Issue 9 February - May 2002by Gary Taylor

Just as employers are contemplating payroll increases of 7%–8% in 2002, they are hearing murmurs of medical aid scheme increases in the region of 12%–18%. Nine South African medical aid schemes already had interim increases during 2001. This has major repercussions to companies offering standard healthcare benefits to their employees. Traders asked Gary Taylor, MD: Group Services Division of Medscheme what corporates could do to contain this expenditure, and if there was light at the end of the “cost-spiral tunnel”?

Various underlying factors can be sited for rising costs in medical cover the world over. These include:

1. Invention of exciting but expensive new technologies and treatments
2. New diseases (eg AIDS)
3. More cases of old diseases (eg depression)
4. Demand for specialists
5. Modern lifestyles (stress, poor eating/drinking/exercise habits)
6. Wrong incentives in medical aid (eg doctors get richer when patients are sicker)
7. Fraud and abuse (by doctors, patients or both)
8. Aging population (on average, we live 9 years longer than our parents did)
9. Weak currency exchange rate (most medical equipment has to be imported in foreign currency).

Anyone who offers glib solutions to the above challenges is naive at best. Every healthcare system in the world must offer quality of care, affordability of premiums and good access to facilities if they are to attract business. Yet, in the face of the above basic obstacles, these objectives are proving extremely challenging. This is even more the case in Africa where pandemic diseases such as HIV/AIDS, Tuberculosis and Malaria are having a major impact on its trained and productive workforce, affecting not only the individual companies who employ these people, but the economies of Africa at large.

What the client should do to minimise premium increases
Clients can play an important role in minimising premium increases by, for one, ensuring that their service provider is incentivising administrators to recover fraudulent payouts. In addition, a culture of avoiding unnecessary expenditure should be cultivated within the company, encouraging employees, for instance, to avoid visiting a doctor for treatment that a nurse could handle just as well. When it comes to HIV/AIDS, the importance of employee education programmes should not be underestimated. Many companies are still reluctant to minimise or halt production for such initiatives, questioning the ability of these programmes to change their employee’s behavior patterns in any way. Our experience has shown however that programmes of this nature that provide insight into healthly eating habits etc can have a profound effect on the length of time even HIV positive employees remain productive. This saves both the company and the country a great deal on money in the long term.

What we are doing
In response to HIV/AIDS and its impact on healthcare in sub-Saharan Africa, Medscheme has pioneered the world’s largest private sector AIDS Benefit Management Programme called Aid for AIDS. (See Traders Journal, issue 8 for further information on this programme). Essentially, Aid for Aids ensures the appropriate use of cost-effective medication by patients in order to keep them out of hospital, well and working. Results have been impressive. Mother-to-child transmission in South Africa has been reduced from the average untreated instance of 30% to less than 3%. The savings in future costs, let alone the alleviation of human suffering, appears to make this programme a very sound investment. Several large companies such as Anglo American and Daimler Chrysler in South Africa have extended similar benefits to all employees not covered by medical aid.

The programme’s clinical protocols were endorsed by the AIDS Clinicians Society and proud recognition was received when it was the only one of its kind invited to present results at the International AIDS Conference in Durban last year. Based on its South African successes, US AIDS has given its support for the introduction of Aid for AIDS into Botswana later this year.

“While AIDS is no doubt a serious health and cost issue for the sub-continent, the good news is that it can be managed,” says Bafana Nkosi, Principal Officer of 750 000 beneficiaries in the Bonitas Medical Fund. “Even more encouraging are the announcements by socially-responsible pharmaceutical companies of substantial decreases in the cost of drugs, making treatment viable, at least for the economically active,” he says.

But what else can be done to contain the general costs of medical aid? The single most substantial and meaningful range of solutions available at present lies in what is loosely termed “managed healthcare” (reference Traders issue 8 for more information). Managed Healthcare can be defined as a suite of integrated intervention programmes for identifying and managing clinical risk. Put simply, it allows one to interfere in the current unbridled freedom of doctors and patients to do what they want, and then bill the medical aid scheme.

Managed healthcare is however no simple task. There are those still bruised from the application of imported USA models in the mid-1990s who might argue that it does not work. This is however not the case. All the examples of the mid-90s show is that we could not make it work! If we accept the adage that around one third of all treatments charged for are not clinically essential, the challenge must be to identify that wastage and pay for only the cost-effective, appropriate treatments. This is managed healthcare. Some examples of the system are already showing promising results in South Africa:

• Capitation systems (such as offered by Prime Cure and others) whereby patients are required to go to a single one-stop supplier. Premiums can be as low as R295 per month

• Optical benefit management, where unnecessary profiteering from designer frames ensures a savings of R250 per intervention

• Dental benefit management, whereby rules-based systems alone prevent billing abuse which often bypasses the untrained scrutiny of even the vigilant patient

• GP profiling which uses sophisticated data warehouse statistical reports to point out to GPs where they are practising outside of general cost norms.

• Chronic medicine authorisations, which substitute more cost-effective drugs for brand names, particularly on high-ticket treatments, saving R680 per intervention

• Hospital account management and tariff restructuring to prevent padding and reward optimum patient management

• AIDS and other disease-management programmes which provide not only cheaper drugs, but cost-effective protocols to keep employees healthy and employed

• Performance-based reimbursement for doctors, who can now get paid more if they reduce the cost of prescriptions and unnecessary referrals to specialists.

Savings being proven by some schemes are very promising. Given the underlying causes of healthcare inflation mentioned at the beginning of this article however, it is still a tough job to get premium increases near to Consumer Price Idex (CPI). Only through a combination of financial and clinical risk management can medical aid payouts be reduced (without compromising quality).

Conclusion
Capping the risk, or even converting to cost-to-company packages, simply seeks to avoid, rather than manage the risk. Legislation (as well as the practical imperatives) will force us to manage rather than avoid the inevitable risks. The co-operation of all stakeholders will be essential in this process.

Solutions for SADC
In the light of increasing co-operation between SADC countries, South African based Medscheme has expanded to Namibia, Botswana, Swaziland and Zimbabwe, as well as Mauritius. “We have been careful to avoid the trap of believing that the South African way is the right way for other SADC countries”, says Medscheme CEO, Anton Roux. “What we can offer is 30 years experience in healthcare funding in a developing country, as well as world-class administration systems”.

Medscheme’s operating methodology is to enter into partnership agreements with a strong local player who is keen to take the lead in interpreting the needs of the local market, and running the business in that country. This formula best allows both parties to bring their respective strengths to the partnership. Many employers in the region are looking for healthcare solutions, which span national boundaries, and Medscheme’s expansion efforts are facilitating this for these employer groups.

Author's Contact Details
Author: Gary Taylor
Tel: +27 11 510 2714
Fax: +27 11 463 6299
Email: garyt@medscheme.co.za