Category Archives: Medical Aid

Information on Medical Aid schemes in South Africa

Private healthcare loses more than R22bn a year to fraud, waste

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Fraud, waste and abuse is costing the private healthcare system more than R22bn, and if you submit false claims, you could face more than just being terminated from your scheme, the Council for Medical Schemes warned at its summit on fraud this week.

The event comes after deputy president David Mabuza announced at the Presidential Health Summit that the Special Investigating Unit (SIU) would be honing in on the healthcare sector.

“We want independent investigations that are turned around quickly and submit and identify findings appropriately,” Mabuza said at the October gathering.

The CMS estimates that fraud, abuse or waste accounts for about 15% of the R160bn in claims that medical aids pay out annually.

The head of the SIU, advocate Andy Mothibi, said the body is working with the National Prosecuting Authority to help ensure that its investigations result in cases that can be prosecuted as it proactively targets healthcare fraudsters.

“Specifically with the SIU, when the investigations are done, there are not effective follow-ups to make sure action is taken. We have put in place measures now [to combat that],” he said.

The SIU is also trying to ensure investigations are followed from the point they start to the day they result in a conviction.

Last year, the public interest law organisation Section27 released the findings of an SIU investigation into corruption at the Gauteng health department. That report was only handed to former President Jacob Zuma’s office seven years after it was commissioned. The organisation says it, as well as the non-profit organisation Corruption Watch, have already joined a National Health Anti-Corruption Forum convened by the SIU.

Mothibi’s remarks come after a high profile win for his unit — a recent investigation led to the arrest of a prominent attorney in Mthatha in the Eastern Cape that relates to fraudulent medico-legal claims estimated to be over R100m, the government news agency SAnews reported on Monday.

But, the SIU isn’t in it alone

Some medical scheme administrators and funders have their own ways of uncovering irregularities. The Board of Healthcare Funders of Southern Africa now oversees the Healthcare Forensic Management Unit that allows medical aids to track suspicious activity by using healthcare professionals’ individual medical practice numbers.

Discovery Health uses a case management system that gives them insights into their members’ claim trends. Based on these trends, Discovery is able to pick up on suspicious activity. Their system has led to R2bn in direct savings; since 2013, it has helped the scheme to recover more than R5bn.
“It’s not only about money,” Marius Smith, head of Discovery Health’s forensics, explains. “It’s about the quality of care. The health of patients is jeopardised by fraud, waste and abuse. We shouldn’t lose sight of that.”

So, who’s behind all of this fraud?

“It’s not [just] a doctor issue,” Smith says. “Discovery has seen an equal spread of fraud, waste and abuse between healthcare professionals, medical aid members and hospital groups.”

But is it all illegal? Not always

Paul Midlane, general manager of Medischeme’s healthcare forensics, says sometimes perpetrators are technically not doing anything illegal — but it doesn’t make their actions ethical or less costly.

Catching out the bad guys is going to take teamwork and larger pools of data would need to be combined to detect trends sooner, says Lynette Swanepoel who works for the commercial firm, Southern African Fraud Prevention Service.

What does weeding out fraud mean for the average person?

Simon Magcwatywa, the principal officer of Sizwe Medical Fund, says combating fraud could lead to more affordable private healthcare.

But only if the money lost to corruption is returned.

CMS’s chief executive Sipho Kabane warns terminating people who fall foul of the law from schemes is not combating corruption. Instead, he says, they should be rehabilitated through penalties, including making them refund schemes for the money lost.

NHI is an opportunity to access orphan drugs

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Government’s National Health Insurance (NHI) scheme represents a substantial policy shift to restructure healthcare and secure universal health coverage for all South Africans. The success of this ambitious plan and the quality of service lies in the hands of a number of the private health sector’s stakeholders – many of which met recently to discuss challenges and proposed solutions, especially those impacting access for orphan drugs.

