The Medical Schemes Act was amended last month to spread medical risks and costs. Kathryn Strachan reports
Medical aid schemes are gearing up for a complete overhaul of their operations, with newly introduced legislation opening up new avenues and ending discrimination against the patient.
Up to now medical aids have shared risk with the patient, but the amendment to the Medical Schemes Act, passed last month, is designed to spread the load.
What the new legislation signals is that the focus on securing “low-risk” members to allow medical schemes to engineer lower premiums will shift to managing health care costs together with the health care providers. Essentially, medical schemes have to shift the burden of risk from patients to doctors, hospitals, pharmacists and managed health care organisations.
It legislates that people can no longer be discriminated against on the basis of their age, sex, health status – or their HIV status. Medical aid schemes have to provide lifetime coverage of all essential services, and the only factors on which contributions can be based are income and number of dependents.
The Act reintroduces the concept of minimum benefits, but exactly what these benefits will be still has to be worked out. At the very least, it means medical aids will have to fully fund all essential services – which can be described as the range of services that could be obtained from a public hospital. There can be no limit to cover. If, for example, a patient is in intensive care, the medical aid scheme would now have to fully fund his bills to the end of the treatment period, regardless of the cost.
What led to the new Act was that the medical aid industry found itself close to collapse when it covered the full risk. With medical prices rocketing, and members resisting sharp increases in their premium contributions, the medical schemes could not be sustained. This brought in the concept of sharing risk with members – a plan that made those at higher risk (the elderly and the sick) pay more than the young and healthy. It cut out poorer people and led to widespread instability in the industry.
It meant that an elderly patient who had made contributions for 30 years could no longer afford the new premiums and fell off the medical scheme. This patient had to rely on the public health service, with all its inconveniences.
Another problem was that the private health sector had been receiving the patient’s premiums for 30 years, but it was now the public health sector, which had not received a cent of this, which had to provide for the influx of people who fell out of the medical aid net.
Reg Magennis, director of Medscheme’s managed care division, says other trends arising from the new legislation are that people will not be able to join medical schemes when they need cover, and leave once they have paid their bills; there will be severe penalties for not joining and staying with a medical scheme; and employees will have greater reason to join medical schemes in future, and could be penalised for electing to join later in life when they have a greater risk of needing health care.
The challenge to medical aids, doctors and hospitals is to make it work. “The new health Act signals an end of an era,” says Representative Association of Medical Schemes (Rams) CEO Aslam Dassoo. The year ahead will see the introduction of various regulations emanating from the Act, which will mean the full impact of the Act will only be felt on January 1 2000, he says.
But the Act has left in its wake a fragmented industry, with a third of medical schemes deserting Rams, arguing that it no longer represents their interests. The task is to heal the divide, says Dassoo, adding that he expects a new association to be established within the next few months.
Esme Prins, head of health policy and economics at the South African Medical Association, which represents doctors, has her reservations about the legislation. The health care environment is not ready for such an advanced concept as sharing risk with the provider, she says, and she does not believe medical aids will be able to make use of this mechanism in the short term.
Medical aid schemes have not tried to control their costs in the past, she says, but acted merely as claims processors. Many still did not have systems which were sophisticated enough to manage utilisation and costs.
The best known model for risk sharing is the “capitation arrangement” where the doctor receives a fixed pre-payment for a group of patients per month to provide certain agreed- upon health care services. This effectively means that the patient can access the doctor’s services as often as she wishes without the risk of any additional payment.
It is then the doctor’s responsibility to manage the care in such a way that the patient does not need to access the services that often. If the capitation amount is calculated incorrectly, insolvency could await either the doctor or the medical aid, says Prins. To calculate an appropriate capitation amount, accurate data is required, and this data is seriously lacking in South Africa – a fact that makes risk-sharing arrangements premature, she says.
Dassoo says the new legislation requires a whole new mindset on the part of health care providers, and adds that medical schemes are trying to go about the steps of risk-sharing in a consultative way. “We need to join forces to do it,” he says.
The new Act still retains the principles of managed health care which were introduced four years ago. Managed care brought in a series of tools to manage costs which included plans such as preferred provider arrangements, where a hospital or doctor gave discounts to a medical scheme in return for their referring patients on to them, and getting authorisation from the medical scheme before an elective operation or treatment.
Regulations would soon be published which required managed care organisations and administration companies to be accredited, said Magennis. Under an Act that significantly extended the powers of the minister, their activities would become subject to audit, and levels of supervision and control would increase, he said.
The solution, said Magennis, was to be found in information technology. Managed care companies were developing information and “tools” for identifying and managing costs in collaboration with health care providers, and he expected that through information technology this would be an ever-growing segment of the private health care market.
He said this legislation brought health care closer to the health ministry’s plan for new social health insurance legislation which would make it mandatory for everyone in formal employment to enjoy cover for minimum benefits in the future.