/ 15 September 2008

More on medical aid

The government medical scheme has continued to siphon new members, driving the first noteworthy increase in the number of medical aid beneficiaries in South Africa.

The latest report from the Council for Medical Schemes (CMS) found that there had been a 4,9% increase in beneficiaries last year compared with 2006. But schemes with restricted membership showed a 22% increase in beneficiaries, the bulk of this increase coming from growth of the Government Employees Medical Scheme (Gems). By the end of December last year there were 7 478 040 medical aid beneficiaries in South Africa.

These insured individuals rep­resented gross contributions of R64,7-billion, of which R56,2-billion was paid out in benefits.

The largest single tranche of these benefits — 36% or R20,2-billion — was paid to hospitals. Private hospitals received the bulk of this money, about R19,9-billion, representing a 12,5% increase last year compared with 2006.

In the report the Registrar of Medical Schemes Patrick Masobe said: ‘Schemes have been spending significantly more, especially on private hospitals, but at the same time members have been using private hospitals less frequently since 2002.”

Despite the rising levels of hospital costs, the CMS decided earlier this year not to continue with threatened litigation against the hospital groups over tariff increases. This was in response to initiatives from Minister of Health Manto Tshabalala-Msimang on the control of these costs.

The use of medical specialists has continued to increase, as did costs in 2007: this group consumed 21,7% of benefits last year, an increase of 11% compared with 2006. General practitioners, however, saw an 1,5% decrease in the amount of benefits they received.

Administration fees were up by 3,8% to R4,9-billion in open schemes, while in restricted schemes such costs accounted for R1,4-billion, up from R1,2-billion in 2006. On average the industry spent R71,50 per beneficiary per month on administration.

Broker costs increased by 6,1% from 2006 to reach R1-billion last year. In the report Masobe said: ‘Broker service fees have been rising sharply over the past few years, resulting in their rates of increase now far exceeding the increases in member numbers.”

The CMS report said that analysing trends for contribution rate increases against CPIX showed that the two had started to follow the same pattern from 2003, but medical aid contributions are still higher than inflation.

On average gross contributions for this year rose by 8,3%, varying between 9,9% for open schemes, which anyone can join, and 7,5% for restricted schemes. The minimum monthly payable premiums per principal member were R1 189,50 in open schemes, and R1 090,50 in restricted schemes. The minimum cost of being a medical aid member for restricted schemes was R161,10, while for open schemes is was R330,10.

The CMS said cost escalation remained a serious concern, because it was leading to devaluation of scheme benefits, and increased payments of top-up fees by members.

The number of medical schemes also fell from 124 in 2006 to 122 in 2007. Further amalgamations within the industry are widely expected.

Masobe said: ‘Market consolidation is in many instances desirable, given the bigger size and consequently, the better stability of risk pools in merged entities — A key strategic issue for the CMS is ensuring that consolidation is effectively managed so as to protect the interests of affected members adequately and to ensure that effective competition is enhanced, rather than reduced, through the consolidation process.”