/ 12 April 2013

Managed care is a strategic partnership

Managed Care Is A Strategic Partnership

Increasingly, managed care is being viewed as a strategic partnership between key role players reflecting the government's drive to bring affordable and quality healthcare within reach of all. Laubi Walters, executive manager: strategic support, says that if the healthcare industry wants to achieve sustainable healthcare, behaviour patterns must change.

"Influencing the behaviour patterns of those who receive medical care, as well as of those who are responsible for providing it, should take the form of contracts between funders and providers.

"Contracts should be based on the principle of fair reimbursement and an understanding of all role players's and stakeholders's roles within the healthcare ecosystem," he says.

Walters says that remedial measures aimed at reducing total healthcare expenditure have already been applied in many instances.

Although they are difficult to quantify, he argues that costs would be higher than their current levels if it were not for the type of managed care practices by South Africa's leading healthcare institutions.

"We have been effectively managing the price and utilisation aspects of costs to some degree, but more needs to be done," says Walters.

What will be the role of managed care organisations in bringing down the spiraling costs of healthcare in the future?

"It's a very sensitive ecosystem," says Walters. "All role players are necessary for sustainability and should be respected for the role they play.

"We should move forward in a strategic partnership between funders, healthcare providers and healthcare beneficiaries to make a meaningful difference in bringing affordable and quality care within the reach of all. "Managed care must move from a predominantly rules-based approach with some aspects of supportive patient care to being based on supportive coordination of care for the patient," he says.

Walters believes that managed care organisations of the future will play a central role in the co-ordination of care and facilitating these efforts, especially where risks are pooled and funded across the entire risk spectrum.

Managed care typically includes a major emphasis on preventative care and wellness programmes. It usually also involves appropriate screening and early detection of potentially life-threatening diseases and medical conditions.

Once a condition is detected – at any age – the appropriate treatment should be applied to prevent deterioration of the condition. The entire spectrum of prevention should be seen as a holistic co-ordinated approach.

Walters says that an approach that co-ordinates care to the patient has the potential to generate a return of investment upwards of 200%. This figure is the result of reduced direct and downstream costs and a significant cost reduction in high morbidity groups.

"In partnership with all stakeholders, progressive managed care can create a better understanding of the healthcare ecosystem to facilitate achievement of the common goal of improved access to quality and affordable care," he says.

What drives private healthcare costs?
World-wide, healthcare inflation is higher than general inflation for reasons that include the high cost of new health technology, ageing populations and new drugs, such as biologicals.

In the South African private healthcare environment added factors that contribute to the cost of healthcare include the "double hump age distribution", where members in the 20- to 30-year-old age group migrate out of schemes, resulting in less ability for the scheme to cross-subsidise.

South Africa's high and rising non-communicable disease burden (including lifestyle diseases like diabetes and obesity) contribute significantly to the cost spiral, as does the country's communicable burden of disease, like tuberculosis and HIV.

Added to these are the increases in hospital and specialists costs. Most public sector facilities are not in a position to compete with the private sector hospitals.

A Competition Commission ruling in 2004 prohibited medical schemes from negotiating collectively on behalf of all medical scheme members. This means that each scheme must negotiate individually the prices it will pay healthcare providers.

Consequently, the lack of bargaining power, especially among smaller schemes, contributes to the rising cost of healthcare. 

The most significant cost driver, however, is the way the private healthcare system is structured. This system allows over-servicing, entrenches fraud and does nothing to align the incentives between the funders and the providers. 

The legislative environment — which includes the structure and payment of prescribed minimum benefits — also contributes to an increase in costs. It therefore becomes very difficult for schemes to contain their increases to their members when all the benefits the scheme pays, increase above the level of general inflation.

This complex combination of factors therefore puts enormous pressure on medical schemes to maximize the healthcare rand and exert a downward pressure on costs within the sector.

Although there may be isolated cases where schemes pay more than they should for non-healthcare costs, it is not a major cost-driver. Given the complexities of South Africa's private healthcare system, it is essential that both the administration and managed care interventions are highly sophisticated.

Non-healthcare costs come under regular scrutiny by the regulator of medical schemes, who places a cap on the amount schemes pay out on non-healthcare costs.

Social and national health insurance systems worldwide are based on the social solidarity principles of cross subsidisation. The National Health Insurance system proposed for South Africa will be no different – the higher income earners will subsidise lower income earners and the healthy will cross subsidise the elderly and sick.

What are 'waiting periods'?
Medical schemes are governed under socialist principles. This means that all members within the scheme contribute equally, whether they are young and healthy or chronically ill, and benefits are paid out to those who need them. Effectively, this means that young and healthy people cross-subsidise elderly and sick people.

Therefore, it would not be fair on those members who had been contributing to the scheme for a number of years and contributing to the risk pool, to be funding someone who only joined the scheme when they were suffering from a certain condition or when they were elderly and needed cover. An analogy would be someone without car insurance who has an accident and only then insures the car, expecting to be paid out for the accident.

If everyone joined a medical scheme only when they needed cover or when they were likely to need cover, medical scheme premiums would be prohibitively expensive.

If an individual joined a scheme at a rate of R1 500 a month at the time they needed a medical intervention that costs R20 000, but left the scheme as soon as they had had the procedure, the other members on the scheme would have to pay the R18 500 shortfall. People would only join a scheme if and when they needed cover and cover would become unaffordable.

Waiting period legislation contained in the Medical Schemes Act of 1998 can be summarised as follows:
• If you haven't been a member of a medical scheme for more than 90 days, a general waiting period of three months and a condition-specific period of 12 month may apply.
• If you have been a medical aid member for more than two years and left the scheme within the last 90 days, a general waiting period of three months (excluding prescribed minimum benefits) may apply.
• Waiting periods do not apply when you have to involuntarily transfer to another scheme due to a change of employment, unless a previous waiting period has not yet expired.
• Waiting periods do not apply when your employer changes the medical scheme of his employees with effect from the beginning of the financial year (for members who terminated less than 90 days before).
• Changing options also doesn't have any waiting periods attached, unless previous waiting periods still apply.

One vision, one future
The Board of Healthcare Funders Conference 2013, to be held at the Cape Town International Conference Centre from August 18 to 21 2013, promises to be one of the most inspiring yet, with a programme covering key issues of the day.

The overarching theme of this year's event is that of unity — at all levels of the industry and between all stakeholders within the industry — with the aim of fostering trust and enhancing collaboration.

Various topics will be discussed by local and overseas experts, with emphasis on promoting accountable institutions, including those highlighting innovations to improve the consumer experience, an interrogation into trustee remuneration and restoring real competition.

The popular BHF/ Metropolitan Health Risk Management Golf Challenge will be held at the magnificent Pearl Valley course in Paarl on Sunday August 18.

As usual, the organisers have secured special conference rates at the hotels around the conference centre.

For more information or to register, please visit www.bhfglobal.com

The Board of Healthcare Funders and its members have funded these pages and have supplied and signed off their contents. Views expressed do not necessarily coincide with those of the Mail & Guardian