The Costing of Prescribed Minimum Benefits

Centre for Actuarial Research

The Costing ofPrescribed Minimum

Benefits

January 2003

Centre forActuarial Research

PMB Study Data

Data from Medscheme Data Warehouse Data covers 2001 calendar year, extracted in July 2002 Data fully run-off, no adjustment for IBNR 90 options 31 schemes 18.071 million beneficiary months of data Average exposure of 1,505,917 beneficiaries


Cluster Analysis and Applicability to

the Industry


Cluster Analysis Different clusters experience different benefit utilisation,

costs and disease profiles. Provider behaviour differs by cluster, even within the same hospital facility.

Four distinct clusters: High contains options with older, 'whiter' members with

high utilisation; Medium-older contains options with medium utilisation

and older members; Medium-younger contains options with medium

utilisation and younger members; and Low contains options with younger, 'blacker' members

with low utilisation.


Cluster Analysis

8.8%

9.6%

10.1%

71.6%

High

Medium-older

Medium-younger

Low


Cluster Analysis Study contains more Low cluster beneficiaries than the

industry. For industry comparisons, use Weighted industry price.

This uses 50% of the costs of the Low cluster and 100% of the other clusters.

Low cluster is more relevant to the emerging low-cost option environment.

High cluster is used to give an upper limit to the PMB price. Would only be applicable to a few high utilisation options.


Cost of PMBs


Claim Value by Status


55.1%

12.8%

32.1% Included

Not Classif iable

Out



Proportion of Total Cost of PMBs by Disease Chapter


CNS9.5%

Eye3.9%

ENT1.6%

Respiratory10.5%

Cardiac12.8%

GIT12.2%

HSP3.2%

MS/Trauma6.3%

Skin/Breast3.4%

Endocrine2.2%

Genitourinary2.7%

Gynaecology4.5%

Obstetrics - Neonate17.3%

Mental Illness3.2%

Other2.6%

Haem-Infect3.9%



Average Cost of PMBs by Disease Chapter

R 0

R 2,000

R 4,000

R 6,000

R 8,000

R 10,000

R 12,000

R 14,000

R 16,000

R 18,000

R 20,000

CN

S

Eye

ENT

Res

pira

tory

Car

diac GIT

HS

P

MS

/Tra

uma

Ski

n/B

reas

t

Endo

crin

e

Gen

itour

inar

y

Gyn

aeco

logy

Obs

tetr

ics

- N

eona

te

Hae

m-In

fect

Men

tal I

llnes

s

Oth

er

Tota

l

Av

era

ge

Co

st



Cost of PMBs by Age


Incidence All Ages

Incidence of PMB Admissions by Age

97.6850

0

50

100

150

200

250

300

350

400

450

0-1

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

+

All

ag

es

Inc

ide

nc

e

0

50

100

150

200

250

300

350

400

450

0-1

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

+

All

ag

es

Inc

ide

nc

e


Average Cost of PMBs by Age


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

0-1

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

+

All

ag

es

Av

era

ge

Co

st

R9 127

Average Cost for All

Ages


Raw PMB Price by Age (pbpa)


R 891.56 pbpa

Average Price for All

Ages

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

R 3,000

R 3,500

R 4,000

R 4,500

R 5,0000

-1

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

+

All

ag

es


R 0

R 1,000

R 2,000

R 3,000

R 4,000

R 5,000

R 6,000

0-1

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75+

TotalHighMedium-olderMedium-youngerLow

Raw PMB Price by Age and Cluster (pbpa)



Adjustments to the Raw Price of the

PMB Package


Adjustments to Raw Price Uncertainty in Definition of the PMB Package

Recoding the OUT Group Recoding the NC Group

Costs of hospital management programme Costs of hospital and related claims administration Costs of chemotherapy and dialysis Costs related to HIV/AIDS Estimate of the cost of ambulatory care Costs of ambulatory administration Reduction for cost of delivery in the public sector


Full Price of PMB Package

Four components : In-patient PMB package price based on full data in

study (high degree of certainty) Portion of price for which uncertainty exists in PMB

definition (proportion to include of NC and OUT) Margin added for ambulatory costs Non-healthcare costs.

Note: Prices should not be used blindly in pricing work. Contact a professional for assistance.


