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CMS’ annual medical schemes report in a nutshell

By Danielle van Wyk

The Council of Medical Schemes (CMS) has released its annual report, which focuses on a comprehensive analysis of the South African private medical schemes industry.

Its the 16th unaudited annual report and has been dubbed a special one as according to the CEO and Registrar of the CMS, Daniel Lethutjo. The CMS has been given a ‘clean opinion from the Auditor General, with no area of improvement identified.’

The CMS continues to administer 83 registered medical schemes nationwide, enforcing statutory provisions, accrediting administrators, brokers and managed care organisations as well investigating and adjudicating complaints.

The CMS have this year further provided input to the White Paper of the National Health Insurance (NHI) and the Competition Commission’s Health Market Inquiry.

Lethutjo outlined some of the main points from this year’s report to be:

-Medical scheme membership: There was a year on year decrease of 0.06% in the total number of medical scheme beneficiaries. “The decrease marks the first negative growth experienced in the medical scheme industry since 2004. The total number of beneficiaries of restricted schemes showed a negative growth of 1.1 % compared to a 0.79% increase in the beneficiaries of open schemes,” stated the CMS.

-Age of beneficiaries: The average age of members underwent a marginal increase, from 32.1 years in 2014 to 32.3 years in 2015. In total the number of male beneficiaries also reported slightly lower than that of female beneficiaries. While the pension ratio increased slightly.

The CMS attributed the stats to loss in membership, as the younger lower risk members tend to be the first to go when a loss in membership is experienced.

-Contribution income and health expenditure: Scheme contributions increased by 8.1 % to R151.6 billion as at December 2015, from R140.2 billion in December 2014. The total gross relevant healthcare expenditure incurred by medical schemes also rose by 8.9 % to R138.9 billion from R127.6 billion in 2014.

-Expenditure on hospitals and specialists: Overall expenditure on healthcare benefits increased by 9.0 %. “Total hospital expenditure by medical schemes comprised 31.7% of the R138.6 billion that medical schemes paid to all healthcare providers in 2015,” added the CMS.

A significant rise was also experienced in the category of medical healthcare specialists, as the amount paid to allied and supplementary specialists increased by 12.65%. This category accounted for 7.2 % of all benefits paid by schemes in 2015.

-Other healthcare expenditure: Expenditure on General practitioners (GP’s) amounted to 6.2 % of healthcare benefits paid. Interestingly though, only 11.5% of the R8.6 billion paid to GP’s in 2015 was paid to those operating in hospital settings. This a further attribution to the pay-out increase of specialists.

“There is a strong negative correlation between the proportion of benefits paid to GP’s and the proportion of benefits paid to GP’s. Medical schemes that have a high proportion of benefits paid to GP’s tend to have a lower proportion of benefits paid to hospitals, while schemes that have a low proportion of benefits paid to GP’s tend to have a higher proportion of benefits paid to hospitals. The results show the importance of primary healthcare interventions in bringing down the high cost associated with hospitalisation,” said the CMS.

Medical technology also recorded the most significant increase in total benefits in 2015. While the amount increased by 41%, this category still just accounted for less than 1% of all benefits paid by schemes in 2015.

Medicines dispensed by pharmacists other than hospitals also saw an increase of 16.1% of total healthcare benefits paid in 2015.

-Healthcare benefits paid from risk pool: With all the increases experienced and reported, healthcare benefits which medical aids covered from their risk pools also increased by 8.53%.

The allocation of these funds largely went to hospital expenditure, expenditure of medicines and medical specialist pay-outs.

-Prescribed Minimum Benefits (PMBs): The total cost of PMBs for medical schemes amounted to R64.2 billion, while the total risk benefits paid in 2015 was R124.7 billion. The expenditure on PMB related healthcare benefits therefore comprised 51% of the total risk benefits paid. While still a significant chunk, this came in under the 52% that was recorded in 2014.

The cost of PMBs is mainly driven by scheme demographic profile, burden of disease and the cost of treatment which is strongly linked to contracting between schemes and providers, explained the CMS.

In the case of non-healthcare expenditure administration costs followed by broker costs constituted the largest chunks. Total non-healthcare expenditure also increased by 1.5% overall.

“Non- healthcare spending has consistently been a key focus for the CMS. Substantially high increases in non-healthcare expenditure which exceeded the rate of increase in contributions were observed between 2000 and 2005. Even though the costs have generally reduced in real terms, there is still high spending in non-health items, such as advertising and marketing, consulting and legal fees and trustee remuneration; which continues to show upward trends and thus require attention.

In recent years, the remuneration of trustees and Principal Officers of medical schemes has also come under the spotlight, with increases being significantly higher than inflation, as well as the expenditure on Annual General meeting (AGM) costs. In the interest of member protection, it is important that such expenditure is associated with a discernible value proposition,” added the CMS.

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