While prescribed minimum benefits (PMBs) have presented the advantage of helping to ensure a minimum level of cover for medical scheme members, they have also had some less positive, and quite unintended, consequences for the healthcare funding industry that are important to consider. One of the more significant consequences is that PMBs have made it extremely difficult for medical schemes to curtail healthcare costs within reasonable limits.
This is the view of Mark Arnold, principal officer of Resolution Health Medical Scheme. “PMBs were originally intended to form part of a broader risk pooling exercise, which unfortunately never materialised. As a result, we are now left with only one piece of a broader strategy, leading to escalating costs throughout the healthcare industry to the detriment of medical schemes and their members,” adds Arnold.
“One consequence has been that even the cheapest benefit packages provided by medical schemes put private healthcare insurance out of reach for most South Africans before even covering any additional benefits.”
Arnold says that setup of a task team by the Council of Medical Schemes (CMS) back in 2006 to investigate how a low income medical scheme option could be established using a different set of PMBs for low-income members failed to gain a foothold, and this has inevitably had consequences for the industry.
“The strategy proposed by the task team included various principles to curb costs and ensure more affordable healthcare funding models as part of the previously envisaged Social Health Insurance [SHI] model. Principles included the introduction of PMBs, cross subsidisation of PMB benefits via the Risk Equalisation Fund, as well as mandatory cover for all formally employed citizens.
“We believe that under a scenario such as this, medical scheme coverage could have been extended to approximately 15 million lives, from the current figure of approximately 9.5 million, immediately relieving the burden on the state, while ensuring more affordable cover to formally employed individuals.
“The situation has been exacerbated due to the pricing of PMBs not being regulated. Some providers are charging as much as 500 percent or more than the recommended tariffs for PMBs because they know that the schemes are legally compelled to cover them.
“Providers are consequently not willing to contract at lower tariffs and are able to charge high fees because of a shortage of, and great demand for, their specialised skills. In effect, the current hospital-centric structure and rampant commercialisation in the private health sector continue to significantly contribute to driving up costs and healthcare inflation,” notes Arnold.
“We at Resolution Health believe that there is a need for greater emphasis on a primary care-focused model in the private sector. For example, medical scheme members should be channelled through general practitioners instead of going directly to specialists, as many continue to do. However, the PMBs in their current form discourage such behaviour, and instead tend to encourage hospitalisations.
“This situation is exacerbated due to very few private patients using state sector hospitals as a treatment option, as is the case in most developed countries. In addition, the competitive nature of the private healthcare environment further aggravates the situation, thereby making it most difficult for schemes to peg back costs.”
In Arnold’s view, what is needed is a regulatory model that places all medical schemes on an equal footing so that schemes can reward GPs for quality outcomes. This would ensure that care is significantly improved.
“Implementing a patient-centred healthcare system where schemes’ funds are freed up to cover more preventative care, such as regular diagnostic tests and health screenings, would ensure that members require less hospitalisation. Schemes could still provide continuous care to members with fewer PMBs, or at least have the tariffs regulated for PMBs within specified limits.
“A two-tiered PMB structure, with a shorter, more primary care-orientated list of PMBs for lower income earners, could assist medical schemes in providing more affordable healthcare coverage to those who previously could not access it.”
Arnold says that a large part of the problem came about when the PMB concept was implemented but the National Health Reference Price List (NHRPL), which aimed to institute associated provider pricing ceilings, was scrapped by a High Court ruling in 2008.
“We still urgently need a framework within which funders, as an industry, can negotiate and agree on tariff structures with health service providers. This will assist in controlling the rising costs associated with PMBs and make the funding industry more sustainable.
“If medical schemes are to pay for all PMB treatments and medications, it is important for schemes to be able to influence the costs of this by agreeing to an upfront reference price list with hospital groups and healthcare specialists,” concludes Arnold.