Full Price of PMBs (excl CDL)

R 0.00

R 500.00

R 1,000.00

R 1,500.00

R 2,000.00

R 2,500.00

High Medium-older

Medium-Younger

High andMedium

Low TotalStudy

WeightedTotal

Per

Ben

efi

cia

ry P

er

An

nu

m

Non-healthcare costsAmbulatory packageUncertainty in PMB definitionIn-patient PMB package

R1 343.43

R1 479.04

R2 432.41

R1 100.08

R2 010.90

R1 489.49

R1 956.01



Conclusions


Improvements to PMB Definition

All stakeholders need an unambiguous definition of the PMB package.

The Council for Medical Schemes is requested to reconsider the definition of PMBs in the Regulations and to include clear diagnosis and procedure codes in an amendment as soon as possible.

Tighter definition of PMBs would ensure more focussed attention on accurate coding from providers and administrators.

Attention should be given to the nature of the chapters and to bringing them in line with clinical practice or a particular coding standard.


Comprehensive Crosswalk

Provides a powerful tool for rapid application of PMB status to hospital admissions based on ICD-10 coding

Strongly recommend that this should be made freely available to other medical schemes and administrators, in order to improve their understanding and management of PMBs.

Recommend utilising this tool, or one developed from this work, to define and manage the PMB package in future.


The Costing of the Chronic Disease

List

January 2003


Registration of Beneficiaries for Chronic Medicine

Other Chronic Conditions

22.9%

CDL Conditions

77.1%


Diabetes Mellitus Type 1 & 210.6%

Epilepsy2.6%

Asthma12.2%

Osteoarthritis3.4%

Other 18 conditions7.6%

Anti-Coagulating Therapy

4.9%

Hypothyroidism5.1%

Hyperlipidaemia12.5%

Hypertension37.3%

Coronary Artery Disease

3.8%

Prevalence of CDL Registrations



Beneficiaries Registered for CDL Conditions

1 disease62.5%

2 diseases25.0%

3 diseases9.2%

4 or more diseases

3.3%


Cost of Each CDL Condition


Average Cost per Case


0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000

Addison's DiseaseAnti-Coagulating

AsthmaBipolar Mood Disorder

BronchiectasisCardiac Failure

CardiomyopathyChronic Obs. Pulmon.

Chronic Renal DiseaseCoronary ArteryCrohn's Disease

Cushing's DiseaseDiabetes Insipidus

Diabetes Mellitus T1&2Dysrhythmias

EpilepsyGlaucoma

HyperlipidaemiaHypertension

HypothyroidismMultiple Sclerosis

OsteoarthritisParkinson's DiseaseRheumatoid Arthritis

SchizophreniaSystemic LupusUlcerative colitis

Total excl. Hemophilia

Average Cost per case

Primary Drugs Secondary Chronic Drugs Other Acute

no cases

R21 013

Single diseases only



Average Cost per Case

Centre forActuarial ResearchMultiple diseases

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

Diabetes, Hypertension

Hyperlipid., Hypertension

Hypertension, Osteoarthritis

Hypertension, Hypothyroid.

Asthma; Hypertension

Anti-Coag, Hypertension

Anti-Coag., Hyperlipid., Hyperten.

Diabetes, Hyperlipid., Hyperten.

Coronary Artery, Hyperlipid.

Top 9 Multiple Diseases

Other Multiple Diseases

All Single Diseases

All CDL Diseases

Average Cost per case

Primary Drugs Secondary Chronic Drugs Other Acute


0.3116.94

0.32

0.260.100.49

0.600.07

4.980.43

2.570.44

3.81

2.46

1.630.11

0.860.150.090.19

6.574.43

2.191.491.84

1.281.071.160.83

0.02

0.01

0.03

0.00

0.02

29.88

0 5 10 15 20 25 30

Addison's DiseaseAnti-Coagulating Therapy

AsthmaBipolar Mood Disorder

BronchiectasisCardiac Failure

CardiomyopathyChronic Obs. Pulmon. Disease

Chronic Renal DiseaseCoronary Artery Disease

Crohn's DiseaseDiabetes Insipidus

Diabetes Mellitus T1&2Dysrhythmias

EpilepsyGlaucoma

HyperlipidaemiaHypertension

HypothyroidismMultiple Sclerosis

OsteoarthritisParkinson's DiseaseRheumatoid Arthritis

SchizophreniaSystemic Lupus Erythromatosis

Ulcerative colitisDiabetes, Hypertension

Hyperlipid., HypertensionHypertension, OsteoarthritisHypertension, Hypothyroid.

