What does your medical scheme contribution pay for?

South Africa’s 8.8 million medical scheme beneficiaries contribute on average R1 543.20 per month to their medical scheme, but often question the value they receive.

The Council for Medical Schemes in its recently published annual report shows members’ out of pocket payments grew by 13.4% in 2016, compared to the previous year and it represented 18.6% of total benefits paid. The biggest items members paid for themselves were out-of-hospital medication and supplementary and allied health care.

This is most probably a vast understatement, as members often don’t submit claims for such expenses.

According to the council, schemes in 2016 paid on average R1 423.60 per beneficiary per month or 92% of the equivalent contribution on healthcare.

Of that R1 423.60, more than a third, or R535.79, is paid to hospitals. R224.92 or 15.8% is paid by medical schemes for medication. The council’s statistic show the share paid to hospitals has been growing over the last three years, while the share of medication spend has been shrinking.

Supplementary and allied healthcare professionals were paid R103.21 per average beneficiary per month and general practitioners R84.41.

All specialists, including anaesthetists, medical specialists, pathology services, radiology services and surgical specialists, accounted for 24.02% of healthcare benefits paid during 2016. That means that they received R431.94 per average beneficiary per month.

Source: Council for Medical Schemes Annual Report 2016/7

The monthly administration cost per average beneficiary amounts to R132.40.

The average benefits paid to service providers per discipline per event differed vastly, with the highest being the R2 935.67 paid to anaesthetists. This calculation however does not take into account the duration of the event.

General practitioners were on average paid R369.20 per event, an increase of only 4.42% from the previous year. These doctors were on average paid R861.45 for in-hospital consultations, but only R328.00 for out-of hospital visits.

Source: Council for Medical Schemes Annual Report 2016/7

The council points out that the amounts paid to private hospitals and all specialists per average beneficiary per year have increased consistently in real terms over the last decade. In 2016 alone it increased by 9.22% to private hospitals and 9.34% to all specialists in real terms.

Growing healthcare expenditure has outpaced the increases in contributions since 2000, the council shows. Gross contributions per average beneficiary per month have grown by 64.9% in real terms, but healthcare expenditure grew by 70.5% over the same period.

Schemes utilise investment income and reserves to cover increased healthcare costs, the council states.

Scheme expenditure on non-health items have decreased in real terms since 2000, the council reports. This includes administration, commission and service fees paid to brokers, and impairments.

Nevertheless the council warns that items like advertising and marketing, consulting and legal fees and trustee remuneration continue to increase. Recently the spotlight has been on the cost of annual general meetings and increases in the remuneration of trustees and principal officers, the council states.

The three open schemes with the highest administration cost per average beneficiary per month, compared to the industry average of R132.40, are Spectramed (R224.60), Selfmed Medical Scheme (R204.20) and Fedhealth (R168.20).

The council shows handsome increases in the remuneration of some principal officers in the past year:

Source: Council for Medical Schemes annual Report 2016/17

Discovery Health Medical Scheme with 1.2 million members, spent almost R9 million on its annual general meeting. Moneyweb earlier reported that 111 candidates contested four seats on the board of trustees in 2016 and the scheme appointed consultants PwC to run the elections. Sizwe Medical Fund with 50 784 members, spent more than R3 million on its annual general meeting.

Medical schemes paid on average R62.20 of members’ R1 543.20 average monthly contribution as commission to brokers.

The Medical Schemes Act requires that schemes maintain reserves of at least 25% of gross contributions, also known as the scheme’s solvency ratio. The council points out that, while the reserves are meant to provide a buffer for unforeseen and adverse developments, a lower solvency ration does not necessarily indicate financial difficulty. That is especially the case with bigger schemes.

The council closely monitors the schemes with solvency levels below 25%. In 2016 six schemes failed to comply, namely Bonitas Medical Fund (24.4%), Government Employees Medical Scheme (GEMS) (7%), Lonmin Medical Scheme (15%), Resolution Health Medical Scheme (12.2%), Thebemed (18.6%) and Transmed Medical Scheme (20.8%).

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