“When it comes to patient access we believe that new, viable models to improve access can only be addressed if elevated to a higher political level within each stakeholder constituency and developed through collective conversation involving all stakeholders – which is exactly what this stakeholder meeting aimed to achieve,” says Kelly du Plessis, CEO and Founder of Rare Diseases SA.

With parties including the South African Health Products Regulatory Authority (Sahpra), the Council for Medical Schemes, IPASA as well as large medical schemes among others in attendance, dialogue focused on access not only in terms of contentious prescribed minimum benefits (PMBs) and Section 21, but also on orphan drugs and their availability and cost in South Africa.

Discriminatory

“When a rare disease is not funded purely based on the fact that the treatment is costly would it be fair to say the approach and behaviour around funding rare diseases is discriminatory?” asks Patricia Matseke, principal consultant at Elsabe Klinck Associates.

Of course, given the high complexity, limited treatments and limited number of patients, evidence-based decision for funding is difficult, only to be exasperated by a siloed and fragmented eco-system. It is for this reason, Gavin Bauer, chairman of the IPASA Access Working Group, called for a collaborative eco-system – one that views vulnerable communities such as the rare disease community in the context in which they stand, rare.
“Rare disease and access to orphan medicines require a different perspective to essential medicines and when we look at the marginal expenditure growth on these medicines and the decline in utilisation of these orphan medicines within our current medical schemes, one has to question if the medical schemes system has money to fund these orphan medicines and close the funding gap.”

He points to possible solutions including using the increasing level of scheme solvency as funding headroom for rare disease patients but what became evident through the discussion is that schemes are competing on PMBs, rather than standardising these. This needs to be overcome if we are to define PMBs for rare diseases and ensure that our healthcare spend is invested where it is needed most.

It was also collectively agreed that there needs to be new ways and agree on new solutions to ensure that:

  • The prices of future orphan medicines are determined in a decisively fairer manner;
  • Patient outcomes become once again the single most important factor in the decision;
  • Patients are not exposed to unjustifiable access delays or restrictions; and
  • Investment into our healthcare system by industry continues to be made – encouraging appropriate market access which is regulated.

No orphan drug policy

Sahpra will play a crucial role in access to orphan medicines. Dr Shyamli Munbodh, acting director clinical evaluations and trials and head of sections 21 units, Sahpra says; “Currently there is no orphan drug policy, but we are working on a broader exemption policy guideline which is expected after June this year. It is aimed at providing guidance on exemptions from the requirements for registration of a medicinal product including those that treat rare diseases.”

The Council for Medical Schemes was also optimistic about the progress being made. “The current PMB package is hospicentric and does not sufficiently include primary preventative healthcare services in support of customer care and we are working on reviewing this. It is a process and with any policy change there will need to be constant revisions and changes. What is evident is that there has to be public-private partnerships for sustainability.”

Unprecedented opportunity

Rare Diseases SA has always been committed to engaging with the Council for Medical Schemes, medical schemes themselves and the National Department of Health to find solutions to access of healthcare for the rare disease community and these stakeholder engagements are critical for advocacy and engagement.

“We have an unprecedented opportunity to address the unmet medical needs of people living with rare diseases and we need to unlock the deadlock we find ourselves in when it comes to access. Access to healthcare is a universal right – it’s not going away, and respective stakeholders need to move forward if we are to get NHI right. When we talk about universal healthcare, resources constraints alone – cannot justify inaction,” concludes Du Plessis.

Is NHI going to make the SA economy even sicker?

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Concerns raised by the Hospital Association of SA (Hasa) over contradictions in the National Health Insurance (NHI) and the Medical Schemes Amendment that could lead to potential job losses has raised the ire of the national health minister.

The organisation has been accused of “fear-mongering” and attempting to sabotage the implementation of NHI by Health Minister, Aaron Motsoaledi,, but Hasa chairperson Melanie da Costa provides two scenarios to demonstrate the economic effects of two different policy paths.