Asthma; HypertensionAnti-Coag, Hypertension

Anti-Coag., Hyperlipid., Hyperten.Diabetes, Hyperlipid., Hyperten.

Coronary Artery, Hyperlipid.

Incidence per 1000 beneficiaries

Prevalence All

Diseases


CDL Package by Age


Age of Claiming Beneficiariesfor Selected Diseases

0%

2%

4%

6%

8%

10%

12%

14%

0-1

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

Pro

po

rtio

n o

f C

laim

ing

Ben

efic

iari

es

Asthma Hypertension Diabetes Mellitus T1&2

Diabetes, Hypertension Other CDL diseases



CDL Prevalence by Age

0

100

200

300

400

500

6000-

1

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

All

age

s

Pre

vale

nce

pe

r 10

00

ben

efic

iari

es


Average Cost of CDL by Age

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,0000

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

All

Age

s

Ave

rag

e C

os

t p

er c

ase

pa


Raw Price of CDL by Age

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

0

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

All

Age

s

Pri

ce

pe

r b

en

efi

cia

ry p

a


CDL Package by Cluster


Raw Price by Cluster

0

100

200

300

400

500

600

700

800

900

1000

High Medium-older

Medium-younger

High andMedium

Additional Low Total

Pri

ce p

er b

enef

icia

ry p

a

All Single Diseases Top 9 Multiple Diseases Other Multiple Diseases


Raw Price High vs. Low Cluster


0

500

1,000

1,500

2,000

2,500

3,000

0

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

Pri

ce

pe

r b

en

efi

cia

ry p

a

Total High Low


Differences Between Clusters

Age profile differences explain roughly two-thirds of difference in raw cluster prices.

Other differences are probably due to a combination of “the four P’s”: variation in Prevalence rates of important conditions; Presentation or manifestation of conditions; Provider choice (GP vs. specialist and the

management or prescribing habits of each); and benefits available within the health care Plan.


Adjustments to the Raw Price of the

CDL Package


Adjustments to Raw Price

Haemophilia Removal of three diseases from final Regulations Cost of diagnosis and medical management Adjustment for compliance Adjustment for limits Adjustment for co-payments Costs of chronic medicine management programme Costs of administration Reduction for cost of delivery in the public sector


Full Price of the CDL Package


Full Price of CDL Package

Four components: Medicine component, based on full data in study (high

degree of certainty) Portion of price for which uncertainty exists until

package is fully defined and allowance for impact of package being mandatory

Amount added for medical management costs Non-healthcare costs.

Note: Prices should not be used blindly in pricing work. Contact a professional for assistance.


Full Price CDL Package

R 0

R 250

R 500

R 750

R 1,000

R 1,250

R 1,500

High Medium-older

Medium-Younger

High andMedium

Low Additional TotalStudy

WeightedTotal

Pe

r B

en

efi

cia

ry P

er

An

nu

m

Non-healthcare costs

Medical management est.

Uncertainty in CDL

CDL Medicine Package


Conclusions


Price in Mandatory Environment

Expect change in member and provider behaviour from existing environment.

Uncertainty exists in price until package is fully defined. Have included an effective 30% margin on medicine

component of CDL package. Consortium opinion that collective margin of 30% on

medicine component is sufficiently conservative to cover this uncertainty in the pricing.


Need for Mandatory Package

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,5000

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

All

Age

s

Pri

ce

pe

r b

en

efi

cia

ry p

a

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,5000

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

All

Age

s

Pri

ce

pe

r b

en

efi

cia

ry p

a

Community rated price


Need for Mandatory Package

Real danger that open schemes will pursue more aggressive self-seeking behaviour and limit chronic medicine benefits to discourage older members and improve their community rate relative to their competitors.

Substantial broker activity and churning of members worsens this incentive.

A mandatory minimum package of chronic medicine and management benefits is essential for reducing opportunistic behaviour by some schemes.


