourage best practice among clinicians in the private healthcare sector.
EBC was spearheaded by the South African Society of Anaesthesiologists (Sasa) and rolled out to Discovery Health’s arthroplasty network. For example, a hip or knee replacement requires a team of professionals comprising a minimum of an anaesthetist, an orthopaedic surgeon, an appropriate hospital facility and a physiotherapist. The contract will cover the period for eligible patients from surgery into the recovery and rehabilitation period.
The model is the result of four years of extensive research and consultation with the healthcare sector, and is aligned with the Health Professions Council of South Africa’s (HPCSA’s) ethical rules and South African legislation.
“Sasa is committed to enhancing the delivery of healthcare services, ensuring that patient care is secured above all else. This led us to explore models that incentivise greater accountability and more collaborative work among clinicians, and offer both the funder and patient cost certainty, without compromising the patient’s care. The new contracting model achieves all of these goals,” says Natalie Zimmelman, Sasa chief executive.
Protects the patient without adding cost
It should not increase medical costs for patients and will, in fact, probably result in lower fees for private healthcare services over time, as all players in the healthcare system seek better efficiencies with good health outcomes, she adds.
Zimmelman says that the EBC is appropriate for the South African market – “which does not have the kind of sophisticated regulatory processes and active oversight seen in many other markets” – in that it promotes a greater level of transparency, and makes clinicians and facilities (clinics and hospitals) more accountable to each other and to their professional peers.
“This new patient-driven care model protects the patient without adding cost. Because the clinician contracts directly with the funder, they will share the risk, and it will drive collaborative care and information sharing, while keeping the patient at the centre. Ultimately, it’s always about putting patient safety first while ensuring the sustainability of the South African healthcare sector.”
Sasa also notes that this model can be used as an example of a mechanism for the procurement of private healthcare services under the National Health Insurance.
“The Sasa EBC is an example of a positive move towards enhancing and placing value on the integration of anaesthetic services in holistic patient care, supported by an innovative fixed-fee reimbursement model. The approach provides regulatory certainty and societal peer review, and entrenches quality-of-care principles through the monitoring of team processes and care outcomes,” says Darren Sweidan, Discovery Health’s head health professional unit.
The “startling costs” of South African private healthcare is at the heart of the Competition Commission’s Health Market Inquiry (HMI) draft report released in July. While cost is a key theme, the report also describes a sector lacking the vital force of authentic, robust competition.
Carl Grillenberger, Advanced Health CEO
Currently, the South African private healthcare sector is an opaque system dominated by a small handful of players. Members pay for medical scheme cover, and accept that they will also have to pay costs out of their own pockets.
The common refrain of the medical aid will pay is one that is inherently false. It is not the medical aid that pays, but the member. “The fact that so many people cling to this erroneous statement reveals two important facts about our business,” says Carl Grillenberger, CEO of Advanced Health.
“First, few consumers understand medical aid schemes, or are able to navigate them effectively. Second, the private healthcare economy routinely ignores the vital concept of value-based purchasing.”
He explains that the draft HMI report describes a fee-for-service model that reliably stimulates oversupply through wasteful expenditure and the provision of more services than are actually needed.
Competition is cosmetic
“Our private healthcare market is driven by supply induced demand, where competition mostly occurs mostly at a cosmetic level, and is based on a supposed choice between available products rather than value for money. The choice, of course, is often illusory. Consumers end up trying desperately to compare glossy medical aid scheme brochures and failing, despite their best efforts, to compare like with like,” Grillenberger says.
“The Competition Commission also tells us that lack of competition runs right through the market. Simply put, trustees and principal officers experience little pressure to hold scheme administrators to account for their actions – especially when it comes to procuring services based on value.
Runaway medical inflation
“Another key theme of the draft report is that there is very little incentive for change, because the South African private healthcare market is a de facto oligopoly where three hospital groups have a combined market share of 83% of the national private facilities market in terms of the number of beds. The same groups control 90% of all private healthcare admissions.
“All these are factors contributing to the most urgent issue facing our industry: runaway medical inflation,” he says.
