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Health insurance
Sunday, April 1, 2007
Benefit from benefit design

According to Leighton McDonald, Executive Manager of Qualsa, Metropolitan Health Group’s risk management arm, costs for medical schemes are soaring due to the high price of hospitalisation, lack of preventative measures for curable conditions, inappropriate rationing of care, increased longevity of the population , and HIV and Aids.

“In order for medical schemes to be sustainable on an ongoing basis, they will have to meet the significant challenge of providing comprehensive health care benefits within a set budget. Given the challenges faced by medical schemes, achieving this objective will only be possible through innovative benefit design and a review of the way in which services are delivered to scheme beneficiaries,” he points out.
“There is an increasing pensioner ratio in medical schemes as people are living longer. This is largely due to medical interventions which cost schemes a significant amount – this increased longevity means increased costs, not balanced by increased contributions for those who are covered.
“On the other end of the scale, younger people are increasingly only ensuring for catastrophic cover, resulting in loss of the cross subsidization required for funding sustainability. They have competing priorities - such as paying for their children’s education, financing a more mobile lifestyle and paying off big ticket items like houses and cars,” he says.
Mr McDonald adds that costs linked to the treatment of HIV and Aids have also added a new category of costs to the medical scheme industry. “Late diagnosis of the disease incurs high hospital costs. Individuals living with HIV need to be diagnosed as soon as possible in order to allow for early intervention. Schemes need to focus on the need to encourage people to be tested for HIV because there is still a level of apathy about testing and a large amount of denial.
“Although there is less stigma attached to HIV and Aids than there was previously, and the percentage of people undergoing testing is increasing, this is happening slowly. Treatment, started early, is much more effective and less expensive,” he says.
Hospital costs contribute significantly towards medical inflation and there has to be a much more appropriate rationing of care.
“This doesn’t have to affect the quality of care or access to the care - the process just has to be managed very carefully. There is now a much bigger focus on contracting with provider networks in order to reduce costs whilst still complying with applicable legislative obligations,” he says.
Medical schemes need to consider these factors as well as the changing legislative framework in ensuring their sustainability. Benefit design should focus on the provision of a comprehensive set of essential benefits whilst avoiding the inclusion those that do not have a directly positive impact on individual and population health.

Copyright © Insurance Times and Investments® Vol:20.3 1st April, 2007
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