Further Policy Issues

Membership of medical schemes needs to be compulsory, rather than voluntary, for medium to higher income groups to stabilise the system.

A risk equalisation system between medical schemes, based on the Prescribed Minimum Benefit package will reduce the opportunistic profiting from risk selection still further.


Composition of the CDL List

Brief did not extend to consider diseases outside of the draft list and whether any should have been included.

Need for a process of chronic disease prioritisation in medical schemes in order to inform the rationing process in future.


Definition of CDL Package

Draft of Treatment Guidelines for Chronic Disease List Conditions

Based on Standard Treatment Guidelines and Essential Drugs List published by DoH in 1998.

Appoint task team for documenting and maintaining treatment algorithms for CDL conditions.

Actuarial and pricing expertise to estimate the price of the algorithms. Iterative process of refining algorithms.

Project manager to ensure process completed in time for pricing in August 2003 if implementation is 1 January 2004.


Complementary and Traditional Medicine

Serious concerns about the implications of legislating the algorithms for CDL conditions.

Only one approach to treatment will receive funding from medical schemes: entrenchment of an allopathic approach to treatment, largely based on drug interventions.

Hard won legal freedoms to operate must not be negated by preventing funding of complementary medicine and African traditional medicine for CDL conditions.

Allied Health Professions Council with 11 modalities. Consumers will increasingly question health plans. Inclusion unlikely to be simple and debate will be vigorous.


The Impact of PMBs on Affordability

January 2003


Approach to Affordability

Compare price of components of PMB package to reported benefits and contributions of medical schemes. Industry level Scheme level Option level

Compare price of PMB package to published contribution tables for open scheme options. Focus on low-cost options.

Compare price of PMB package to income levels of existing members and potential members of medical schemes. Impact of employer and per capita subsidies.


Price of the PMB Package


Price of Complete PMB Package

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

R 3,000

R 3,500

R 4,000

High Medium-older

Medium-Younger

High andMedium

Low TotalStudy

WeightedTotal

Pe

r B

en

efi

cia

ry P

er

An

nu

mNon-healthcare costsCDL Medicine PackageAmbulatory PMB packageInpatient PMB package


Private Sector PMB Packageper beneficiary per annum

Price pbpa in 2001 Rand terms

HighHigh and Medium

Low Total StudyWeighted Industry

Inpatient PMB package R 1,994.95 R 1,591.46 R 867.47 R 1,073.31 R 1,188.01

Ambulatory PMB package R 477.24 R 416.72 R 308.12 R 339.00 R 356.20

CDL Medicine Package R 1,154.35 R 805.33 R 286.33 R 421.58 R 499.09

Non-healthcare costs R 170.96 R 141.97 R 89.55 R 104.82 R 113.47

Complete PMB package Private Sector

R 3,797.50 R 2,955.48 R 1,551.47 R 1,938.71 R 2,156.78


Non-Healthcare Expenditure on PMB Package

Non-healthcare Expenditure as a Proportion of …

HighMedium-

olderMedium-Younger

High and Medium

LowTotal Study

Weighted Total

Total Inpatient package 3.9% 4.0% 5.0% 4.3% 5.4% 4.9% 4.7%

Total Outpatient package 2.3% 2.3% 2.7% 2.4% 2.7% 2.6% 2.5%

Total CDL package 5.9% 6.8% 6.8% 6.4% 7.8% 7.3% 7.2%

Complete PMB package 4.5% 4.7% 5.4% 4.8% 5.8% 5.4% 5.3%

Well below Registrar’s benchmark of 10% of total expenditure


R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

R 3,000

R 3,500

R 4,000

High Medium-older

Medium-Younger

High andMedium

Low TotalStudy

WeightedTotal

Pe

r B

en

efi

cia

ry P

er

An

nu

mPrivate sector costTotal CDL packageTotal Outpatient packageTotal Inpatient package