Two scenarios

In the first scenario, which combines the provisions of the two bills and assumes government would not purchase any private hospital services under the NHI, Hasa estimates 9, 600 jobs would be lost in the private sector and R31bn shed from South Africa’s GDP.

The second scenario includes the effects of price regulation, with a proposed cap on prices at levels 23% lower than they are at present. Under this scenario, 13, 000 jobs would be lost. Apart from job losses in the private hospital sector, implementing the NHI is fiscally unaffordable and comes at a time when the country is struggling to keep the lights on and the wheels of the economy spinning. We estimate that NHI will cost taxpayers R446.8bn in 2018 prices.

“Considering that the total revenue from personal income tax collections – the main vehicle for financing NHI – amounted to R462.9bn in 2017, the futility of the government’s ambitious NHI scheme confronts us. South Africa has a very narrow tax base and it would be extremely unwise for government to even consider imposing another tax on already overburdened taxpayers to fund the NHI rather than trying to get more people actively involved in the workforce.

Since the main funding option for the NHI scheme will necessarily come from a surcharge on taxable income and a payroll tax, the NHI is nothing but a tax on labour. A payroll tax will always, ultimately, be borne by workers, either through reduced earnings or compensation or job losses – precisely the opposite of what the poor in South Africa require.

“While the NHI scheme is supposed to help people access medical care, instead it would undermine their chances of economic success by either cutting their wages or eliminating their jobs altogether,” she says.

Potential to wreck the economy

In short, adopting the proposed NHI has the potential to wreck South Africa’s already weak economy. To compound matters, in his State of the Nation Address, President Cyril Ramaphosa said the NHI Bill would soon be ready for submission to Parliament.

However, the NHI Bill has been surrounded by controversy ever since the National Treasury revealed that the President’s advisor, Dr Olive Shisana, attempted to introduce draconian changes to the proposed bills after the public comment period had closed that would have all but destroyed the private healthcare sector in South Africa. Despite millions of taxpayer rands having been spent on the NHI, including the catastrophic failure of the NHI pilots, South Africans are no closer to understanding any of the material details of the plan. Yet, the government is surging ahead. Indeed, critical details such as how much the scheme will cost, where the money to pay for it will come from,
and where the country will obtain the additional personnel (both medical and bureaucratic) to staff the ambitious scheme are all sorely lacking.

Absence of critical details

Given the conspicuous absence of these and other critical details we can only assume that the government’s NHI scheme is a politically motivated event that will not improve the health outcomes of the poorest and most vulnerable members of society. We are reminded of the quote by Paul Starr: “Whoever provides medical care or pays the costs of illness stands to gain the gratitude and goodwill of the sick and their families… Political leaders since Bismarck seeking to strengthen the state or to advance their own or their party’s interests have used insurance against the costs of sickness as a means of turning benevolence to power.”

When one considers the high levels of poverty and unemployment, the small tax base, and the poor performance of the public health sector, it is difficult to envision how a government-funded system that promises “free healthcare for all” is appropriate for South Africa.

The consequences of the government adopting its proposed NHI policy are entirely predictable. It would reduce the quantity and quality of South African healthcare provision; drive more healthcare professionals out of the country; create a bureaucracy incapable of efficiently handling the huge
volume of claims; impose an unnecessary and intolerable burden on both government and taxpayers; and cause job losses.

Motsoaledi outlines NHI war room plan

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President Cyril Ramaphosa indicated in his State of the Nation Address (Sona) last week that in 2019 government will take a significant step towards universal health coverage that will bring quality healthcare to all South Africans.

The National Health Insurance (NHI) delivery model will be based on the primary healthcare approach, which emphasises the importance of providing preventative, promotive, curative, promotive and rehabilitative services.

“By applying the principle of social solidarity and cross-subsidisation, we aim to reduce inequality in access to health care. Realising the magnitude of the challenges in health care, we have established an NHI and quality improvement war room in the Presidency.

