Article: Celeste White from FAIRLADY
Image: Media24

When Michael Baxter, 64, was told he needed a hip replacement, he was shocked when, instead of authorising hospitalisation, the medical aid scheme he subscribed to sent him to a dietician and a biokineticist.

His medical scheme administrator was able to do so because of treatment protocols saying he was required to lose weight – he weighed 111kg – before the scheme would even consider authorising the operation. His biokineticist put him on an exercise regimen, which saw him shed 7kg in two months. Not enough, said the scheme administrator, insisting he lose a further 13kg. He argued that Baxter was obese and at "high risk of complications" if he underwent the operation.

For Baxter, this was a bitter pill to swallow: "I'm in so much pain I can't do the exercises. I'm using a stick and I'm going to end up in a wheelchair." He has now applied to the scheme's board of trustees for an ex gratia benefit. Ex gratia refers to a benefit which a member is not entitled to but is nevertheless granted, at the scheme's discretion.

Although Baxter contributes R2100 a month to his medical scheme for himself and his wife, his predicament illustrates that there is no longer any guarantee of cover for any and every health crisis. Whether you are paying for comprehensive medical cover or a hospital plan, it's clear that medical schemes have gradually and steadily eroded our benefits over the past five years, while contribution increases have skyrocketed at a rate higher than inflation.

What to do?
Consumer response to rampant contribution hikes – in excess of 9% per annum – has been to retain some sense of value for money by going for cheaper options like hospital plans and basic cover plans. Many consumers are choosing to self-fund day-to-day medical expenses, as medical scheme offerings such as medical savings accounts and strictly controlled day-to-day benefits lose their lustre.

National Consumer Forum chairperson Thami Bolani says he has a hospital plan "because it's cheaper. It's a waste of money for a healthy person to have comprehensive medical aid." His advice: "Rather save the money so if something happens you have cash flow. Six months into the year, people who have medical aid have already run out of certain benefits and end up with problems, because on top of having to make medical aid contributions for seven months, they also have to contribute cash. I think medical aids are ripping people off in a big way."

So why are so many open medical schemes no longer offering the same value for money in comprehensive cover at affordable prices? Some of South Africa's largest open schemes, Discovery, Oxygen, Spectramed and Medihelp, concur with the Council for Medical Schemes (CMS) that major drivers of contribution inflation and benefit cutbacks over the past five years include spiralling hospital costs, rising dollar-linked medicine prices, imported technologically advanced treatments, and fraud.

In recent years, changes to the Medical Schemes Act, like compelling schemes to offer 26 prescribed minimum benefits including HIV/Aids cover, and forbidding schemes from discriminating against the old and sickly, have also affected contribution inflation. CMS spokesperson Pat Sidley says some seven million South Africans enjoy medical aid cover, but in six years this pool has not grown.

What about medical savings?
Anton Swart, head of Momentum Health Initiative, says the death knell for affordable traditional medical cover came with the introduction of medical savings accounts as a means of transferring risk away from the scheme to the member.

"In the late '80s and early '90s we had traditional schemes where everything was covered, but in the late '90s came new generation products, and controllable expenses (such as dentists, GP visits, gynae) were apportioned to savings accounts where there was no subsidisation of the old and sickly by the young and healthy. With rising medical inflation in the 1990s, schemes started shifting more benefits to savings accounts to bring down contribution increases. Schemes tried to make members carry more of the risk," Swart says.

Research by the Hospital Association of South Africa also reveals that, on the back of rising hospitalisation costs, admissions spiralled from one million in 2002 to just under 1,5 million in 2005. While some schemes are reluctant to admit that benefits were slashed, Sidley says these are being eroded every year. She says medical costs have gone up "far higher than inflation", but that in some instances, high costs were a result of "plain profiteering".

In the case of medicines, she says, this has been addressed through the legislated single exit price, which restricts the prices at which pharmacies purchase and sell medicine. Medical schemes are non-profit entities under the Medical Schemes Act. The problem starts when non-healthcare expenses (like the outsourcing of administration) outpaces contributions and claims.

The cost of fraud
According to the CMS 2006 report, this has been the case since 2000. Fraud also has a negative impact on the industry. John Armstrong, a director of financial services company Royal Union, says that fraud cost the industry R8 billion of the state's R50 billion spend on private healthcare in 2005, thanks to service providers who overcharged, fraudulent claims, and collusion between members and practitioners.

Pharmacists have been known to sell members branded sunglasses and waterless cooking pots for their "health benefits", thereafter submitting claims to schemes. Medical schemes now employ entire units to combat fraud. One of the facets of this complex issue is the state of national healthcare. Bolani says: "Government services are so bad that it's easy for private healthcare providers to charge exorbitant prices that most people can't afford, forcing us to have medical aid."

The problem is that there is hardly any competition and prices go up and up. If government upgraded services then patients would[ use] state hospitals. So what's the bottom line? James van Vught, Oxygen's principal officer, says medical aid is about human relationships. "We want to go for operations so we can live longer, and that's what's costing medical schemes. We are going to spend money on whatever gives us extra time to have that relationship.

"I don't think members understand there is a finite pot they are contributing to, and once that's used, there's no more money," Van Vught says. For the young and healthy, hospital plans might be the best way to save precious health rands, but for the frail, or those with chronic illnesses, full medical cover is probably still the safest option. However, you have to know exactly what you're covered for and how that cover measures up against what you are paying.

Do you think your medical aid is ripping you off? Tell us in the comment box below.