Contribution inflation in Medical Schemes Documents... · Contribution inflation • Contribution...

Contribution inflation in Medical

Schemes

10 August 2016

by Charlton Murove

10 August 2016 1

OverviewI. Inflation & medical inflation as measure by Statistics South Africa

(Stats SA)

II. Contribution inflation in medical schemes

III. Drivers of contribution inflation

IV. Utilisation in 2014 & 2013

V. Contribution inflation measurement (prospective)

VI. Questions

2

Inflation - Stats SA

• CPI – general increases in prices of goods and services

• Rebased after carrying out Income and Expenditure surveys (IES) every five

years (may be reduced to 3 years)

Medical inflation from Stats SA

• Also includes medical inflation basket targeting healthcare goods and services

• Stats SA measures how the general prices of medical services increase from

year to year

• This is regardless of how much if these services are consumed from year to

year

3

Medical inflation - Stats SA

• Medical inflation measures how prices change over time

• The price measured is not affected by how much health services are consumed

• For medical schemes, its important how much health services are consumed

Just calculate the

increase in the price of

one egg. This does not

measure how many

eggs are consumed

over time

4

Medical inflation or contribution inflation• Contributions are used to finance both Medical services & goods and non health-care

expenditure

• It is important to measure how much cost of services change over time and how much

of the services are consumed over time for Medical Schemes

Even when the

price of eggs do

not change you

would need more

cash

5

Contribution inflation

• Contribution increases of medical schemes respond to a number of factors such as:I. General increase in price levels of medical goods and services

II. Increase in use of the medical goods and services (utilisation)

III. General increase in non-healthcare expenditure (NHE)

IV. Reserving requirements

• Industry technical advisory panel (ITAP) formula & work

Medical inflation = tariff increase + utilisation increase

Medical inflation = tariff increase + (demand side component + residual supply side effect)

Medical inflation = tariff increase + (plan-mix effect + residual demographic effect) + residual supply side effect

• ITAP led to the review of data collected by CMS so as to measure medical inflation more accurately

6

Contribution inflationEffect of demographic profile on cost of PMBs

7

-

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

< 1Year

1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85 +

No

of b

enef

icia

ries

Changes in demographic profile from 2005 to 2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


8

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

< 1Year

1-4 5-9 10-1415-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85 +

Pro

port

ion

of b

enef

icia

ries

Beneferciary profile changes from 2005 to 2014

2005 2014

There were significant change with a higher proportion of beneficiaries in the older

ages and an increasing proportion of beneficiaries in younger ages


• The change in beneficiary profile translates to an increase of 8% in the cost of PMBs from 2005 to 2014

9

< 1

Year1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85 +

2014 Cost of PMBs pbpm

1 947 153 79 89 171 286 446 464 481 519 606 735 940 1 242 1 613 1 951 2 156 2 289 2 061

All Beneficiaries in 2005

127 763 420 470 575 877 615 955 600 673 440 336 436 872 569 258 596 517 582 196 508 188 386 104 316 477 222 694 162 136 115 329 81 920 48 340 28 516


270 626 640 610 773 740 672 734 636 933 469 327 638 615 736 123 704 826 689 077 615 338 554 042 447 887 318 886 241 759 173 879 116 995 68 834 44 227

Cost of PMBs pbpm in 2014

582,96 *

Cost of PMBs pbpm in 2005

539,48

*The 2014 PMB cost pbpm is different from previous publication as a sample was beneficiaries was used in those publications


• Cost of PMBs pbpm for 2014 was used to calculate the cost of PMBs using the beneficiary profiles of

the previous years

• If the profile had not changed from 2005, the cost of PMBs would be 8% lower

• In 2014 the effect of change in demographic profile was 0,94%

10

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2006 2007 2008 2009 2010 2011 2012 2013 2014

% c

hang

e

Change in PMB cost over time (by changes in risk profiles)

Annual Change (%) Cumulative Change (%)


• The impact of change in membership profile was mostly on open schemes

• If the profile had not changed from 2005, the cost of PMBs would be 14% lower on open schemes

• In 2014 the effect of change in demographic profile was 0,91% for Open schemes and 0,87% for restricted

schemes.

