“We know that rising costs in healthcare are outstripping inflation, and legislated steps to address this are overdue. The proposals will usher in a new set of rules for how medical schemes operate,” says Mark Arnold, principal officer of Resolution Health Medical Scheme.

“While the details of how uniform tariffs for healthcare providers will be arrived at are not expected to be addressed in the Medical Schemes Amendment Bill, but rather will be informed by the outcome of the Competition Commission’s Health Market Inquiry, this is an important step towards protecting healthcare consumers.”

He explains that there are no regulations at present to limit what healthcare service providers can charge for their services. “A High Court ruling in 2008 scrapped the National Health Reference Price List (NHRPL), which aimed to institute associated provider pricing ceilings. The NHRPL and Prescribed Minimum Benefits (PMBs) were originally intended to work in tandem to protect medical schemes and their members.

“As it stands, with PMBs remaining in force without the moderating influence of the NHRPL, even the Council for Medical Schemes has noted with concern that healthcare providers tend to charge higher fees for PMB diagnosis and treatment. This is because medical schemes have no choice but to cover the costs of PMBs in full.

“The fact that medical schemes are left to individually negotiate rates with healthcare providers also means that a handful of large medical schemes have considerably more bargaining power than the rest of the industry. The consequence of this is that healthcare providers make up for the discounted rates they have acquiesced to with the large schemes by demanding higher fees of the smaller schemes.

Uniform tariffs

“The proposed introduction of uniform tariffs for healthcare providers will go a long way towards levelling the playing field, however it is imperative that tariffs are applicable to both PMB and non-PMB claims and ICD-10 coding conventions must be clearly defined to avoid practises such as code farming,” he observes.

“At the moment there is no standard for acceptable ICD 10 codes associated with a particular treatment or procedure, and the risk is that if uniform tariffs are introduced without establishing coding conventions, then providers may simply bulk up on ICD codes to achieve higher claims. Medical scheme administrators will therefore need to ensure they have the infrastructure and necessary systems in place to manage this effectively and adjudicate claims based on coding.”

Arnold says that the proposal for a new set of PMBs, which will place greater emphasis on primary and preventative healthcare, could be a welcome development.

“This development would directly benefit members’ health in the long term, as health concerns can be identified and treated before progressing to more serious conditions. For medical schemes, this would also help to avoid more costly treatment down the line.”

Co-payments

One of the proposals reportedly contained in the Medical Schemes Amendment Bill is a prohibition of members being charged co-payments. Arnold explains that under the status quo, co-payments are implemented on non-PMB claims and while schemes limit co-payments as far as possible, these are generally higher for elective surgical procedures.

“Limits on claims for elective procedures are in place particularly where more conservative means of treating the condition, such as physiotherapy, are available. Here the co-payments charged for such procedures are in place to protect the funds available for claims that are truly a medical necessity. Here, co-payment should, in theory, encourage members to consider alternatives to elective surgery.

“If co-payments on elective procedures were to be scrapped, this would open up an avenue of considerable risk for the majority of members in favour of the few. This is because if procedures are covered in full by law, then healthcare providers may be encouraged to prescribe more costly treatment rather than choosing more conservative options that are less profitable.

“The average medical scheme member may welcome the prospect of co-payments being eliminated, however the wider implications must be considered.

“We would, however, instead advocate the introduction of a defined list of treatments that co-payments can be charged for, to protect the funds available to cover the entire membership of any given medical scheme,” he adds.

“The reality is that co-payments are one of the few risk management tools left to medical schemes to counteract over-servicing from opportunistic healthcare providers and undesirable claiming practices from a minority of members who may otherwise abuse the system and reduce the value we can offer to all members,” Arnold concludes.

A survey, which covers more than 900 employers across the EMEA region, in 25 industries and covering 2.7-million employees aims to identify the key health issues employers are facing as they develop their people risk strategies, including the opportunities and challenges.

The majority of employers overwhelmingly recognise the importance of having a well-defined, well communicated health and wellbeing programme and that there is a correlation between employee health and their performance, and 100% of South African firms agree that they have a role to play in positively influencing good employee health.

Nearly 70% of overall respondents either have a specific budget in place, or plan to have within the next two years, to fund health initiatives.
Most employers seem to have a good idea of the types of health and wellbeing issues they need to focus on, for example, lifestyle risks, and financial, physical and/or emotional wellbeing. Stress and mental health issues are the primary concern of 72% of South African respondents.

Yet, in spite of this recognition of a correlation between health and employee performance, many organisations do not appear to be implementing strategies that best enable these outcomes, and the prevalence of health programmes of all types is lower than two years ago.

Only 40% of employers say they have a defined health strategy in place, the same as 2016, and even fewer (36%) have a clear view of the impact (including cost) of the health issues in their organisation.

