Gary Feldman, Executive Head of Healthcare Consulting, NMG Benefits
The Council for Medical Schemes (CMS) recently recommended that medical aid schemes cap their contribution increases for 2023 at 5.7%. On the face of it, limiting medical aid increases looks like a prudent cost cutting measure. In reality, it could affect the sustainability of the entire healthcare ecosystem, which includes patients, healthcare providers and funders alike.
The bigger challenge is that private healthcare is not sustainable in its current format. There is clear overservicing in many areas. That is why both the private and public healthcare systems need to be reviewed to come up with a system that affords all South Africans access to decent healthcare.
In the meantime, the healthcare industry is trying to balance affordability and sustainability. It is essential that the industry find ways to manage rising healthcare costs. But restricting contributions to medical aid schemes is a blunt response to a complex and nuanced situation.
The harsh reality is that few, if any, medical aid schemes will adhere to the 5.7% contribution cap being proposed by the CMS. During the Covid years, some schemes put through low, and even negative, increases. We saw medical schemes changing the way they implemented fee increases, including deferring increases, dipping into reserves and announcing delayed increases.
None of those measures are sustainable in the long term. That’s because claims have gone back to pre-Covid levels, so schemes will come under severe financial pressure if they don’t implement realistic increases now.
What type of increases can we expect? In general, medical inflation is around 3% higher than the consumer price index (CPI). What that means is that we can expect to see increases of at least CPI plus 3%, if not more. In fact, we will potentially see several medical aids putting through double-digit contributions in the coming months to stay abreast of rising costs and claim levels.
Some schemes will justify contribution increases above inflation due to some industry specific cost factors. For example, we are already seeing hospitals increasing their prices by 10% or more. It doesn’t help that providers hike their rates by 10% but funders can only increase their contributions by 5.7%. That is simply not sustainable. To ensure the sustainability of schemes, we anticipate increases of between 7% and 10%.
Of course, the bigger question is what steps need to be taken to create a more sustainable and equitable healthcare system. Right now, there are about 4.5 million registered members of different medical schemes, serving a total of around 9 million beneficiaries. That leaves 51 million South Africans who rely on the public health system.
And here, the elephant in the room is the National Health Insurance (NHI). Make no mistake, an NHI is necessary, because everybody in the country has the right to access decent healthcare.
As we know all too well, there are several challenges to NHI. Perhaps the biggest of those challenges is that there is low to zero trust in the ability of government to manage what will effectively be a medical scheme that is 20 times bigger than Discovery. Then there is the funding of the NHI, which remains a well kept secret. We still have no indication of what it will cost and exactly how it will be funded.
Throw into the mix the chronic shortage of doctors, nurses and facilities in our country, and you’re starting to get an idea of the mountain facing NHI. Medical schools are still generating the same number of doctors they did 30 years ago and our population has doubled since then. At the same time, the brain drain is robbing us of the highly trained medical professionals our healthcare system is crying out for. The bottom line? NHI may not be fully implemented in our lifetime.
That’s not particularly comforting to the average medical aid member, whose main concern at this stage is that any increases in medical aid contributions are kept as low as possible. We are already seeing many members downgrading their plans and options, and any further increases will only put more pressure on consumer wallets that are already under immense strain.
Most of the larger medical aid schemes have introduced network options in an effort to maintain affordability. Other than that, their options are limited in the current healthcare set-up. The best thing medical aid members can do at this stage is to speak to an informed broker to ensure they get the best coverage for their family’s needs at a price point they can afford.
Ultimately, balancing affordability with the provision of quality healthcare requires a holistic approach that recognises the complex relationships between the various stakeholders in the system. Until then, we’re not going to reduce healthcare costs, let alone ensure a robust and sustainable healthcare ecosystem for all.