Sent: 02 September 2015 10:22 AM
To: MDS Howard
Subject: Health: solvency article - pls read and pass on!
Seven medical
schemes on solvency watch
Non-healthcare
expenses a concern.
Antoinette
Slabbert | 2 September 2015 00:01
The Council for Medical Schemes (CMS), which regulates the medical
scheme
industry, has placed seven schemes on close watch due to solvency levels
below the
statutory requirement of 25% during 2014.
This was disclosed in the CMS annual
report for 2014/15, published in Pretoria on
Tuesday.
The schemes represent 24.1% of all medical scheme beneficiaries, due to
the inclusion
of the Government Employees Medical Scheme (Gems) with 1.8 million
beneficiaries.
They are: Resolution Health (9.4%),
Gems (10%), Liberty Medical Scheme (17.2%),
Community Medical Aid Scheme (Commed) (21.4%), Suremed Health (21.4%),
Thebemed (22.8%) and Transmed (22%).
Of these, Resolution, Thebemed and Transmed
in fact improved on their 2013 solvency
rate.
Discovery Health Medical Scheme,
which accounts for 53.8% of the open scheme market,
maintained a solvency level above 25% for the year in 2014, up from
24.3% in the previous
year.
According to the CMS, the drop in
Gems’ solvency ratio is largely due to a higher-than-
expected claims ratio. Membership also dropped by 0.8% due to
resignation of public
servants, termination of membership due to the scheme’s debt management
policy and
members who passed away.
The CMS is developing a risk-based
solvency framework that will later be issued for
comment.
Medical schemes that saw a drop of
100% or more in operating performance before
investment income in 2014 include Bonitas, Medshield, Fedhealth,
Liberty, Gems and
Polmed (South African Police Service Medical Scheme). CMS general
manager for
financial supervision Tebogo Maziya pointed out that some schemes
deliberately manage
reserves down and this may result in decreased operating profit.
Non-healthcare expenditure – which
includes among other things administration cost,
remuneration of principle officers and trustee fees, as well as
advertising and broker fees –
has increased from R1 743 to R1 753.50 per average beneficiary per
month. This has long
been a focus area for the CMS.
The CMS said while the overall costs
have decreased in real terms, some schemes still see
it moving upwards. “In the interest of member protection, it is
important that such
expenditure can demonstrate clear value,” the regulator said.
Some of the schemes that fail to
meet the solvency level, also feature as high spenders on
these non-healthcare items.
Gems and Liberty with 116 000
beneficiaries, are the top and fifth respectively on the list
of schemes with the highest trustee fees and feature with Transmed on
the list of top ten
highest remuneration for principal officers. Transmed has 81 000
beneficiaries.
The CMS has introduced compulsory
disclosure of payments to trustees and the next step
would be to prescribe the levels of payment, the council said.
Liberty and Commed are also among
the biggest spenders on advertising, marketing and
broker costs.
Medical schemes paid a total of
R124.1 billion in benefits in 2014, up 11.1% from 2013.
The amount paid per average beneficiary per annum increased by 10% to
R14 185.
Hospitals were the main
beneficiaries of these payments, getting R46.6 billion or 37.6% of
the total. Only 6.6% or R8.2 billion was paid to general practitioners
(GPs).
The CMS says from the data it is
clear that medical schemes that have a high proportion of
benefits paid to GPs have lower payments to hospitals. The opposite is
also true. If payments
to GPs are low, hospital costs increase. This negative correlation may
be caused by the way
benefit options are structured, the CMS says.
GPs were paid an average of R328.70
per visit, dentists R879.62 and anaesthetists – the top
earners – R2 506.42.
Members paid on average R6 000 per
annum out of their own pockets, although this may be
understated as all direct payments to service providers are not recorded
by medical schemes.
Prescribed minimum benefits
The actual cost for prescribed
minimum benefits (PMBs) amounted to R567 per beneficiary
per month and constituted 52.5% of all risk benefits paid out. PMBs are
conditions that medical
schemes are legally obliged to cover to a prescribed minimum level of
treatment.
The accuracy of this amount is
however questioned, since data from 19 schemes had to be
disregarded as it was clearly not correct, according to Dr Anton de
Villiers, CMS general
manager for research and monitoring. De Villiers said some schemes
suggested the average
PMB cost was R20, which cannot be correct. He said the problem may be
with the actual
implementation of PMBs or with the reporting.
The CMS also interrogated the
quality of care beneficiaries received for nine conditions on
the PMB chronic disease list. The results indicate that
beneficiaries do not get the benefits they
are entitled to, which results in higher and more costly outcomes,
including hospitalisation
and developing complications that need costly treatment.
From a sample of 404 161
hypertensive beneficiaries, for example, only 33.8% have undergone
at least one electrocardiogram test during 2014, and of 44 608
beneficiaries suffering from
Diabetes Mellitus 1, only 6.6% had the Fundus Exam eye test that should
be done at least once
a year.
De Villiers said medical schemes
should pro-actively contact members suffering from these
diseases to encourage them to make use of these benefits, as it will
save costs in the long run.
He said these tests are indicated for managing these conditions and are
covered as PMBs.
“They pay for managed healthcare,
but they don’t get the value.”