There has been an average difference between medical inflation and CPI inflation of 4.2% over the last 10 years.
“In our calculations, we have projected an average differential of 4% for the coming decade. If today’s trajectory holds, by 2028 medical aid costs will be two and a half times their current value.
“In other words, the net income of an average income earner’s gross income increases at the CPI rate, but their medical aid contribution escalates at 9.6% per annum. If this trajectory continues, medical aid inflation will see private healthcare members experience a deteriorating net income in the coming years.
“The reality is that within 10 years a substantial number of medical scheme members will not be able to pay scheme contributions and will fall out of the market.
As the membership fall off accelerates, our industry is likely to shrink at a compounding rate. As this happens, more strain will be placed on a national health system that is clearly buckling in some places and broken in others. I think we all understand that our country cannot afford to further stress such a fragile system,” Grillenberger says.
“Many medical scheme administrators are much more concerned about the proposed implementation of National Health Insurance (NHI). The reality is that the NHI remains unlikely to achieve lift off any time soon. Not only is funding a major, unresolved issue, but the Department of Health still needs to dramatically improve services to resolve the fundamental distrust that still exists between state patients and provincial service providers. Without this key change, NHI won’t find the traction it needs to become operational.”
To resolve supply induced demand, the draft HMI report suggests serious consideration be given to alternative remuneration models (Arms).
“I think it’s clear that value-centric transformation of private healthcare is the only thing that will fully secure the long-term viability of our industry. By choosing to change we will make the private healthcare sector better for all players however it will also drive other crucial social contributions.
“Change will ensure our activities don’t destroy the South African public healthcare system, it will give patients better choice and value, lay the foundation for the long-term sustainability of the sector, the economy and the country.
“As an industry, we know what we need to do. We need to take the first step towards a value-centric structure, to change the market for the better, before it’s is too late,” Grillenberger says.
A distribution audit of healthcare professionals across all disciplines highlights areas of concern, but there are also some reasons for optimism as the country moves towards universal healthcare.
Charlton Murove, head of the BHF’s research unit. Photo: ehealthnews
The Board of Healthcare Funders of Southern Africa (BHF) recently investigated the distribution of service providers in both the public and private sectors across South Africa. The research not only included general practitioners (GPs) and specialists, but also allied health professionals such as medical technologists, radiologists and pathologists.
Older practitioners moving to private sector
The report focused specifically on professionals registered on the practice code numbering system (PCNS) from January 2000 to December 2017. For a healthcare provider to claim from a medical scheme they need to be registered on PCNS. “A 52% increase in active healthcare professionals was noted, from about 36,000 in 2000 to 54,800 in 2017. Surprisingly, however, this increase occurred in tandem with a higher average age in most disciplines. This unexpected observation is worrying as it suggests that there has been an increase in the number of older professionals moving from state facilities to the private sector,” says Charlton Murove, head of the BHF’s research unit and the author of the report.
The private sector services medical scheme beneficiaries, numbering 8.9-million in 2017, and other patients accessing health services through paying cash or via insurance products. “In 2000, there were 7-million beneficiaries, so there has been an increase over the years. But there has clearly been an even larger increase in healthcare professionals in the private sector (52% vs 27%).”
The report found that the distribution of healthcare providers is disproportionate in terms of geographical location and population needs. Gauteng and the Western Cape have more per 10,000 population compared to more rural provinces such as Limpopo and Mpumalanga. This disproportionate distribution is acute in more specialised disciplines. The provider numbers in the latter provinces are well below the national Department of Health targets of healthcare providers per 10,000 population. This disproportionate distribution is evident in both the private and public sectors. Over and above this, there is a disproportionate number of providers practising in the private sector compared to the public sector. This leaves a high burden of care for those in public facilities. “The increasing number of providers in the private sector and the aforementioned increase in their average age suggests two things; training programmes to recruit new providers are inadequate and the public sector has lost staff to the private sector over the years,” says Murove
Those registered on the PCNS do not seem to stay in practice for long. A high number leave before reaching retirement. About half of male healthcare professionals de-register their PCNS numbers before they reach the age of 50. The rates of exit are significantly higher among women; about half leave private practice before the age of 45. “For a country below its target number of healthcare providers per 10,000 population, this observation is very worrying,” he says.
