How Covid-19 changed how people use their medical schemes

Covid’s ugly footprints are noticeable all over medical schemes, according to the industry report for medical schemes, with people going to the doctor less and choosing not to have operations or procedures that were not urgent due to the pandemic.

The Council of Medical Schemes (CMS) Industry report for 2020/21 Industry Report shows the impact of the Covid-19 pandemic on the medical schemes industry. Members claimed R10.10 billion due to Covid in 2020, with 422,894 members infected and 383,585 recoveries, as well as a mortality rate of 3.02%.

It is also evident that the pandemic caused a decrease in healthcare use and expenditure in 2020, due to the varying levels of lockdowns and cancellation of elective procedures and services. However, the decrease in screening activities during 2020 could affect downstream costs, because early detection normally means lower costs and better clinical outcomes over the long-term.

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Help from medical schemes for financial distress

Medical scheme members also suffered financially during the pandemic and to help them, the CMS allowed members to use their medical savings accounts to balance contributions. The CMS also relaxed credit policies, enabled contribution holidays and lowered future contribution increases.

As a result, medical schemes granted 19,914 members contribution deferrals to the value of R586.90 million, while 16,654 members received relief through their personal medical savings accounts to the value of R180.11 million.

The CMS also helped small, medium and micro-sized enterprises (SMMEs) with less than 200 employees by allowing schemes to make payment arrangements with these businesses to protect their employees’ cover.

This allowed 30,725 members to receive relief through rule amendments and the impact was R133.31 million. A further 5,447 members received other types of relief, such as debt policy relaxation, to the value of R53.68 million.

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Profile of medical scheme members

Due to two mergers, the number of medical schemes fell by two to 76 registered schemes that had a total subscription of 8.89 million beneficiaries in 2020, down from 8.99 million in 2019, a year-on-year decrease of 1.15%.

In 2020, the average age of medical scheme beneficiaries was 33.4 years, compared to 33.04 years reported in 2019. The average age of female beneficiaries was 34.5 years and 32.2 years for males, while the pensioner ratio increased slightly to 8.9%, with increases for males and females.

Other findings show:

• Healthcare expenditure on benefits decreased by 3.81% to R178.04 billion compared to R185.1 billion in 2019
• Hospital expenditure declined by 8.38% between 2019 and 2020 from R68.4 billion to R62.7 billion
• The average amount paid per beneficiary for hospital services also decreased by 8.45% to R7 052.00, with over 92% spent at private hospitals
• People also visited their doctors less, with the amount general practitioners claimed decreasing by 10.07% from R10.3 billion in 2019 to R9.21 billion in 2020
• The amounts paid to specialists (-2.26%), hospitals (-8.83%), general practitioners (-10.07%), dentists (-7.29%) and dental specialists (-5.52%) also decreased
• General practitioners’ hospital visits increased by 15%, with an average of R1 044.94 per event in 2019 to R1 203.43 in 2020, accounting for 14% of the total expenditure on general practitioners
• The cost of out-of-hospital visits also increased from an average of R404.62 in 2019 to R424.59 in 2020
• Caesarean sections increased by 7.30% from 651.83 in 2019 to 699.40 in 2020
• Expenditure on medical specialists decreased by 2.2%, from R13.4 billion in 2019 to R13.1 billion in 2020
• The average expenditure per event in-hospital increased by 10.99% from R1,549.13 2019 to R1,719.41 in 2020
• The average expenditure per event out-of-hospital increased by 4.28% from R1,185.57 in 2019 to R1,236.31 in 2020.
• The only specialist service that increased during the period under review was pathology services, which amounted to R11.6 billion in 2020
• Pharmacists and other providers dispensed medicines and consumables to the value of approximately R29.43 billion, representing an increase of 3.73% compared with R28.3 billion in 2019
• Overall, risk benefits paid per beneficiary decreased slightly by 4.31% from R18,791 in 2019 to R17,980 in 2020
• The average spent from medical savings accounts increased by 0.04% to R2,029.63.

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Prescribed Minimum Benefits

Prescribed Minimum Benefit (PMBs) expenditure, consisting of risk and savings expenditure, amounted to R92.4 billion in 2020. As a percentage of total benefits paid, PMB expenditure accounted for 51.9% of benefits paid in 2020, up from 51.2 % in 2019.

The cost of PMBs is driven by the beneficiary profile determining the level of cross-subsidisation between:

• the young and the old
• the sick and the healthy
• the prevalence of chronic conditions and disease burden
• the expenditure on treatment, which is strongly linked to contracting between schemes and providers.

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Other medical scheme expenses

Gross non-healthcare expenditure (NHE) for all medical schemes at the end of 2020 was reported at R17.14 billion, an increase of 3.55% from R16.55 billion in 2019. Administration expenditure grew by 3.67% to R14.35 billion from R13.84 billion between 2019 and 2020.

Administration expenditure is the biggest component of NHE (83.73%), followed by broker fees and other distribution costs (14.81%) and impaired receivables (1.46%). Administration and co-administration fees paid to third-party administrators were the main component of Gross Administration Expenditure (GAE), growing by 3.85% to R10.36 billion in 2020 from R9.97 billion in the previous year.

These fees represented 81.08% of the GAE of schemes which incurred this expenditure in 2020 (2019: 81.06%). Broker costs include all broker service fees (or broker commissions) and other distribution costs. Broker costs increased by 3.63% from R2.45 billion in 2019 to R2.54 billion in 2020 (2019: 9.19%).

The net healthcare result for all medical schemes combined reflected a surplus of R19.93 billion in 2020 compared to R1.03 billion in 2019 due to lower use of benefits during the pandemic. The 2020 industry solvency ratio stands at 44.55% compared to 35.61% in 2019. It exceeds the minimum required ratio of 25.00%.