11

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2006 2007 2008 2009 2010 2011 2012 2013 2014

% c

hang

e

Change in PMB cost over time (by scheme type)

Open Cumulative Change (%) Ristricted Cumulative Change (%)

Contribution inflationEffect of disease burden on cost of CDLs

• The change in disease burden translates to an increase of 19% from 2008

• This calculation is based on the cost of CDLs only

• The calculation excluded the less than 1 year old beneficiaries

• This calculation includes beneficiaries with multiple chronic conditions 12

< 1

Year1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85 +

2014 Cost of CDLs per CDL meeting Entry and Verification Criteria

167 869 7 890 6 089 7 381 11 534 12 754 8 923 6 271 5 574 5 518 5 464 5 309 5 229 5 101 4 896 4 783 4 702 4 464 4 326

CDLs meeting Entry and Verification Criteria as a percentage of beneficiaries in 2008

0,1% 1,7% 2,0% 1,8% 1,8% 2,1% 3,0% 5,7% 10,0% 15,6% 25,6% 36,9% 52,6% 73,8% 93,0% 109,4% 119,2% 117,2% 104,1%

CDLs meeting Entry and Verification Criteria as a percentage of beneficiaries in 2014

0,1% 1,7% 2,3% 2,4% 2,3% 3,0% 4,5% 8,8% 15,2% 23,1% 32,8% 45,3% 59,6% 79,5% 99,7% 115,4% 127,1% 132,0% 121,0%

Cost of CDLs per CDL meeting Entry and Verification Criteria in 2014

6 477

Cost of CDLs per CDL meeting Entry and Verification Criteria in 2008 using 2014 CDL costs and beneficiary profile

5 266


270 626 640 610 773 740 672 734 636 933 469 327 638 615 736 123 704 826 689 077 615 338 554 042 447 887 318 886 241 759 173 879 116 995 68 834 44 227


• Cost of CDLs pbpy for 2014 was used to calculate the cost of CDLs using the chronicity of beneficiaries in

the previous years – adjusted for changes in beneficiaries overtime

• If the chronicity had not changed from 2008, the cost of CDLs would be 19% lower

• In 2014 the effect of change in disease burden was 2,67% for all schemes

13

-5%

0%

5%

10%

15%

20%

25%

2009 2010 2011 2012 2013 2014

% c

hang

e

Change in CDL cost over time (by chronicity)

Annual Change (%) Cumulative Change (%)


• The impact of changes disease burden was higher on restricted schemes

• If the disease burden had not changed from 2008, the cost of CDLs would be 12% lower on open

schemes and 27% lower on restricted schemes

• In 2014 the effect of change in disease burden was 0,64% for open schemes and 5,24% for restricted

schemes

14

0%

5%

10%

15%

20%

25%

30%

35%

2009 2010 2011 2012 2013 2014

% c

hang

e

Change in CDL cost over time (by scheme type)

Open Cumulative Change (%) Ristricted Cumulative Change (%)

Utilisation

Data Collected

15

Data TableFields collected

Option level for financial years 2013 & 2014

Adjustments /

Quality of data

A2No of beneficiaries at the end of each month in the financial

years 2013 and 2014.None / good quality

B1No of visits to the various providers and the total cost of such

visits

None / good quality

Providers

• Consultation code was used to identify each visit

• Providers included GPs, Specialists Supplementary& Allied providers

• Table B1 data was collected by discipline code

UtilisationProviders

16

Category Average Cost “Tariff”

per event

Utilisation

pabpm

Sub-category

Providers

(43,7% of total

benefits paid)

Each visit paid for by the

schemes

No of visits

In-Hospital

&

Out-of-Hospital

• This calculation included benefits paid from Risk and the member savings accounts (MSA)

UtilisationProviders

17

2013 2014 % change pabpm

Providers

Number of visits 68 824 388 71 435 900 2.7%

In-hospital 17 340 663 18 428 527 5.2%

Out-of-hospital 51 483 725 53 007 373 1.9%

Average cost per visit (R) 689.13 744.05 8.0%

In-hospital (R) 1 103.59 1 184.16 7.3%

Out-of-hospital (R) 549.53 591.04 7.6%

• Utilisation of providers increased more for in-hospital visits

Utilisation

18

• A hospital GP visit

costs more than

double an out-of-

hospital visit.

• The assumed

increase in GPs’

tariffs was 6,6%

Utilisation

19

•There is a very

significant increase in

utilisation of medical

technology especially

in-hospital.

•The average cost per

event is also much

higher in-hospital

Utilisation

Data Collected

20



Adjustments /

Quality of data



B2Total amount spend on medicines and consumables outside

hospital and the no of items dispensed

None / good quality

• NAPPI code was used to identify medicines and consumable (first digit of the NAPPI code is less or

equal to 7, product is classified as medicine and the remaining products were classified as Consumables)

• Was also collected by discipline code of the provider dispensing medicines

Medicines

Utilisation

21


per event

Utilisation

pabpm

Sub-category

Medicines

(16,6% of total

benefits paid)

