Healthcare costs will be taking an increasingly bigger bite out of our pockets each year as medical inflation continues to climb far higher than wage increases.
This was the bottom line at a panel discussion held at the Absa Healthcare Consultants’ Seminar last week. The panel discussion between various players in the healthcare industry showed there were serious divisions between healthcare providers and administrators of medical schemes.
But the various stakeholders will have to put their differences aside and work together to combat spiralling costs if we are to avoid a complete collapse of the medical scheme industry and unaffordable healthcare.
The one issue they all agreed on was that doctors are under-remunerated in terms of government’s National Health Reference Price List (NHRFL) — so don’t expect any cost savings from that quarter.
The problem is simply that, globally, healthcare is extremely expensive. It is a service-driven industry ministering to a declining number of skilled working people, which is driving up salaries.
Hein van Eck, head of product development at hospital chain Medi-Clinic, said nursing costs have soared due to global shortages. In 2005, salary increases for nurses were nearly triple that of inflation. Analysts in the United States estimate that by 2020 the US will be short of 375 000 nurses.
Jonathan Broomberg of Discovery Health said that in the 1980s, healthcare-spend made up 9% of the US’s GDP. Today that figure is 15% and rising. Globally, healthcare as a single sector has become the biggest percentage of GDP.
New technologies, while making giant leaps in the field of medicine, come with a hefty price tag. An ageing population and the effect of HIV have seen massive increases in the number of people going to hospital.
Van Eck said that Medi-Clinic’s profit margin had remained within a 1% band in the past six years and argued that increasing hospital costs, which currently run at double the rate of inflation, are due purely to higher input costs and not higher profits. He said if hospitals made no profit, the monthly premiums from medical-aid members would drop from R2 000 to R1 890, insisting that hospitals are not making unnecessary profits.
Broomberg countered that hospitals are not taking advantage of increased volumes and economies of scale to introduce greater efficiencies, to which Van Eck responded by asking why Discovery, the largest administrator with greater economies of scale, was more expensive than its competitors.
Other issues were highlighted by Johan Oelofse of Spesnet Healthcare Director, an organisation representing specialists, who said doctors want to be allowed to treat their patients to the best of their abilities without having to be second-guessed by the medical scheme. “Doctors don’t want to think about whether a certain drug would reduce the administrator’s profits.”
On the one hand, he said, doctors are being dictated to by medical schemes, and on the other they are faced with patients who see healthcare as their right and who are used to receiving 100% cover with no co-payments. “Patients are usually unaware of the benefits of the plan they have bought and get angry when their benefits are limited, especially in closed schemes.”
Ninety percent of the people who belong to a medical scheme are insured at rates which are often lower than those charged by doctors, and are often unpleasantly surprised to find they are footing the bill. Oelofse took a swipe at Discovery when he said patients don’t care about discounts on movie tickets when the scheme won’t pay for their catarrh surgery.
But Broomberg said that doctors would have to work with medical schemes to bring down costs because, although underpaid as doctors, the medications and further treatment they prescribe add heavily to the medical bill.
“Discovery accepts that specialists are under-remunerated — especially as we lose specialists who go abroad. We are very worried, and part of our responsibility is to drive specialist remuneration up.”
However, Broomberg made it clear that this would come with conditions, and doctors would have to have contracts in place so that members do not have to make co-payments. They would also have to cut add-on expenses.
From the consumer’s point of view, consultations need to start with questions about costs before a doctor’s recommendations can be accepted. This would keep both the doctor and patient focused on cost-containment.
If medical premiums continue to increase and cover decreases, more people will opt out of medical schemes, resulting in poor health, which will in turn exacerbate costs and premiums, leading to the collapse of the industry or its over-regulation by the government.
This might lead to an exodus of skilled doctors, and South Africa’s renowned private healthcare — rated number four in the world — would be reduced to tatters.
New proposals
Discovery’s Jonathan Broomberg said government was considering implementing a new benefits structure for medical schemes by 2009.
All members will have exactly the same package of essential care as a basic building block. From there they could opt for additional cover.
The industry is concerned about exactly what it will be expected to include in this package and if the cost will be prescribed.
Discovery said its doctors’ network is one way to try to offer discounts within these prescribed packages. If members use the networks they can offer discounted premiums. The networks also create certainty for members who will not have to make co-payments.
“Governing of prices by government is never a good idea; it creates distortions. This is something that should be negotiated between doctors and medical schemes collectively,” said Broomberg.