May 2008

Essential healthcare for all

Last month we discussed PMBs – Prescribed Minimum Benefits. This month we look at two more acronyms – the REF (Risk Equalisation Fund), and EHP (Essential Healthcare Package). We also look at two hot healthcare topics that hit the media in the past month.

What is the Risk Equalisation Fund?

Currently, medical schemes with large numbers of younger, healthier members are paying less to provide the PMBs, because these members use less of these benefits, while schemes with many older, sicker members are paying more.

The Risk Equalisation Fund (REF) will ensure that healthier members cross-subsidise the PMBs of the less healthy across all medical schemes. This will be achieved by making schemes with healthier members pay into the REF, while those with less healthy members will receive payments from the fund.

Legislation and logistics still need to be finalised and it could be a while before the REF is implemented.

What is the Essential Healthcare Package?

Still at proposal stage, the Essential Healthcare Package (EHP) is a follow-on to Prescribed Minimum Benefits. It would ensure that medical scheme members have access to crucial healthcare services when ill, regardless of the diagnosis. Those in favour of the EHP explain that there are some oddities in the current PMBs. For example, the PMBs provide benefits for middle ear infection but not for sinusitis or tonsillitis, and cover some abscesses but not dental abscesses.

It's these kinds of discrepancies that the EHP would iron out, by providing a package that ensures primary care benefits for all basic conditions, for example, a visit to a GP and medication for a sore throat.

Part of the EHP debate is the fact that if the EHP is adopted, more people will have access to health care, but the depth of cover may not be the same as that enjoyed by scheme members under the existing PMBs. Ideally, the EHP should provide an acceptable standard of minimum care without detracting from the principle of allowing members to buy up to higher levels of care.

The proposed EHP is part of a process of redefining the PMBs that will only be complete around February next year.

Hot topics in the media

Top-up products create a furore

You may have seen the name "Guardrisk" in the press and the ongoing related court case. Guardrisk created 'top-up' insurance products that pay (to the insured person) the difference between a hospital bill and the final settlement by the medical aid. The final settlement paid by the medical aid is not always the full amount, and the difference sometimes amounts to several thousands of rands. An insurance product to close this gap sounds like great cover to have, but the Council for Medical Schemes and the Registrar of Medical Schemes have taken action against Guardrisk, claiming that Guardrisk is attempting to conduct medical scheme business without being registered as a medical scheme.

At one stage Guardrisk had the victory but the CMS and the Registrar were not prepared to accept the ruling. This battle has gone from the Johannesburg High Court to the Supreme Court and is now heading for the Constitutional Court. It seems to boil down to an issue of legislation, but those in favour of the top-up products (there are many existing policy-holders) are furious that the CMS and the Registrar want to bring down the curtain on these innovative products. Watch the press as the drama continues!

Medical Schemes Cost Increases

Also in the media recently was a report from the Council for Medical Schemes on increases in medical schemes costs. The report states: "Private health cost increases are unsustainable and unjustifiable in significant respects. Without corrective government interventions, continuing cost escalation will have long-term impacts on access to health care through medical schemes."

The report puts private hospitals and specialists as the major contributors to rising healthcare costs. The Council recommends a range of corrective measures to address uncontrolled escalation in health costs, and the full list can be viewed on their website: www.medicalschemes.co.za

Click here for previous issues of Money Matters.