Public Sector Complete PMB Package


Public Sector PMB Packageper beneficiary per annum

Price pbpa in 2001 Rand terms

HighHigh and Medium


Total Inpatient package R 1,465.44 R 1,173.53 R 648.89 R 798.05 R 881.17

Total Outpatient package R 251.27 R 207.78 R 129.64 R 151.85 R 164.23

Total CDL package R 708.76 R 520.56 R 237.08 R 311.83 R 354.66

Complete PMB package Public Sector

R 2,425.48 R 1,901.87 R 1,015.61 R 1,261.73 R 1,400.07


Price of PMB Package by Age

0

2,000

4,000

6,000

8,000

10,000

12,000

0

1-4

5-9

10-1

4

15-1

9

20-2

4

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

65-6

9

70-7

4

75-7

9

80-8

4

85+

Mis

sing

All

ages

Pri

ce p

bp

a

Total CDL package

Total Outpatient package

Total Inpatient package

Complete PMB packagePublic sector


Price of PMB Package by Age

Note that for all age bands over 40, the PMB price by age exceeds the community-rated PMB price.

This explains the incentive open schemes have to attract and retain younger and healthier members.


Complete PMB Packagefor family of four per month

Price per family per month (2001 Rands)

HighHigh and Medium


Total Inpatient package R 556.37 R 466.84 R 291.98 R 345.27 R 373.29

Total Outpatient package R 98.28 R 84.98 R 59.00 R 66.93 R 71.09

Toal CDL package R 338.95 R 259.47 R 138.33 R 176.00 R 195.94

Complete PMB package Private Sector

R 993.59 R 811.28 R 489.31 R 588.19 R 640.33

Complete PMB package Public Sector

R 638.26 R 525.01 R 321.15 R 383.75 R 416.76


Affordability Relative to Reported

Benefits and Contributions


Beneficiaries 2001

Open Schemes67.9%

Restricted Schemes

28.3%

Bargaining Council

Schemes3.8%

Source : Registrar’s Returns 2001


Total Benefits


1,462

2,043

3,627

4,4884,833 4,591

R 0

R 500

R 1,000

R 1,500

R 2,000

R 2,500

R 3,000

R 3,500

R 4,000

R 4,500

R 5,000

PM

B L

owC

lust

er

PM

B In

dust

ryW

eigh

ted

PM

B H

igh

Clu

ster

Ope

n S

chem

es

Res

tric

ted

Sch

emes

All

Reg

iste

red

Sch

emes

Pe

r B

en

efi

cia

ry p

er

An

nu

m




Total Contributions


4,877 5,192 4,971

599433

549

1,551

2,157

3,798

R 0

R 1,000

R 2,000

R 3,000

R 4,000

R 5,000

R 6,000

PM

B L

owC

lust

er

PM

B In

dust

ryW

eigh

ted

PM

B H

igh

Clu

ster

Ope

n S

chem

es

Res

tric

ted

Sch

emes

All

Reg

iste

red

Sch

emes

Pe

r B

en

efi

cia

ry p

er

An

nu

m

Savings Contributions

Pooled Contributions




Non-Healthcare Expenditure

752

496

676

--

-

169

110

11390171

5

R 0

R 100

R 200

R 300

R 400

R 500

R 600

R 700

R 800

R 900

R 1,000

PM

B L

ow

Clu

ste

r

PM

B I

nd

ust

ry

We

igh

ted

PM

B H

igh

Clu

ste

r

Op

en

Sch

em

es

Re

stric

ted

Sch

em

es

All

Re

gis

tere

d

Sch

em

es

Per

Be

nef

icia

ry p

er A

nn

um

Other Non-Healthcare

Administration and Managed Care921

501

786




Public Sector


1,551

2,157

3,798

5,475 5,625 5,520

1,400

2,425

R 0

R 1,000

R 2,000

R 3,000

R 4,000

R 5,000

R 6,000

PM

B L

ow

Clu

ste

r

PM

B I

nd

ust

ry

We

igh

ted

PM

B H

igh

Clu

ste

r

Op

en

Sch

em

es

Re

stric

ted

Sch

em

es

All

Re

gis

tere

d

Sch

em

es

Per

Be

nef

icia

ry p

er A

nn

um

Private Sector

Public Sector

1,016




Total Benefits pbpm by Scheme 2000

21

26

32

26

23

51

29

99

128

42

187

87

344

203

36

40

10

76

501

205

335

0 100 200 300 400 500

Clothing Industry Health Care Fund (Cape Town)

Clothing Industry Medical Benefit Scheme (FS & NC)

