Developments vital to reform healthcare in Africa

Achieving effective low-cost healthcare in Africa is only possible if a number of challenges affecting the industry are tackled. This is the view of Mike Marshall, General Manager of Healthcare Professional Networks and Contracting at Medscheme and speaker at the upcoming Africa Health Exhibition & Congress 2015, who says that a number of developments need to take place in order to achieve the healthcare reform needed on the continent.

Marshall says that one issue facing the industry is that the current low cost plans in the South African healthcare market are typically loss-making and the industry is struggling to remain sustainable. “A key driver should be to provide a package that is affordable and in line with the target market’s ability to pay.”

He says that some developments we have seen in the industry that need to be addressed include standardised coding and reference prices, the scope of current prescribed minimum benefits packages, subsidies and underwriting.

The lack of standardised coding causes a lack of reference process which in turns poses a challenge to manage the costs of medical scheme cover, says Marshall. “There is a major need for the Regulator to set up an independent industry coding authority. This authority should take the responsibility of governing standardised coding structures and should also set up a minimum reference price list (MRP) to provide a reference price list as a benchmark for the private healthcare industry. Service providers’ fees and medical scheme benefits need to be clearly defined in relation to the MRPL to improve transparency and therefore empower consumers to select providers whose fees best match their benefits.”

He says the current scope of the existing PMBs in South Africa has to be limited in order to lower the cost of the PMB package. “Ideally, hospital-centric packages should be altered towards a primary care based package. Allowing for these PMBs to be paid at a cost without benefit limit is also unsustainable for the industry. Medical schemes should be allowed to set a scheme rate and this should apply to all services including PMBs, but this approach would require regulatory changes in the sector.”

Marshall says that increased government or employer subsidies should also be implemented in order to help achieve consumer affordability.  

The South African Council for Medical Schemes (CMS) suggest that late joiner penalties are not applied in the low cost benefit option framework. As a proposed solution, Marshall recommends that late joiner penalties should be waived for a temporary period upon introduction of the low cost benefit option framework, after which medical schemes are able to charge these penalties. “In addition, the late joiner penalties should be increased to reflect the true underlying claims costs of such late joiners.”

He explains that if the regulatory framework is incomplete, as is the case in South Africa, increased claims expenditure due to anti-selection can be expected, even with optimal provider network arrangements.

Marshall says that in a private healthcare environment with limited underwriting and without compulsory membership and risk equalisation, the consequences can be summarised as below:

  • Risk management is indirectly, but intentionally extended to benefit design (either including benefits more attractive to the young and healthy and / or limiting benefits more likely to be used by the older and sicker), as well as marketing initiatives targeting the young and setting broker commission levels to favour the attraction of good profile lives.
  • Anti-selective behaviour is evidenced, such as people not joining schemes when they are healthy, increasing claims experience.
  • Schemes may end up in an ‘actuarial death spiral’, where contributions are too high, resulting in healthy members leaving which results in even higher contribution requirements. Schemes then need to amalgamate or close.

More detail on the challenges and solutions to achieving effective low-cost healthcare in Africa will be discussed at the Healthcare Management Conference to be held as part of the 5th annual Africa Health Exhibition & Congress, which is set to take place from 5th-7th May 2015 at the Gallagher Convention Centre in Johannesburg, South Africa.