Each item dispensed and

paid for by the schemesNo of items dispensed

Consumables

&

Medicines

Medicines

• This calculation included benefits paid from Risk and the MSA

UtilisationMedicines

22

2013 2014% change

pabpm

Medicines

Number of items dispensed 212 366 520 223 161 203 4.2%

Consumables 14 752 285 15 063 860 1.0%

Medicine 197 614 235 208 097 343 4.2%

Average cost per item dispensed (R) 88.69 92.18 3.9%

Consumables (R) 66.38 72.25 8.8%

Medicine (R) 90.36 93.62 3.6%

• The increase in average cost per item dispensed for medicines was lower compared to consumables

UtilisationData Collected

23



Adjustments /

Quality of data



B3Hospital admission data for beneficiaries: no of admissions,

admission type and no of days spent in hospital

Adjustments to length of

Stay for some options /

reasonable quality

B6Hospital admission data for beneficiaries: no of admissions,

admission type & category and no of days spent in hospital

None / reasonable quality

Hospitalisation

Utilisation

24


per event

Utilisation

pabpm

Sub-category

Hospitalisation

(37,6% of total

benefits paid)

Each hospital admission

paid for by the schemes

Each day spent in-hospital

paid for by the schemes

No of admissions

No of in-patient days per

admission and is not

calculated pabpm

In patient days <24hrs “Short

stay”

&

In patient days >24hrs “Long

stay”

Hospitalisation

UtilisationHospitalisation

25

2013 2014% change

pabpm

Hospitalisation

Number of admissions 2 506 398 2 540 535 0.3%

Day case 756 185 769 764 0.7%

Long stay 1 750 213 1 770 771 0.1%

Average cost per admission (R) 16 606.88 18 331.34 10.4%

Day case (R) 6 545.34 7 213.98 10.2%

Long stay (R) 20 953.99 23 164.12 10.5%

Number of inpatient days 7 494 131 7 904 851 4.1%

Day case 756 185 769 764 0.0%

Long stay 6 737 946 7 135 087 4.7%

Average cost per day (R) 5 554.14 5 891.50 6.1%

Day case (R) 6 545.34 7 213.98 10.2%

Long stay (R) 5 442.90 5 748.82 5.6%

UtilisationHospitalisation - No of admissions per 1 000 beneficiaries (all admissions)

26

0

200

400

600

800

1 000

1 200

Lessthanoneyear

1-4years

5-9years

10-14years

15-19years

20-24years

25-29years

30-34years

35-39years

40-44years

45-49years

50-54years

55-59years

60-64years

65-69years

70-74years

75-79years

80-84years

85years+

Hos

pita

l adm

issi

ons

per

1 00

0 be

nefic

iarie

s

2013 Males 2014 Males 2013 Females 2014 Females

UtilisationHospitalisation – Average Length of Stay per admission (In patient > 24 hours)

27

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

Lessthanoneyear

1-4years

5-9years

10-14years

15-19years

20-24years

25-29years

30-34years

35-39years

40-44years

45-49years

50-54years

55-59years

60-64years

65-69years

70-74years

75-79years

80-84years

85years+

Ave

rage

leng

th o

f sta

y pe

r ad

mis

sion

2013 Males 2014 Males 2013 Females 2014 Females

Utilisationmajor take-away

I. no of admissions increased marginally while length of stay increased at 4%

I. (it would be more helpful to unpack utilisation in hospital more)

II. utilisation of providers increased most in-hospital 5,2% compared to 1,9% out-of-

hospital

III. average cost per event is higher in hospital for a number of disciplines

IV. the increase in average cost of medicines was 3,6% - probably due to single exit price

and use of generics

28

Contribution increase measurementContribution allocation in Medical schemes

29

Non Healthcare Expenditure Medicines

Providers &Hospitalisation

Need to determine:

• What proportion of

contributions goes

towards NHE & HC

costs?

• How does NHE &

HCE increase over

time?

• How does the

utilisation of HC

change over time?

Contribution inflation measurement

• Assumptions / objectives

1. By analysing the industry wide revenue account of medical schemes – one has in

actual fact considered all drivers of contribution increases (tariff +utilisation)

2. Understanding and measuring utilisation does not require us to determine how

much each individual component of utilisation contributes – over time with more

data this maybe possible

• The following method is a mirror of contribution assumptions methodology; it does not

specify how each individual component of utilisation contributes to total contribution

inflation

30

Contribution inflation measurement

• Actual expenditure is used – true reflection of how contributions are spent

• Basket of items is rebalanced every year

• Utilisation trends would be easily calculated from the data

• For years 2014 and 2015, total healthcare expenditure can be analysed by

age – we can accurately determine the demographic component

Actual increase in contributions

32

All Schemes

Weight in

Index

Tariff

(cost per event)

Utilisation

(no of events pabpm)