Clothing Industry Medical Benefit Society (Northern Areas)

Clothing Industry Sick Benefit Fund (Natal)

Knitting Industry Medical Benefit Society (Northern Areas)

Bargaining Council for the Building Industry (Kimberly)

Building Industry Medical Aid Fund (Bloemfontein)

Building Industry Medical Aid Fund (Eastern Cape)

Building Industry Medical Aid Fund (Gauteng)

Building Industry Medical Aid Fund (Western Cape)

East London Building Industry Medical Aid Fund (ELBIMAF)

Autoworkers Medical Aid Fund (Automed)

Motor Industry Medical Aid Fund (MIMED)

Hairmed

Natal Hairdressers Sick Benefit Fund

Furniture & Allied Workers Sick Benefit Society(S.W.D.)

Natal Furniture Workers Sick Benefit Society

Electrical Industry (Cape)

MEDCOR

Overall Exempt

Overall Registered

Sch

em

e

Rands pbpm

Clothing Industry

MEDCOR

Furniture Industry

Hairdressing Industry

Motor Industry

Building Industry

Electrical Industry

Low cluster PMB contribution for public sector in 2001

Exempt Scheme Benefits 2000



Affordability Relative to Published

Contribution Tables


Options Available to Benchmark Family

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Op

tio

ns

Contributions per family per month

R 640.33 per month Weighted industry PMB package for a family of four

Source : CARE Monograph



Primary Care Network Options

843

638

728

966

730

824

657

576

780

904

732

480

841

810

672

635

321

489

0 100 200 300 400 500 600 700 800 900 1,000

Fedsure Larona PrimeCure

Ingwe PrimeCure

Ingwe CareCross

Medihelp Nucleus

Medimed PrimeCure

Medimed ECIPA, UDIPA

Metropolitan Primary Plus

MSP/Sizwe PrimeCure

MSP/Sizwe Ecipamed

MSP/Sizwe MediCross

NMP PrimeCure

Protector Health Primary

Protector Health Primary Plus

Provia SilverCure

Spectramed Spectra Alliance

Topmed Bophelo Network

Vulamed Standard

Low cluster PMB Public Sector

Low cluster PMB Private Sector

Contribution per family per month

280

Source : CARE Monograph



Affordability Relative to Income


47.1%

5.4%5.0%

7.4%

5.0%

13.5%

8.2%

4.6%3.7%

R0

Don't know or missing

R1-R799

R800-R1 800

R1 800-R2 499

R2 500-R4 999

R5 000-R9 999

R10 000+

Refuse

Income Levels Medical Scheme Beneficiaries

Source : OHS 1999


-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

0

1-4

5-9

10

-14

15

-19

20

-24

25

-29

30

-34

35

-39

40

-45

45

-49

50

-54

55

-59

60

-64

65

-69

70

-74

75

-79

80

-84

85

+

(bla

nk)

Refuse

R10 000+

R5 000-R9 999

R2 500-R4 999

R1 800-R2 499

R800-R1 800

R1-R799

Don't know or missing

R0


Income Profile Medical Scheme Beneficiaries

Source : OHS 1999



0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

R0

R1-

R79

9

R80

0-R

1 80

0

R1

800-

R2

499

R2

500-

R4

999

R5

000-

R9

999

R10

000

+

Ref

use

Don

't kn

ow o

r m

issi

ng

Potential

Part of a medical scheme

Part of a medical scheme

Potential SHI

Public Sector


Possible SHI Income Earners

Source : OHS 1999


Conclusions


Conclusions on Affordability

Comparing actual benefit expenditure and contributions to PMB package: at industry level, PMB package was well covered.

There should thus be no upward pressure on contributions from Prescribed Minimum Benefits.

Comparing published options prices to PMB package: showed conclusively that the current packages on offer by open schemes were way in excess of the price of the PMB package for the industry. In some cases the prices were four or five times the price of the PMB package.


Conclusions on Affordability

The conclusion must be that there is substantial room to reduce the current benefit offerings in the industry to something closer to the price of the PMB package plus an additional amount for routine primary care.

The industry needs to critically examine benefit offerings for 2004 and begin the designs with a focus on the PMB package.