Rates of exit of men do not differ much by provincial location. Gauteng experiences the highest number of exits. Women’s rates of exit differ markedly by provincial location, however, with Limpopo experiencing the highest rates and the Western Cape the lowest.
Rates of exit also vary according to discipline. Male healthcare providers practising in laboratories, medical technologists, pathologists and radiologists had the highest rates; 23% higher than male GPs. Specialists (anaesthetists, medical and surgical specialists) had the lowest – about 50% lower than GPs.
Similar observations were made for women. The differences across disciplines were much wider, though – those practising in laboratories had exit rates 41% higher than female GPs, while specialists’ rates of exit were about 60% lower than those of GPs.
Training as a lever
But while the maldistribution of human resources and the rates of exit are alarming, the report also made some positive findings. “The number of GPs in private practice is 15.69 per 10,000 population, which is higher than the Department of Health target of 3.66 per 10,000 population. This presents an opportunity for both medical schemes and the state, as GPs may be contracted into arrangements where they serve a targeted population group. The government’s plans for rolling out NHI are possible given the number of GPs in the private sector – if they can be contracted to service the rest of the South African population. (In Gauteng and the Western Cape, even the number of specialists is above target.)
“The training of healthcare professionals should be considered as a lever to improve the provider/patient ratio, especially among specialists. Greater focus must be placed on increasing the number of specialists. The increasing average age points partly to a small base of new providers entering from training facilities,” concludes Murove.
Earlier this month, Wandile Theophilus Mashego, an audiologist and speech therapist practising in Pretoria, was found guilty of 259 counts of medical aid fraud and one count for contravening Section 66 of the Medical Schemes Act. The case was brought against him by Bonitas Medical Fund after it was discovered he had been submitting fraudulent claims on behalf of members over a period of two years – from 2014 to 2015.
Kenneth Marion, Chief Operating Officer of Bonitas Medical Fund
A soon to be identified ‘runner’ provided details of Bonitas Medical Fund members to Mashego, who then billed Bonitas fraudulently, for ‘services’ to these members.
Mashego pleaded guilty under Section 105A of the Criminal Procedure Act 77 of 1951 and was sentenced to five years’ imprisonment, wholly suspended for five years, on the 259 counts of fraud with conditions that include:
- Paying Bonitas back R506k as from 1 August 2018. Failure to pay will result in direct imprisonment
- Correctional supervision for 36 months, which includes community service of 16 hours per month
- House arrest for a period of 36 months (except when going to work)
- Restricted to the Pretoria area for 36 months; and
- Refrain from consuming alcohol, drugs, attending night clubs and taverns.
He was also sentenced to five years’ imprisonment, wholly suspended for five years, on the one count for contravening Section 66 of the Medical Schemes Act and declared unfit to possess a firearm for five years because of the guilty verdict.
Kenneth Marion, Chief Operating Officer of Bonitas said, “We identified a sharp spike in his claims and some members contacted the Scheme complaining about claims submitted on their accounts without their knowledge and no service having been rendered to them. We are indebted to the whistle blowers and to SAPS for ensuring that he was convicted and sentenced and for other recent convictions and sentencing we have had in the recent months.”
It is estimated that 15% of claims in the healthcare industry contain an element of Fraud, Waste and Abuse (FWA). For a scheme of Bonitas’ size, this translates to a loss of R190m. “To address this”, says Marion, “We implemented initiatives against FWA, including hospital and pharmacy claim analytics. The result was the identification of FWA of R129.8m, with R31.2m recovered in 2017.” The Scheme further benefitted from R75m in potential savings.
“Five imprisonment sentences have been handed down by the judiciary – clearly indicating a zero tolerance approach to this white collar crime.”