Overall

Increase

2013 2 013 2 014 % Change 2013 2014 % Change

Non

Hea

lth-C

are

Exp

endi

ture

Administration Expenditure 7,84% 12 932,55 13 810,05 6,79% - - - 6,79%

Managed Care 2,68% 4 412,06 4 711,41 6,78% - - - 6,78%

Brokerage 1,33% 2 186,76 2 347,33 7,34% - - - 7,34%

Other Expenditure -2,78% -4 588,60 -4 757,50 3,68% - - - 3,68%

Sub-Total 9,06% 7,82% - - - 7,82%

Hea

lth-C

are

Exp

endi

ture Day Admission 4,17% 6 545,54 7 214,21 10,22% 1,051 1,057 0,60% 10,87%

Long Stay Admission 30,92% 5 437,57 5 741,91 5,60% 9,373 9,811 4,67% 10,53%

Medicines 15,05% 90,44 93,63 3,53% 274,422 285,736 4,12% 7,80%

Consumables / Medicines 0,82% 66,40 72,26 8,82% 20,481 20,684 0,99% 9,90%

Providers In-Hospital 16,13% 1 103,91 1 184,19 7,27% 24,089 25,306 5,05% 12,69%

Providers Out-of-Hospital 23,84% 549,34 590,93 7,57% 71,545 72,803 1,76% 9,46%

Sub-Total 90,94% 6,31% 3,66% 10,19%

Grand Total 100,00% 6,45% 3,33% 9,98%

NHE was

assumed to

increase at

6,1% in

2014

Assumed

Utilisation

increase was

2,3% &

overall

increase was

9,2%

SEP was 5,8% for

2014


Contribution increase including NHE

• In 2014 tariff increase = 6,45%

• In 2014 utilisation increase = 3,33%

Increases in Healthcare Expenditure (excluding NHE)



• Effect of demographic change (2014) = 0,94%

• Effect on increasing disease burden (2014) = 2,67%

• Unexplained utilisation (2014) = 0,05%

All Schemes summary

This assumes the effect

of demographic &

disease burden for total

healthcare is similar to

PMB experience

Actual increase in contributions Open Schemes

34

Open Schemes

Weight in

Index

Tariff

(cost per event)

Utilisation


Overall

Increase

2013 2 013 2 014 % Change 2013 2014 % Change

Non

Hea

lth-C

are

Exp

endi

ture


Managed Care 2,74% 4 812,26 5 075,67 5,47% - - - 5,47%

Brokerage 2,17% 3 809,99 4 066,59 6,73% - - - 6,73%

Other Expenditure -2,28% -4 001,83 -4 676,49 16,86% - - - 16,86%

Sub-Total 11,87% 3,44% - 3,44%

Hea

lth-C

are

Exp

endi

ture Day Admission 4,41% 6 443,88 7 281,14 12,99% 1,204 1,214 0,82% 13,92%


Medicines 13,75% 115,59 111,55 -3,50% 209,183 232,647 11,22% 7,33%

Consumables / Medicines 0,76% 81,89 81,71 -0,21% 16,227 17,054 5,09% 4,87%



Sub-Total 88,13% 4,47% 5,20% 9,78%

Grand Total 100,00% 4,34% 4,58% 9,03%










• Unexplained utilisation (2014) = 3,65%

Open Schemes summary


of demographic &



PMB experience

Actual Increase in ContributionsRestricted Schemes

36

Restricted Schemes

Weight in

Index

Tariff

(cost per event)

Utilisation


Overall

Increase

2013 2 013 2 014 % Change 2013 2014 % Change

Non

Hea

lth-C

are

Exp

endi

ture


Managed Care 2,59% 3 919,15 4 257,63 8,64% - - - 8,64%

Brokerage 0,12% 187,50 205,60 9,65% - - - 9,65%

Other Expenditure -3,51% -5 311,30 -4 858,42 -8,53% - - - -8,53%

Sub-Total 5,04% 21,57% - 21,57%

Hea

lth-C

are

Exp

endi

ture

Day Admission 3,83% 6 720,30 7 096,86 5,60% 0,862 0,862 -0,03% 5,57%


Medicines 16,92% 72,18 78,88 9,28% 354,774 351,871 -0,82% 8,39%

Consumables / Medicines 0,92% 54,37 64,29 18,26% 25,721 25,206 -2,00% 15,89%



Sub-Total 94,96% 8,17% 2,34% 10,68%

Grand Total 100,00% 8,84% 2,22% 11,23%










• Unexplained utilisation (2014) = -3,77%

Restricted Schemes summary


of demographic &



PMB experience

Conclusion

• The objective is to have a way of understanding and measuring proponents of

contribution increases

• Its important that this is measured for all schemes and is based on data that is

readily available

• The proposed method may be improved to in cooperate other details

/indicators and we would be keen to work with stakeholders on this

• Contribution inflation and what drives it has been very topical and there are

many views of what is driving it – let's work towards telling one story based on

global evidence and what is measurable

38

Questions

39

Thank You

40

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