Policy Issues


Understanding of PMBs It has become apparent during this research that the

introduction of Prescribed Minimum Benefits with effect from 1 January 2000 has barely impacted the industry.

Very few schemes are able to isolate PMB expenditure from other benefits.

Of even greater concern is how few medical practitioners seem to have heard of PMBs. Thus at the critical interface with patients there is little knowledge of the rights of medical scheme beneficiaries to treatment for the PMB conditions.

It is certainly not in the interests of schemes to educate practitioners and this critical role must be taken on centrally by the Department of Health or the Council for Medical Schemes.


Community-rated PMB Price

The comparison of options prices in open schemes for the benchmark family shows a wide divergence of prices.

Members should be facing a common community-rated price for the PMB package and not a price determined by each scheme according to its own demographic profile and illness burden.

Now that a price has been conclusively determined for the PMB package for the industry, this can facilitate work on a risk equalisation mechanism between schemes that covers the benefits in the PMB package.


Future Pensioner Philosophy

7%

1%

6%

16%

60%

4%

12%

15%

26%

43%

0% 10% 20% 30% 40% 50% 60%

Eligibility CriteriaChanged

Cap Benefits

Cash or Benefits inlieu of Medical

Cap CompanyContribution

Do Not Offer Benefitsto New Employees

19992001

Source : OMHC Health Survey 2001


Vulnerability of Pensioners

From the study findings, it is evident that pensioners are already vulnerable and that they will increasingly find contributions to medical schemes difficult to afford, given that medical contribution increases have exceed pension increases.

Added to this is the changing structure of employee benefits in such a way that future pensioners will be unlikely to have a subsidy for medical benefits in retirement.

The study describes the subsidy issue as a future time bomb and this issue needs to be placed on the agenda now.


Impact of Per Capita Subsidy

No subsidyR 800 pa subsidy

R1 000 pa subsidy

No subsidyR 800 pa subsidy

R1 000 pa subsidy

Complete PMB Package Price pmpm in 2001

R 124.26 R 57.59 R 40.93 R 321.15 R 54.48 -R 12.18

Effective price to the member R 124.26 R 57.59 R 40.93 R 321.15 R 54.48 R 0.00

More than R10 000 1.1% 0.5% 0.4% 2.9% 0.5% 0.0%

R5 000 to R9 999 1.5% 0.7% 0.5% 3.8% 0.6% 0.0%

R2 500 to R4 999 3.0% 1.4% 1.0% 7.7% 1.3% 0.0%

R1 800 to R2 499 5.2% 2.4% 1.7% 13.4% 2.3% 0.0%

R 800 to R1 800 8.6% 4.0% 2.8% 22.1% 3.7% 0.0%

R 1 to R 799 27.8% 12.9% 9.2% 71.8% 12.2% 0.0%

Proportion of IncomeMonthly Income Bands

OHS99

Single Adult Family of Four


Per-capita Subsidy

The study also attempts to put into context the per capita subsidy mooted in the Taylor Committee report.

It was demonstrated that this subsidy could have enormous impact on the affordability of healthcare for low-income families.

This impact is subject to the final amount of the subsidy and the exact form it will take.

There is no doubt that a subsidy of this nature has a far-reaching impact on affordability of the PMB package for low-income groups and clarity on proposals is now needed.


Public Sector Contracting

The price of the PMB package in the public sector, which lies at the heart of affordability for the low-cost options and the Bargaining Council schemes, now needs further work by the public sector itself.

Medical schemes need to know at what price they can contract for the delivery of benefits in the public sector and these contracts need to be facilitated at a national level.

The impact of this additional substantial network to the current hospital networks offered by the private sector should have a galvanising effect on hospital benefit negotiations for 2004.


Total Expenditure on Prescribed Minimum Benefits

To put the size of the business in context, total expenditure on the PMB package using the Weighted industry price would have been R 14.573 billion in 2001.

The estimated price for delivery of the package in the public sector would have been R 9.460 billion.

This covers only registered schemes. A further amount of R 0.268 billion would be added to the

public sector total for those Bargaining Council schemes reporting in 2001.


A Research Unit of the University of Cape Town

(CARE)


A Research Report Prepared Under Contract for the Council for Medical Schemes

The Costing of Prescribed Minimum Benefits

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