HEALTH MARKET

INQUIRY

• Introduce Cape Medical Plan

• Regulatory Environment

• Not-for-Profit Insurance model vs the For-Profit model

• Third Party Administration

• Tariff Negotiations

• Member Choice on Scheme Selection

• Third Party Payer

• Strength of Anti-selection

• Billing Rules

• Prescribed Minimum Benefits and Co-ordination

of Care

INTRODUCTION

Purpose of Inquiry

to determine if competition in the sector is working

and how it can be improved

CMP

• A small self-administered not-for-profit scheme

• Not administered as a typical short-term insurer

• Scheme is run as a mutual society

INTRODUCTION continued

• The framework exists and management

structures are designed to allow positive

member input and involvement

• This gives life to the concepts of Social

Solidarity and Mutuality

MUTUAL SOCIETY REFERENCE MODEL

Use relevant Technology to

improve personal contact with

all stakeholders

Skilled, Knowledgeable

staff who support & identify with

the concept of mutuality

Product Design & Benefits that support the Collective in

terms of long term

sustainability

Communications to meet & support

Transparency compliance & governance

requirements

Fully integrated system & processes

which drive rationalised Admin

& improved service delivery

Increased CMP Mgt visibility

(to membership at large)

Increased Board visibility (to membership

at large)

Genuine Empathy

that can be supported & afforded by

the collective

Peace of Mind & confidence in CMP’s decision

making

Experience a sense of

pride in belonging to this mutual society

Promoting Mutuality to create the balance between entitlement & responsibility

Providing Means to defray legitimate Healthcare costs

Long Term sustainability

Promoting social solidarity

INTRODUCTION continued

• At CMP the members are the Scheme and

the Scheme is the members

• 100% of the monthly contribution paid by

the members goes to funding benefits

CAPE MEDICAL PLAN

THE

MEMBERS

OF CAPE

MEDICAL PLAN

THE SCHEME ADMINISTRATION SUPPORTING THE MEMBERS

BROKERS

HEALTH CARE PROVIDERS

MANAGED CARE PROVIDERS

OUTSOURCED ADMINISTRATION

OTHER SERVICE

PROVIDERS

ADMINISTERED SCHEMES

THE

SCHEME

BROKERS

HEALTH CARE PROVIDERS

MANAGED CARE

PROVIDERS

OUTSOURCED

ADMINISTRATION

OTHER SERVICE

PROVIDERS

THE

MEMBERS

PROVIDERS OF OTHER

PRODUCTS

REGULATORY ENVIRONMENT

Regulations related to: • Open Enrolment

• Community Rating

• Inclusion of PMBs

Missing regulations: • Mandatory cover

• Some form of equalisation of Risk

• Payment tariffs for PMBs

THE MUTUAL SOCIETY HAS NO PROTECTION

REGULATORY ENVIRONMENT continued

DEMARCATION

• Not subject to the same regulations

• Consumer is not protected

• Medical schemes losing younger, healthier members

• Losing cross-subsidy

• Gap cover - and how they deal with PMBs

• Hospital Cash Plans and the hidden incentive to over utilise hospitals

NOT-FOR-PROFIT vs FOR-PROFIT MODEL

• South Africa is a developmental state

• Massive inequalities and large numbers of poor

citizens

• For-profit healthcare financing is not the most

desired model

• Is healthcare provision and access a public

good or a market to be exploited?