No budget

The key barriers to running or implementing successful wellbeing programmes include having no budget or a budget that is not deemed enough, having limited resources, or not being able to measure the effectiveness of any initiatives.

Only 22% of employers use data to support their health and wellbeing strategy, and just 17% of South African employers measure ongoing success of their health programmes.

Less than 40% of employers rate their health and benefits communication to employees as good.

Top HR issue

The survey also finds that attracting and retaining talent is the top HR issue in 2018, overtaking increasing productivity and employee performance, which has dropped to the number three concern since the last survey in 2016. Improving engagement and morale is the second highest ranked concern.

“In spite of these obvious concerns, South African firms appear less proactive in offering almost all types of health initiatives. Programmes addressing stress and mental health in particular are the least likely to be provided. Putting in place more structured programmes to address this would seem a good investment,” says Gavin Griffin of Aon Employee Benefits in South Africa.

“Although South African respondents are more confident in their health and benefits communications than many others in the survey, low utilisation by employees has jumped into second place when they are asked to rate the obstacles to health initiative success. This is often a symptom of poor or ineffective communications and a review of current communications programmes would be a worthwhile exercise.”

“If we can get that mindset right across the healthcare value chain, we will move closer to achieving UHC. We’ve heard a lot about why UHC would be impossible to implement, what we cannot do, and why we cannot do some of the things. It’s time the industry pushes boundaries to look at what is possible and what can be done to implement those pockets of possibilities without having to change regulations or legislation. It’s about identifying the low-hanging fruits and kick-starting practical steps towards UHC,” says Katlego Mothudi, managing director, Board of Healthcare Funders of Southern Africa (BHF).

Pockets of success

The narrative around introducing and implementing UHC in Southern Africa has always been that it is unaffordable, and that government systems are collapsing and are not geared to delivering UHC. Yet there are pockets of success in countries such as Rwanda, which ranks as one of the most successful UHC programmes in Africa. Lessons can be learned from Ethiopia and Ghana, which have also achieved significant milestones. These examples go to show that UHC for Southern Africa and for Africa is possible, he says.

“First we need to remove the barriers that we have created in our thinking about UHC. We need to look at what can be done now, without waiting for regulatory reform, and push the boundaries of what we have deemed impossible to realise workable solutions in delivering UHC.

Changing the relationship between the health citizen and service providers

“The healthcare sector’s priority should be ensuring that healthcare delivery is more member-centric and not service provider focused. Efforts must be made towards ensuring that the end product delivered to the health citizen meets their healthcare needs,” says Mothudi.

The relationship between healthcare service providers and the health citizen has conventionally been transactional. Even with chronic health citizens, healthcare service providers have built a relationship of dependence.

According to the BHF, there is a lot that medical schemes can do, working together with governments across the region, without having to wait for regulatory reform to begin driving the implementation of UHC.

Some of the current challenges include cost escalation, reduced access and poor or non-standard quality of care. For the insured, without a doubt, medical aid contributions required to purchase healthcare are very high, and out-of-pocket payments are increasingly becoming a big challenge to the health citizen. Benefits schedules are also so complex that members don’t know benefits to which they are entitled.

A common view among the insured is that while contributions are high, there aren’t enough benefits to justify the costs. For the uninsured, of concern across the region is adequate access to healthcare services as well as the quality of healthcare received. Across the board, health citizens do not know what to expect from their healthcare providers, and also don’t know how to measure quality care. As a result, they cannot benchmark to determine whether they are receiving the best available healthcare services or not.

Information and a multidisciplinary approach

“There needs to be adequate consultation and informed consent to empower the health citizen with appropriate information to influence their choices and compliance to the healthcare services provided to them.

“Information prioritisation must focus on empowering the health citizen; there is a need to create awareness of the drivers of costs, cost of services, to create an understanding of the impact of fraud on the health citizen, the impact of choice of care, as well as an understanding of treatment modalities.

Across the region and continent, there is inadequate accountability for the quality of healthcare. New technologies come into the country and into the region unvetted. There is a lack of standardisation of healthcare measures, which raises the question: whose interests does the healthcare sector seek to serve? If it is for the healthcare citizen, we would be more cautious about these things. A multidisciplinary approach to healthcare delivery and regulation alignment will enable a seamless implementation of universal healthcare across the continent.

“This can only be attained through industry collaboration with all the stakeholders in healthcare to truly deliver to the needs of the health citizen,” says Mothudi.

Putting the healthcare citizen first, pushing the boundaries of the possible is the theme of the upcoming 19th Annual Board of Healthcare Funders of Southern Africa Conference, which will be held at Sun City, from 17-20 June 2018.

The rising costs of healthcare

One area of concern is the cost of private medical aid and VAT. For years increasing healthcare inflation and economic pressures have been a challenge for the industry. “The reality is that when consumers are struggling, medical aid, which is essentially a grudge purchase, is often viewed as unaffordable,” says Gerhard van Emmenis, principal officer of Bonitas Medical Fund. “In addition healthcare costs are not regulated which is why it is crucial for medical aid schemes to continue to explore ways to contain costs without compromising the level of health care offered to members.”