President sets up NHI war room

President Cyril Ramaphosa announced that he has established a war room in the Presidency to deal with the country’s healthcare crisis and the National Health Insurance (NHI)…

8 Feb 2019

“This war room brings together various key departments to address the crisis in the public health system while preparing for the implementation of the NHI,” said Health Minister Aaron Motsoaledi.

He added that government is guided by the insight that improving the health system and introducing NHI are two sides of the same coin.

He said after extensive consultation, the NHI Bill will soon be ready for submission to Parliament.

Role player Involvement

“The NHI will enable South Africans to receive free services at the point of care in public and private quality-accredited health facilities.

“Repairing our national health system is an endeavour that requires the input, involvement and innovation of all role players who understand that good health makes for a good life and a good economy.

“At a time when we are laying the foundations for increased investment in our economy and we are developing the skills of our people to be active in this economy, it is essential that we build and maintain a healthy nation,” he said.

Motsoaledi’s remarks and the launch of the report come after the health sector held a summit in Ekurhuleni in October 2018. Deputy President David Mabuza officiated the summit under the theme: “Strengthening the South African health system towards an integrated and unified health system”.

During the summit, concerns were raised about the poor quality of healthcare that people experience in clinics and hospitals during their moments of vulnerability.

The complaints varied from inadequate access to medicines and equipment; inadequate numbers of staff at facilities; the unprofessional conduct of staff as well as labour unrest; corruption and theft of hospital property.

High cost of private healthcare

One of the barriers to access to healthcare, said the minister, is the unsustainably high cost of private care.

“Many users of this care experience above-inflation increases in medical schemes contributions, and the failure of medical schemes to pay for patient services that have been rendered.

“Several organisations have raised concerns with me regarding the dysfunction of the health system, to the point that it is clear that the system is in crisis and needs urgent rehabilitation. These are issues that must be addressed collectively by all stakeholders if we are to prevent a collapse of our health system,” he said.

There was a need for a robust, efficient and caring health system in a country where more than seven-million people live with HIV; rising rates of diabetes, hypertension and cancer; and where maternal and neonatal death rates must be reduced.

Health sector drafting a compact to improve health outcomes

Motsoaledi said that last year’s summit proposed a centralised, national procurement system, which will achieve economies of scale and assist in addressing corruption.

The success of a quality health system rests on information systems that can generate valid information at the right time and in the right format for decision making and monitoring at all levels of management, taking into account the need for patient confidentiality.

“Having identified critical challenges, the summit called on government to urgently prioritise the filling of critical vacant posts.

Sustainable financing model

“The summit tasked National Treasury to develop a sustainable financing model, and urged provinces to prioritise their financial resource allocation to ensure the delivery of quality health care is not compromised,” he said.

Motsoaledi said further proposals relate to the development of expertise and funding to implement government’s health infrastructure plan in a manner that will respond to changing population and clinical dynamics.

This, the minister said, demands stronger coordination between the Department of Health and partners such as the Department of Public Works.

The summit acknowledged the critical role the private sector has to play in the realisation of universal health coverage and the vision of the NHI, and called for inclusive process started through the summit to continue.

“Through this inclusive and collective approach, the Presidential Health Summit has pointed the way forward not only for health, but for other key sectors where inclusive engagement can make a great difference in the quality of life of South Africans.

“The summit has underlined once more the benefit of working together as a nation and building greater understanding through the involvement of a wide range of persuasions and expertise.”

He said a Presidential Health Summit Compact, based on the summit’s outcomes, was being put together which commits sectors to work together to implement identified solutions.

How will the NHI Bill affect employer medical aid contributions?

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There has been a lot of hype around the proposed National Health Insurance Bill, 2018 (NHI Bill) and the numerous implications for South African citizens. Little has been said, however, about how the NHI Bill will impact on the provision of medical aid benefits in the employee context.