According to Section 66 of the Medical Schemes Act, medical aid fraud, committed either by a member or a healthcare practitioner, is a criminal offence which carries a fine or imprisonment or both. In the instances where a healthcare provider is guilty of committing fraud, all fraudulent claims are reversed and the healthcare provider is reported to the relevant regulatory body and a criminal case opened.
A member found guilty of committing fraud will have their membership terminated. One member was terminated by Bonitas during quarter 2 of 2018 for involvement in fraudulent activities. All fraudulent claims submitted will be reversed and the member will be liable for them. A criminal case will also be opened. In addition, members who commit fraud may also have their employment jeopardised – especially in cases where their medical aid contributions are subsidised by their employer.
“The repercussions of fraud are widespread but it has a very direct impact on each and every member of the Fund,” explains Marion. “Medical schemes are owned by their members and when money is defrauded from the Scheme it can contribute towards increased premiums. In fact the money we recovered last year could have been used to pay for around 57,000 more GP consultations or 18 lung or liver transports.”
Members need to be vigilant
“We believe that our most invaluable tool against FWA remains our members,” says Marion. “To assist them to be proactive in joining us in the fight, we have a toll-free fraud hotline (0800 112 811) to report any incidents of suspected fraud, waste and abuse and encourage them to use it.
“In our experience, the biggest single deterrent is making it known that we are actively investigating every suspicious or unusual claim or activity. Education in terms of the relationships with medical aids, their members and the healthcare providers goes a very long way in curbing the abuse of medical aid benefits and, as such, our approach to fraud management speaks to this education component in all the matters we deal with.”
Who are the culprits?
The culprits are not just medical practitioners. Guilty parties are found all along the healthcare delivery chain – from medical practitioners through to employees, service providers and members. There has also been an increase in collusion between members and healthcare providers.
Marion says fraud may not necessarily be on the increase but the high level analysis means medical schemes are uncovering substantially more fraud than previously. Current trends seem to be ‘phony doctors or medical practitioners’ who submit claims, using another doctors’ practice number. Sometimes this is done in collaboration with members.
Other fraudulent activity
Waste and abuse is far higher than fraud and is more easily quantifiable in terms of values as it is usually a clear contravention of tariff codes or a rule that exists. Most of the common practices include:
- Billing for services not rendered (over billing);
- Using incorrect codes for services (at a higher tariff);
- Waiving of deductibles and/or co-payments;
- Billing for a non-covered service as a covered one;
- Unnecessary or false prescribing of drugs; and
- Corruption due to kick-backs and bribery
Here are some tips of members of medical aids to help prevent fraud
- Keep your personal medical scheme details (such as your membership number) private
- Check your medical scheme statements to make sure that all claims are correct and that you actually received the services you are being charged for
- Keep your membership card safe
- Report any suspicious activity call 0800 112 811
“We are encouraged at the increased reports by our members. Fraud directly impacts them so we all need to be more diligent in checking our billings and questioning unnecessary procedures. The contribution by members, combined with our internal fraud-tracking system and investigations by SAPS and prosecution by NPA will all work together to put a stop to fraud, wastage and abuse and help reduce spiralling healthcare costs. It’s a win-win for everyone,” concluded Marion.
Toll-free fraud hotline (0800 112 811)
For example, the report shows that 70% of the open medical schemes market is controlled by two players – Discovery Health Medical Scheme and Bonitas. The market for restricted medical aid schemes is dominated by the Government Employees Medical Scheme, with a 47% market share. The medical scheme administrators market is controlled by three players, Discovery Health, MMI Holdings and Medscheme. These three have a 70% combined market share.
The situation is no better in the market for private hospitals. Three hospital groups – Netcare, Mediclinic and Life Healthcare – hold 83% of the national market.
The concentration problem in the private healthcare sector is further compounded by integration. Two of the largest medical scheme administrators, Discovery Health and MMI Holdings Limited, and one of the largest hospital groups, Mediclinic, have common ownership.
A market dominated by few players creates an environment in which collusion, abuse of dominance and other anti-competitive conduct can thrive. To remedy the problems identified by the inquiry, addressing the problem of concentration is key. This is because it’s the root cause of other problems affecting the sector.
