Medical aids still battling to cater to the masses

Top medical aid brains descended on Durban this week for the annual Board of Healthcare Funders (BHF) conference - and the prognosis was not too sunny.

The event aimed to grapple with the thorny issues of how to make private healthcare more affordable. It's an evergreen topic, but discussions were given an added air of urgency by the fact that a Competition Commission investigation into high medical costs has kicked off.

One of the speakers described it as the boiling-frog syndrome. That is, if you stick a frog in boiling water, it will hop out; put it in cold water and heat it slowly, and the frog will cook before it realises what's happening.

To some extent, this illustrates the steady erosion in the private healthcare market: medical aid members have seen their benefits drop incrementally, the regulations tighten every year and individual companies battle in silos rather than together.

Getting more people into private healthcare would benefit South Africans and the industry. Risk would be shared, contributions would increase. Almost every speaker seemed to agree a collaborative approach is needed.

This seems a smart plan, given that about 17% of the population use 50% of resources - an unequal distribution that has already been flagged by Health Minister Aaron Motsoaledi.

So if it's such a good idea, why hasn't it happened already?

The answer was complicated, said Alex van den Heever, an expert who used to work at the Council for Medical Schemes.

Consumers often don't understand what they are buying, and how medical aids are priced. Nor do they have any idea about the quality they get, he said.

Instead, medical aid is often bought through "conflicted intermediaries", that is, brokers who are financially rewarded for selling specific medical aids to people, even if that particular option isn't the best fit for that person. This meant the market wasn't functioning properly.

Van den Heever said: "You can have as much information as you like on a website, but do you have the time to analyse it properly?

"Nobody does that," said Van den Heever, chairman of social security systems administration and management studies at the Wits School of Governance.

This was identified at the conference as just one of many market glitches that put a lid on the growth of private medical schemes. Add in the restrictive regulatory environment, which has led to a spike in medical costs, a rise in non-healthcare costs (such as administration fees), and many structural inefficiencies, and you can see why the problem is so complex.

Access to proper data was another key point: information such as where to obtain value for money and which hospitals provided the best care.

Discovery, the largest local medical scheme with 2.1million members, has by far the most sophisticated health database, but it is no longer part of the BHF. The absence of arguably the country's most influential power broker in private healthcare from the conference left a big hole in proceedings.

Elsewhere, there's a dearth of data - and even what exists is not accessible and transparent.

There was an element of deja vu at this conference as expanding private healthcare to low-income South Africans has been discussed for years.

"We've reached the boundaries of what we can do in the current regulatory ambit," said Christoff Raath, joint CEO of Insight Actuaries and Consultants. "We've actually regressed from a sustainability point of view".

This, he argued, was because prescribed minimum benefits (PMBs) couldn't work in the absence of mandatory healthcare cover. These PMBs provided a barrier to entry; up to 4million people could join the private healthcare system if an affordable product was provided.

But that view is not shared by Van den Heever, who said it was important for the industry to develop low-end products. Providing PMBs had not pushed up cost of cover, he said . Costs had been rising for decades, even before PMBs were introduced.

The cost of medical-aid coverage has spiked, but fewer benefits are provided . If anything, it was the failure of the private healthcare market to extend its reach further down the income chain that led the government to start implementing National Health Insurance (NHI).

Meanwhile, the Department of Health is closing loopholes that it argues have allowed drug makers to inflate the cost of medicines through perverse incentives. The government has proposed a blanket ban on rebates, bonuses and all other incentives (prices meanwhile have been capped for years through single exit prices).

"Data fees", which Gavin Steel, head of sectorwide procurement at the Department of Health, estimated to be between R500-million and R3.8-billion a year, is he says where pharmaceutical groups offer pharmacies sums for their sales data in return for stocking their products.

No mention was made of high hospital fees but the idea of putting general practitioners as gatekeepers for specialists was put forward.

Despite all the talk, there was little clarity on what impact the Competition Commission probe and NHI will have. This isn't surprising: there's long-standing distrust between the public and private sectors, and the relationship between service providers is fraught. Doctors mistrust being directed by large medical schemes, while hospitals and funders battle it out to manage costs and profits.

The result is a silo mentality.

Van den Heever said healthcare markets did not necessarily work well without government intervention.

But he warned: "What happens when intervention is ill-considered and poorly administered?"

That is a key worry for medical schemes, which remain none the wiser about their role in NHI and wary of what will come out of the competition probe.