The NHI Bill aims to enable access to free, universal, high-quality healthcare for all, by creating a single national health insurance fund. The NHI Bill will, once promulgated, centralise the procurement of medical supplies by the State. A key feature of the NHI Bill is the establishment of the National Health Insurance Fund (NHI Fund).

Membership of the NHI Fund will be mandatory for all South African citizens. Currently, the NHI Bill is silent in relation to how the contributions towards the NHI Fund will work, but the Department of Health has indicated that everyone that can afford to do so will be liable to contribute towards the NHI Fund. It appears that contributions to the NHI Fund would be in addition to any medical aid scheme premiums, if individuals should choose to remain members of a private scheme. It is envisaged that all healthcare will be accessed free of charge through the NHI Fund.

It has been suggested that one of the options for funding the NHI would be via a withholding tax, similar to Pay as You Earn (PAYE). This would then be paid over to the NHI Fund by the employer.

Accordingly, once the NHI Bill is promulgated, employers will most likely have to contribute towards the NHI Fund and it appears that they would no longer be expected to contribute to private medical aid schemes on behalf of their employees, unless they elect to make both contributions.

Where an employer chooses to cease making private medical aid contributions on behalf of its employees, as a result of the introduction of the NHI Fund, this may result in a unilateral change to the employees’ terms and conditions or a potential unfair labour practice relating to the withdrawal of benefits. This is especially the case if the changes are not effected in the appropriate manner.

For those employees who decide to stay on a private medical aid scheme in addition to contributing to the NHI Fund, the draft Medical Schemes Amendment Bill has made several changes to the current system which appear to be advantageous for medical scheme members. It abolishes co-payments, requires medical aid schemes to make full payment of the patient’s expenses, and removes medical aid brokers. If these amendments are passed, medical aid scheme members who have raised concerns about above-inflation premium increases and exposure to co-payments should see immediate improvements. However, the changes could also potentially cause medical aid schemes to raise member contributions to cover their increased obligations.

While a substantial amount of detail is still to be fleshed out in the regulations, implementation of the NHI is currently targeted for 2025. In the interim, employers should consider whether they would want to cease contributions to their employees’ private medical aid scheme. In order to potentially cap their (future) liability and curb any headaches associated with trying to escape double contributions later, employers should consider building the present value of their contributions into their employees’ gross remuneration packages, requiring them to facilitate their own medical aid membership in the future. The effect of this will, at the very least, mitigate financial risk concomitant with increased premiums following the promulgation of the NHI Act.

Why delays to fixing healthcare are bad news for South Africans

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The inquiry was set up under the auspices of the country’s competition authority in 2013. It’s remit was to investigate characteristics of the private health sector that may prevent, distort or restrict competition. Its preliminary report, released in July 2018, concluded, among other things that the sector was highly concentrated in the hands of a few major players. The final leg of work was to get inputs from various players on the initial findings before concluding the inquiry. The inquiry has cost tax payers R197 million so far.

Another delay of the report – which should have been released in March 2019 –is therefore bad news. The sooner South African authorities deal with the issues of anti-competitive behaviour in the private sector, the more likely access to quality health care will improve.

South Africa has a two-tiered healthcare system. The public sector is under-resourced and stretched while the private sector is highly sophisticated and expensive. Even though only 16% of the country’s population uses private healthcare, it nevertheless gets a large portion of the government’s health expenditure in subsidies.

At the same time, private health costs continue to balloon and fewer people can afford it.

Read more:
Explainer: how competitive is South Africa’s private health care sector

The inquiry’s preliminary recommendations offered a clear agenda for how the private sector can become an integral part of the current national health system. There must be no more delays: if South Africa is to reach its lofty goal of universal health coverage, the report must be released and those recommendations adopted.

Key findings and recommendations

The inquiry examined three aspects of the private sector:

  • Medical schemes through which people pay for private health services and the administrators who run them.
  • Private facilities, such as hospitals and clinics.
  • Medical doctors and specialists in the private sector.