But sadly there isn’t much that competition authorities can do. The Competition Act empowers competition authorities to take effective remedial actions in cases involving mergers, collusion and abuse of dominance. But not when it comes to concentration. This means under the current law the health care market inquiry won’t result in any effective remedial steps being taken.
But there’s hope. If amendments to the country’s competition law are passed by parliament the law relating to market inquiries will be strengthened. The Bill will empower competition authorities to impose more radical remedies, such as divestiture, to address the problem of concentration. Divestiture would involve, for example, a dominant firm being ordered to sell or dispose of its shares or assets to free up the market.
Can divestiture work?
Divestiture can be a drastic and sometimes controversial remedy. Because of this there’s an acceptance that it be used sparingly and as a last resort. It works best when other remedies have failed.
That’s not to deny divestiture its place in competition law enforcement.
Divestiture orders have been part of competition law enforcement for almost 130 years dating back to 1890 when the world’s first competition statute, the Sherman Act, was passed in the US. Ever since the US has used divestiture to prevent monopolies from happening as well as to loosen the unhealthy grip of one or few firms on the market.
In the 1911 world famous case of Standard Oil Co of New Jersey v United States, the American Supreme Court ordered that Standard Oil be broken up into 34 independent corporations. Standard Oil had monopolised the entire American oil sector.
Another prominent case in which the Supreme Court ordered divestiture is United States v Aluminium Company of America . Here the Supreme Court’s remarks about monopoly were more telling:
Possession of unchallenged economic power invariably killed initiative and discouraged thrift.
In United States v Columbia Steel Co, another case of historic significance, the Supreme Court also ordered divestiture. The court found that monopoly was an “industrial menace”, because of the firm’s ability to create inequalities in relation to its competitors. Monopoly was also found to be a “social menace”, because of the firm’s ability to control prices.
Recently, in 2000, information technology giant, Microsoft, also received a divestiture order. In that case, United States v. Microsoft Corp, a Judge ruled that Microsoft established an unlawful monopoly and abused its dominance. The judge ordered that Microsoft must be broken down into two separate units, one to produce computer operating systems and the other software components.
This decision was later overturned on appeal. But some observers still believe that divestiture was an appropriate remedy because where anti-competitive conduct is made possible by market power, divestiture may be a suitable remedy.
South Africa should follow the American example by using divestiture to free up concentrated markets when circumstances require.
The state of flux the private healthcare industry currently finds itself in is reflected in the declining scores in the 2018 South African Customer Satisfaction Index (The SA-csi) for Medical Schemes.
Professor Adré Schreuder, Consulta CEO
According to the report, the sector average dropped from 74.2 in 2017 to 72.7 in 2018. This is primarily due to two of the large brands included in this year’s benchmark showing declining scores. Bonitas’ score declined from 73.1 to 70.2 and Discovery Health also reported a decline from 74.8 to 73.1 over the year.
Medihelp was the only open scheme in this year’s benchmark to see an improved SA-csi score, continuing to reap the benefits of its turnaround strategy noted in 2017. It consistently improved from 70.7 in 2015 to 72.6 in 2017 and 75.1 in 2018 to lead the industry in customer satisfaction. It is noted that Momentum Health maintained its SA-csi score of 2017 – now on 72.0.
Overall, however, South Africans are increasingly frustrated by rising premiums and shrinking benefits, as well as a feeling of lower value for money in comparison to other financial service products.
“While the market’s dominant heavyweights remain strong competitors, pack leader Discovery seem to have shifted focus to other business offerings in its product suite, including the launch of its anticipated banking services and its long- and short-term insurance offerings. This has allowed its competitors to even out the playing field in the medical product suite by delivering simpler, traditional medical insurance that is seen to be less expensive and easier to understand,” says Professor Adré Schreuder, Consulta CEO.