Members’ contributions

However, he says, because the 1% increase will not impact monthly contributions or annual benefits. “Many members are confused as to whether VAT is payable on medical aid contributions but let me reassure you it is not,” says Van Emmenis. “The VAT increase will have no effect on members directly and what they pay every month. Medical aid contributions for 2018 are already. So, while the increase in VAT may influence the price of services, it will not impact benefits.”

“If your plan covers you at 100% of a scheme’s rate, you are still covered at 100% of that rate, no matter what the cost to the scheme because the scheme will absorb the VAT when paying for member’s benefits. The only impact is when it comes to savings and day-to-day benefits with members having a 1% lower buying power.”

The Council for Medical Schemes

In fact, changing contributions in the middle of the year can only be done with the permission of the Council for Medical Schemes following a request from the trustees of the medical scheme. This is a rare occurrence and most schemes generally put through contribution increases in January each year.

The law

VAT is never the property of any private entity but belongs to the government. “We are therefore only vendors that collect the monies on their behalf. From April 1, we will increase the VAT to all providers of the scheme by 1%. However, although this will have a direct impact on the budget for 2018 it will be absorbed by operational surpluses and not passed on to members.’

Tax credit

One positive announcement out of the budget speech regarding medical aid was around tax credits.

“Medical tax credits are effectively used as an ‘expense’ when calculating tax and reduces the amount of tax payable by a household belonging to a medical aid,” says Van Emmenis. ‘There are eight-million people who rely on these credits to make medical aid more affordable. Speculation was rife that the tax credit would be removed but it is a relief that private medical aid members have some reprieve.”

The bottom line: The 1% VAT increase and the additional 52 cents general fuel levy will have a knock-on effect for South African consumers, things will cost more. However, it will not affect monthly medical aid premiums or member benefits although it will have an indirect impact in terms of healthcare services being more expensive, which will reduce buying power.

MetHealth (a division within the health solutions environment of MMI Holdings Limited) administers the Government Employees Medical Scheme and provides wellness services to a number of clients, covering over 1.8-million lives. The key strategic focus of MetHealth is to achieve financial wellness for public sector communities by enabling and delivering sustainable integrated outcomes-based healthcare solutions as a transformed organisation.

Financed through a combination of equity and vendor finance, the transaction creates an exciting partnership which will empower a broad range of stakeholders including the Popcru Trust and Thebe Health’s broad base of shareholders and beneficiaries.

Collaboration

“MetHealth is pleased and excited about the prospects that this partnership creates. We look forward, not only to creating value for our partners and their stakeholders, but also to continue to deliver reliable, effective and quality healthcare services to current and prospective members. We believe that this transaction will help strengthen the MMI health business to become an even more significant player in providing greater access to quality healthcare in South Africa. Ultimately, this partnership demonstrates the parties’ commitment to the socio-economic development of a broader base of South Africa’s population,” Hannes Viljoen, CEO of the MMI health business, says.

Thebe Health is a subsidiary of the pioneering black-owned investment company Thebe Investment Corporation. “Thebe has always been looking for strategic partners to grow its presence in the provision of sustainable healthcare services. This transaction will serve to strengthen and embed Thebe’s presence in this critical sector of our economy. We are very excited about this partnership and we believe that it is merely the beginning of what will be a long and enduring relationship,” executive chairman Vusi Khanyile says.

“We are delighted with this deal, as it is yet another bold step towards the transformation of the healthcare sector, which promises to bring dignity to the lives of ordinary South Africans. This partnership is in line with the organisation’s commitment to providing short and long-term financial support to our clients, while ensuring sustainable growth and value for our shareholders,” Zwi Mdletshe, Workerslife CEO says,

“Validate is a hands-on and value adding partner in all the healthcare and related investments that we participate in. The deal presents us with an opportunity to become a significant player in the South African healthcare industry. It will also help address the transformation agenda. The consortium brings a wealth of experience, expertise and technology, to the partnership,” says Solly Motuba, lead for the Validate group.

Separate transaction

In a separate transaction, Thebe Health will become a 48% shareholder in a merged entity that comprises the mining-sector healthcare business of Providence Healthcare Risk Managers and Thebe Health. The Providence Healthcare Group, acquired by MetHealth in 2013, delivers administration and managed care services for restricted membership schemes. The merged business will be called Momentum Thebe Ya Bophelo and will manage the healthcare costs for over 120,000 employees on behalf of a number of blue-chip mining houses across the sector.

“Quality healthcare forms an important component to financial wellness and we are committed to delivering this to our people, their business and their communities; it will be a privilege to walk this path with our new partners,” concludes Viljoen.