The key preliminary findings and recommendations were:

  • Medical schemes provide multiple plan options for cover without providing adequate information to understand what they cover, how the plans compare and what value the patients receive. As a result, consumers aren’t able to compare what schemes offer or choose plan options on the basis of value for money.
  • There is a lack of transparency on the pricing of healthcare goods and services, standardised reporting of health outcomes and implementation of evidence-based guidelines and treatment protocols.
  • Medical practitioners and specialists are concentrated in the private sector. As a consequence, there is time to over-service and inefficient use of expertise and time.

In light of these and other findings, the inquiry made a number of recommendations to remedy the situation.

These included putting measures in place to enable the Council for Medical Schemes, which regulates medical aids, to exercise more effective oversight.

In addition, to ensure that people who belong to medical aids get more comprehensive cover, the inquiry proposed that all medical schemes also offer a standalone standardised obligatory basic benefit option. The basic option would include a standard basket of goods and services and be comparable among schemes. This option would include cover for the prescribed minimum benefits, make provision for the treatment of these prescribed minimum benefits outside of hospital settings and add primary and preventive care.

And the inquiry recommended tighter regulation of the sector through the establishment of a dedicated healthcare regulatory authority. This would govern the number and distribution of doctors and hospitals to meet current and future needs. And it would ensure the development of clinical protocols as well as shape the structure of payment systems.

The inquiry also recommended that a centralised national licensing framework be introduced. This would accredit all health facilities including clinics, hospitals and GPs’ rooms. Another recommendation was to establish a price-setting mechanism.

Important

The recommendations are innovative and would go a long way toward making health care in the country more equitable. But South Africans will have to keep waiting to see if they actually bear fruit.

The latest development is that, due to a lack of funds, all the inquiry’s work has been suspended until the end of the financial year in March after which a new date for the release of the final report will be published in the Government Gazette.

It’s important that the inquiry is allowed to complete its task sooner rather than later. This is because its findings could have a bearing on a piece of legislation currently making its way through parliament – the Medical Schemes Amendment Bill. The bill proposes changes to medical scheme governance and benefit options. Reports suggested that the department of health wanted to wait for the outcome of the inquiry before finalising the bill.

The inquiry could also affect the National Health Insurance Bill which is meant to herald in universal health care. But the bill is mired in controversy. The most recent version was recently rejected by the country’s cabinet which instructed the national department of health department to review what’s been proposed.

Until the final report is released, South Africans must contend with a fragmented, poorly regulated and expensive health care delivery system.

This article is republished from The Conversation under a Creative Commons license. Read the original articleThe Conversation

BHF rebrands its practice code numbering system

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The practice code number is a unique number allotted to a relevant and registered healthcare supplier who renders services in South Africa, Namibia and Lesotho.

The service promotes a uniform, national and legally constituted HSP identifier for billing purposes and is an important aspect in the process of reimbursing claims to either medical schemes member or HSPs.

“We are releasing the first phase of our online services which will enable HSPs to submit a new application, and facilitate HSPs to link, view and update their existing practice code number,” says Lamees Scholtz, head of PCNS at the Board of Healthcare Funders.

The PCNS client service unit serves as the point of contact which aspires to achieve first-time service resolution. The online service aims to be the primary platform in which HSPs engage the PCNS and enable them to query the status of their practice code numbers in real-time.

Legislative environment

Scholtz says there has been changes in the legislative environment has evolved and thus the alignment of systems is necessary. The PCNS serves the healthcare sector as a neutral party subservient to the constitutional principles of creating the right to access relevant healthcare services.

The system ensures that suppliers have valid accreditation and only allot a practice code number to suppliers who are registered, or licensed for independent practice, by the appropriate statutory body or licensing authority. The PCNS reviews and updates all healthcare services annually to ensure the adherence of accreditation for the ongoing facilitation of payment.