Medical Schemes Amendment Bill
In June, Minister of Health Aaron Motsoaledi announced the NHI and Medical Schemes Amendment Bill, proposing sweeping changes to the running of medical schemes. These changes are aimed at benefitting a wider range of members and paving the way for the NHI financing system for all South African citizens, not just those who can afford medical aid products. Opponents of the plan point to various challenges to the viability of the NHI, should it be implemented.
There are also concerns that the changes announced will have a significant effect on increasing premiums for 2019 and medical aid schemes will have to deliver commensurate improvement in their service offerings to neutralise the potential negative impact in customer satisfaction levels.
“Over the years we have noted the impact of organisational changes, including restructures and changes in management on customer experience as the organisational focus and energy tend to shift towards internal developments rather than on customer delivery.
“Medihelp’s strategy to focus on leveraging the contributions and focused delivery from its strong leadership team, which is underpinned by targeting a niche audience and offering exactly what members want and understand, is working,” says Schreuder.
Now in its sixth year, the SA-csi for Medical Schemes offers impartial insights into South African medical aid schemes by measuring customers’ overall satisfaction out of 100. This satisfaction score is based on medical schemes exceeding or falling short of customer expectations and the respondents’ perception of the ideal service provider. The index also includes, among other measures, a customer expectations index, a perceived quality index and a perceived value index. The 2018 sample included 1,675 respondents who were randomly selected from five medical schemes to participate in the survey.
“Medical premiums rose past inflation increasing on average by 9% this year, and are significantly higher than premium increases in short-term insurance and life insurance,” Schreuder says. “The cost of medical services continues to increase at a rapid rate as consumers are challenged with a supply-induced demand scenario, where medical schemes are forced to carry the cost of unnecessary treatments or admissions by doctors, which is ultimately passed on to members.”
The effect of this can best be seen in the perceived value index, where Medihelp and Momentum Health share the leadership position in 2018. For both brands this came from showing remarkable increases in the year. The Medihelp score from 70.9 to 73.6 in 2018 and Momentum Health increased its score from 70.5 to 72.3 over the same period. Although not to be compared with open schemes, GEMS, which is still behind the industry average of 69.4, scored 67.5 in this measure, which was a 3.9-point jump from its 2017 score of 63.6 marking notable improvements in this year’s survey. Bonitas fell from 70.7 to 68.3 and Discovery Health dropped from 72 to 69 in its perceived value score.
With more than 270 options available, choosing medical insurance products is even more confusing to customers. Many are left feeling frustrated when their claims aren’t covered and the general customer experience of medical schemes remains one of capped benefits and rising premiums.
To remain relevant in the face of NHI, private medical schemes need to assess the value they provide to customers, such as quality, affordability, transparency and ease of use, which should be integrated into their daily operations.
“As the government takes steps to roll out healthcare financing for the entire population, the central issue it will have to address is ensuring that it operates to the same level currently delivered by the private health care industry, and customer experience will be the driving force behind this,” concludes Schreuder.
Why was a market inquiry set up?
The inquiry was set up because private healthcare and medical scheme cover is expensive in South Africa. Costs continue to rise and fewer people can afford it. People who have health insurance find that the scheme covers less care and they often have to pay out of pocket.
Also, the private healthcare sector consumes a large amount of the healthcare spend and resources despite the fact that it only serves a small portion of the population. The private healthcare market serves about 18% of the population who buy healthcare insurance sold by medical schemes. But the private market consumes about half of the total health spend every year.
What did you find about competition – or lack of – in the sector?
The first thing to realise is that this is a complicated market with lots of different players in it so there isn’t a straightforward easy answer. It’s complex.
The report talks about a funder market. What is this and what did you find?
By funders we mean the companies that purchase healthcare. This includes medical schemes, the administrators that schemes use and the managed care organisations that the schemes contract with. We found that competition doesn’t operate as it should on the funder side of the market.
Basically what schemes do is pool the money that members of schemes give in premiums each month. The point of health insurance is to enable money to be pooled so that the healthy can cross-subsidise the sick. Over time it evens out.
Health insurance is there to protect people from catastrophic expenditure. Members should want their scheme to be careful and wise with their money.
Is this not happening and if not why not?