The BHF administers the PCNS in South Africa, Namibia and Lesotho, in terms of section 59 (1) of the Medical Schemes Act (Act 131 of 1998) and regulations 1 and 5, in South Africa.

The rebrand of the PCNS is a commitment by BHF to foster an enabling healthcare ecosystem through the use of information, ease of data exchange between all key health sector stakeholders and a connected, sustainable healthcare system for all healthcare citizens.

BHF sees this as an important step towards improving the governance of the healthcare system.

#BizTrends2019: Policy uncertainty and its impact on healthcare investment

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Policy certainty is necessary for sustainable investment in a sector. Currently, there is considerable policy uncertainty in the health sector in SA, mainly due to three parallel policy processes – the Health Market inquiry (HMI) Provisional Findings and Recommendations Report, the National Health Insurance (NHI) Bill (the June 2018 version and the expected further version) and the Medical Schemes Amendment Bill (MSAB).

The combination of these processes has created a shaky environment regarding the future of the private healthcare. The healthcare sector has seen considerable investment growth globally, but South Africa is being left behind as it cannot attract its share of investment against this background of policy uncertainty.

The main issues at the moment are the recommendations made by the HMI in its provision report and recommendations, and provisions set out in the NHI and the MSAB.

HMI recommendations

The Health Market Inquiry (HMI) has been tasked with analysing the private healthcare market in SA to understand whether there are enduring competition problems. This inquiry has been ongoing for the past five years (it commenced during January 2014). The latest date for completion is March 2019. The process has been delayed significantly since inception for various reasons, which also contributed to the uncertain policy environment.

The HMI provisional report makes various recommendations, among them that the market shares of the three listed corporate groups be reduced/ capped at 20%, via either divestiture or moratoriums on new licences. In addition, the report highlights failures in the regulatory framework of medical schemes which has resulted in escalating premiums and contributes to unaffordable medical scheme cover. The report recommends a simplification of medical scheme options and changes to the risk pooling mechanisms which will ultimately bring down the cost of medical scheme cover.

It is unclear whether these provisional recommendations will find their way into the final report to be published in March 2019. However, recent media reports indicate that findings and recommendations of the HMI will be taken into consideration prior to the tabling of the MSAB in Cabinet.

NHI Bill and MSAB

There are two areas of uncertainty for the private healthcare sector in the proposed healthcare legislation. The first of these is the future role of medical schemes in the provision of healthcare services in South Africa. The MSAB grants the registrar power to limit the services provided by medical schemes to those not provided by the NHI Fund to avoid duplicated spending. Although there is not yet any clarity on what services will be provided by the NHI Fund, limiting medical schemes to providing top-up or complementary cover will lead ultimately to beneficiary attrition and reduction in the size of risk pools. This has the effect of increasing premiums necessary to ensure the financial sustainability of schemes, which will mean further attrition in beneficiaries.

It is worth noting that this is contrary to the recommendations of the HMI which points to the “incomplete regulatory environment” in which medical schemes operate and suggests the creating of a risk equalisation fund. Such a fund will address issues of fragmented risk pools. But the MSAB will reduce the overall size of the risk pools, risking further instability and the potential demise of medical insurance.

The second channel is the impact that the NHI will have on private healthcare sector prices. The Bill gazetted on 21 June 2018 indicates that the prices at which the NHI Fund will contract with healthcare providers will be determined by the Benefit Pricing Committee, which is to be appointed by the NHI Fund. In other words, prices will be regulated and determined by the fund. While it is uncertain whether this committee will be included in future versions of the Bill, the fund’s ability to determine the payment mechanisms and rates for healthcare services will have significant operational implications for the private sector.

Impact on investors

Important to consider, in addition to the impact of these policy elements on the private healthcare sector, is the implication of compromising a high quality and well-functioning private healthcare sector for investment in the rest of the economy. High quality healthcare is a crucial consideration amongst international investors in deciding where to establish operations. Any perceived threat to the private sector is likely to deter future investment and may cause existing companies to withdraw. Along with issues like land expropriation without compensation, the vulnerable state of Eskom, and issues around the Mining Charter, the NHI ranks as a major concern for foreign investors.

The following scenarios illustrate the impact on the sector if the business of private hospitals is severely compromise. We illustrate that investment will be much lower than current industry forecasts with disastrous consequences for employment and economic growth.

As we understand, Cabinet is set to engage on the NHI Bill on 30 January 2019, the HMI is due to release its final report and recommendations on 29 March 2019, and the MSAB will take account of these findings in any further iterations.

#BizTrends2019: SA’s state of health

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The cost of healthcare, inadequate benefits and failing public healthcare facilities were very much in the news in 2018 and are likely to continue to feature strongly in headlines in 2019 as South Africa finds its way towards universal health coverage.

On the scheme beneficiary front

Key concerns are the escalating cost of contributions as well as inadequate medical scheme benefits. In combination, these translate into higher out-of-pocket expenditure by beneficiaries. In 2017, it was estimated that beneficiaries had to pay at least R32bn for out-of-pocket medical expenses. This is a significant amount given the challenging economic environment.

Last year indicated a different focus for medical aid schemes as there were several publications relating to reform which will affect the private healthcare space. We witnessed the publication of the National Health Insurance (NHI) Bill and the Medical Schemes Amendment Bill (MSAB), both of which had been long awaited. What the sector found disappointing was that not much was provided to beneficiaries in terms of immediate relief.

What happened in 2018

The Health Market Inquiry (HMI) published its provisional report, which was very comprehensive, soon after the publication of the two bills. There is, however, a sense of a lost opportunity as the inquiry’s findings were published afterwards and have thus not made their way into the bills. The HMI findings are comprehensive and provide insights based on years of studying of the environment.

The Council for Medical Schemes (CMS) was also in on the action, they published a circular inviting comment on the framework for consolidation of medical schemes. This circular received much criticism and caused significant anxiety among the schemes, particularly those which were specifically mentioned in the circular. It is evident from the circular that more needs to be done prior to consolidation taking place.

The Presidency announced in the latter part of the year that they will be supporting processes to establish the NHI. To this end, several resources from the Presidency were allocated to drive the collaboration. The Presidential Health Summit brought in most stakeholders from the health sector to map a way forward. It looked like a key moment, as all acknowledged and reflected on the poor state of health in the country. There was excitement that there would be a chance for stakeholders to work together for the sake of the much-needed health reform.

The excitement was, however, marred after a leaked document from National Treasury highlighted some potential challenges within the internal stakeholders. The question is whether this will erode the goodwill from the summit and serve to deepen the existing trust deficit.
This year is certainly shaping up to be an even more dramatic year with many changes looming.

The Health Market Inquiry (HMI) was expected to issue its final report in December 2018. When it does come out, the key questions though are whether the recommendations will be in alignment with the other reforms and their activities sequenced to en-able ease of implementation.

What 2019 might look like

The NHI Bill should also come through in early 2019 – probably before elections. In the light of the enthusiasm that surrounded its long-awaited release, we hope it will embrace the input from the various submissions as well as discussions from the consultative meeting and the Presidential Health Summit. The prevailing narrative is that NHI is for the benefit of the citizens, it is so huge a project that there should be more collaboration among all stakeholders across the healthcare spectrum.

While all this is unfolding, we have to be cognisant of the member experience as there are already numerous pressures, mostly economic, that they have been subjected to. With the economy in its current state, other than worrying about job losses, beneficiaries will have to contend with above inflation medical scheme contribution increases. The impact will be worsened by the recently announced interest rate hike by the South African Revenue Service.

Beneficiaries will also be faced with many messages around the future of healthcare, some of which may be confusing as the media will probably be awash with stories and opinion pieces on healthcare and how it should be structured.