We think this isn’t happening for a number of reasons. It’s not to do with schemes being bad. It’s about the way the market operates.
One of the reasons it’s hard to know if schemes are being wise is that consumers don’t have the information they need. There are about 270 different health care plans on offer from all the various medical aid schemes – each offers different cover and costs a different amount. It’s very difficult to compare them and work out which option offers the best bang for a person’s buck.
We have recommended that all schemes have to offer a basic package that offers the same care. Consumers could then compare like with like.
On top of this there are also regulatory problems (rules about how schemes work) where we recommend changes so that it’s easier for schemes to offer a single comparable package.
So one package is one solution. But how does a person know if the quality is good or bad?
In the private market there are no measures of quality that are shared with the public. Consumers don’t know if a hospital is good or bad. There is also no way to judge if care being provided by doctors and specialists is effective as there are no measures on whether or not people are better afterwards.
This can lead to more and more interventions – and a waste of money.
If data are pooled and lots of doctors and patients report about health outcomes, we can begin to know if having an extra test or some kind of intervention works. We make a recommendation about reporting on quality and outcomes.
You looked at hospitals – what did you find?
We found that is a very high level of concentration in the hospital sector. Three hospital groups dominate: Netcare, Mediclinic and Life. They have more than 80% of the hospital beds available and get 90% of all the admissions. This distorts and restricts competition.
We have made some recommendations around this. But one thing we think is essential is a supply side regulator that would, among other things, assist provinces in issuing licenses for hospitals. Some countries, like Germany, are very strict about the number of beds available in the hospital sector.
The report also talks about doctors, what did you find?
There are problems when it comes to the way doctors and specialists work. They work as individuals – not as a team. Team-based care is an internationally accepted standard because it provides better care and can be more cost effective. But our system doesn’t allow this easily.
Also doctors and specialists use a fee-for-service billing model. This means they bill patients for each service they perform during a consultation. Obviously people inclined to maximise their income they will do more so they earn more. There is no good mechanism to manage this.
This is a universal problem. Different countries have different ways of managing it. In Sweden, for example, almost all specialists are salaried and paid by the state. So they don’t have an incentive to do more to earn more.
There is a chapter supply induced demand. What’s that about?
Basically it means that when some additional care is offered (increased access), additional use of the service that would not have otherwise have happened takes place.
This has two consequences: wasteful expenditure and patients being over serviced.
*How does South Africa compare to other countries? *
When it comes to the private healthcare sector South Africa faces a problem of over-servicing and over supplying. Three examples illustrate this.
Firstly, hospital admission rates are extremely high. South Africa’s rate was higher than all but two of 17 other OECD countries we used as comparisons.
We also looked at seven different surgical procedures. In four, South Africa had the highest usage rates.
Lastly we looked at the number of people that get admitted to intensive care units. We found that South Africa had higher admission rates than eight other countries with comparable published data.
What will it take to break the current patterns?
We recommend that the regulatory regime needs to be improved. Regulators aren’t as sensitive to competition issues as they could be. South Africa has laws in place but they aren’t being fully used. Stewardship from the Department of Health has also been weak.
But we were also very aware that there is no quick fix. The market is incredibly complex. This means that several interrelated interventions are needed. Market failures will persist if the recommendations aren’t introduced as a package.
We also kept in mind that the country is trying to move towards a system of universal health coverage and we have been mindful not to undermine that vision.
What, in summary are your main recommendations?
- The way in which schemes operate needs to change. This should include the way options are structured so that people can compare apples with apples. We hope that will improve accountability in the funder market.
- More transparency: a system needs to be put in place that allows people to see what value they’re getting for what they’re paying for.
- Greater competition, especially in the hospital sector is needed.
If a service is provided by a company rather than government, this does not automatically mean a market is at work. The point is fairly obvious but has passed many in South Africa by.
Private provision of services is moving into the spotlight in South Africa as the government looks to make the health system more accessible to the poor. One aspect is the Health Market Inquiry, established by the Competition Commission and chaired by former Chief Justice Sandile Ngcobo. It recently released a provisional report recommending more regulation of private healthcare. It has invited comment on its ideas.
It is absolutely inevitable that whatever proposals it comes up with will be attacked as an assault on the free market in health care. This will ignore the reality – that there is no market in healthcare in South Africa, at least not one which works in the way in which markets are meant to work.
To get an obvious point out of the way first, markets work only for people who have enough money to take part. So it is true that a healthcare market in South Africa would exclude many people who cannot afford private care. But that is not the only problem with the private healthcare system – another is that even those who are able to join medical schemes do not get the benefits markets are meant to offer.
For markets to work as they are meant to, consumers must be able to make informed choices: they must have both a real right to choose and enough information to make that choice. But information and choice operate weakly in private healthcare and not at all in the private health insurance offered by medical aids.
This places the South African debate about healthcare in perspective. The Competition Commission and the health ministry are not trying to abolish the market, they are trying to make it work. The accurate debate is about whether they are doing it in the best possible way.
No real choice
It might be true that people who can afford private medical care can choose their general practitioner. But that is where it ends. If patients need specialised care or hospital treatment, they don’t choose the specialist or the place where they will be treated.
And so they have no way of ensuring that they get the best possible care. While popular wisdom in the suburbs often assumes that all private doctors and hospitals are good, inevitably some are a great deal better than others and some are no good at all. But consumers do not make an informed choice on where to go and who to go to, although this is a far more important decision than buying a kettle.
Informed choice of a medical aid scheme is just about non-existent. Most people belong to the scheme their employer chooses. If they are “lucky” enough to have a choice in theory, they do not have one in practice. Medical aids do not publicise what they do and the language they often use most people can’t understand and so there is no way to “shop around” in ways which would make an informed choice possible.
The situation is quite the same when people have joined schemes. Information on what is allowed and what is not may be understandable to doctors and pharmacists, but not to scheme members.
The supposed solution is the medical aid broker, who is meant to help consumers to choose and to deal with the scheme after they join. But the brokers are paid by the schemes and so it is no surprise that they are there to look after the scheme, not the consumer.
Brokers direct people to the schemes they are working for, not those which will best meet the needs of the consumer. Anyone who has a problem with a medical aid’s decision will soon find that the broker is a public relations officer, not a consumer representative. Their job is to justify the scheme’s decision, not to question it.
Given all this, the Health Market Inquiry’s proposal that healthcare providers and funders should be regulated is a pro-market move – it seeks to make informed choice more of a factor than it is now. There is room for debate on whether it is going about it in the best way. But to claim that it is an attack on markets ignores the way in which private healthcare operates.
Similarly, an amendment to the Medical Aid Schemes Bill which would abolish brokers is currently up for discussion. It, too, is not an attack on the market. Its likely effect would be to force brokers into the customer relations departments of the medical schemes, improving market information by ensuring that consumers know that they are dealing with people who work for the schemes, not for them.
Again, to oppose this measure is not to defend the market – it is the opposite. To argue against it is to say that a market in which people know who they are dealing with and can make informed choices is not a good idea.
The tendency to assume that private provision means that there is a market even when there is not is not restricted to health care. For years, it was assumed in the mainstream that the market was delivering satellite television when there was only one supplier. Moving from services to goods, many beer drinkers no doubt toast the market as they choose between a range of labels produced by one company.
More generally, concentration in the formal economy means that most goods are produced by subsidiaries of a handful of companies – and sold in stores owned by only two or three firms. While competition between a couple of firms is technically a market, it is hardly one which offers strong benefits to consumers.
Making markets work
This has two implications for South Africa’s economic debate. The first is that not all proposals for regulating private economic activity are an attack on the market. A key feature of the country’s economy is that it is dominated by very few players and so markets often do not work as they should. A stronger government role could mean stronger, not weaker, markets.
The second is that, in these circumstances, the claim that markets must be left alone very often means that there is a need to leave existing private providers alone. This hides the reality that, in current circumstances, the challenge is not to protect private providers but to ensure that they really are subjected to the rules by which markets are meant to force them to play.