• Medical scheme contributions are beyond

many individuals

NOT-FOR-PROFIT vs FOR-PROFIT MODEL continued

• This undermines the constitutional imperative of access

to healthcare

• Unregulated insurance market exaggerates the

problem

• Recognise that it is improbable that all For-profit health

service provision from practitioners or healthcare

providers can be removed from the equation

• Greater scrutiny of fees and profits are in the public

interest

• Consumers cannot exercise the same level of control

over demand for healthcare as they can for other

necessities

NOT-FOR-PROFIT vs FOR-PROFIT MODEL continued

• CMP recognises there are advantages to the economies

of scale of large administration organisations

• Is there a place for Not-For-profit administrators and

managed care organisations

• They would be fully owned by the scheme members in

the same way that they own their scheme

• Current environment does not enable this type of

arrangement and undermines the provision of

healthcare in a developmental state as a public good

THIRD PARTY ADMINISTRATION

• Advantages of a large administrator

• Controlled by Insurance companies

• Trustees completely reliant on information given to them

• Economies of scale not evident

• CMP administration cost R108 pbpm

• Entirely funded out of investment income

• No extra cost layers

THIRD PARTY ADMINISTRATION continued

• CMP members have an extra R1 296 per annum

• A family of 3 will have an extra R3 888 per annum

• Never use BROKERS

• Often locked into commercial arrangements with large

insurers

• Our product information is materially misstated – example

GTC Medical Aid Survey report

TARIFF NEGOTIATIONS

• Hospital groupings listed on JSE and vulnerable to

investor sentiment

• Consistently high ratios of operating earnings before interest, tax and depreciation

• Small scheme a PRICE TAKER

• Collective bargaining for medical schemes outlawed in

2004

• Still happens through third parties

• Fee for service not ideal, but other models often lack

transparency

MEMBER CHOICE ON SCHEME SELECTION

• CMP does not pay brokers in any form

• A member chooses to join, wanting to be part of a scheme

with the philosophy of a member-centric mutual society

• To have a say in determining their particular level of funding

• We do this by member involvement and a reciprocal sense of belonging amongst the collective membership

• Benefit set is simple and easy to understand

• Management, Principal Officer and Trustees are visible

MEMBER CHOICE ON SCHEME SELECTION continued

• Members are not enticed through sophisticated marketing techniques which make it difficult for people to identify their

true needs

• Members join through referrals

• Staff are knowledgeable and support and identify with the

concept of social solidarity and mutuality

• Benefits support the collective membership

• Use the IT system we have developed and own

MEMBER CHOICE ON SCHEME SELECTION continued

• Member-centric mutual society

• Communicate with our members in plain language, consistently and openly

• Use electronic and paper-based communication

• Hold open days, benefit information sessions

• Personal visits with members

MEMBER CHOICE ON SCHEME SELECTION continued

• As a society we need to change the attitude of citizens

and organisations

• We do not just exist for ourselves, but also the good of society

• Without a well informed society our own rights will be

compromised

• Few schemes have a member-centric approach

• Often make it difficult for members to exercise their rights and do not pay PMBs as they ought to

THIRD PARTY PAYER

• Consumers are not able to compare or evaluate prices

• Lack of understandable information to make a decision on

treatment

• Difficult to assess quality and efficiency of healthcare

delivery

• The payment mechanism distorts the incentives of both the

consumer and the provider of healthcare

• Opportunity for supplier-induced demand

THIRD PARTY PAYER continued

• Excessive and unnecessary consumption with no

improvement in outcomes

• Vertical relationships - shares held in the hospital

• Hospital depends on specialist to generate

utilisation of the facility

STRENGTH OF ANTI-SELECTION

• Providers assist consumers to access the system in order to

ensure continued payment

• Differential rates are charged by suppliers

• Examples with Renal dialysis

• 2014 - R1 118 private

R1 880.79 medical aid

• 2016 – R1 642 private

R2 172.20 medical aid • Supplier referral

BILLING RULES

• Tariff coding system

• Controlled by the various societies and

professional groups

• Make unilateral changes

• Used to maximise income

• Unbundling of codes to support this

PRESCRIBED MINIMUM BENEFITS

• As we use 100% of contributions to fund benefits, if benefit

spend increases, so does the amount of money required

to fund this

• Why does it matter if PMBs and particularly those linked to

end-of-life care rise much faster than non-PMB benefits

and general inflation?

• Compulsory inclusion of PMBs was good for social

solidarity reasons

• The “pay in full at invoice cost” has had the negative effect of extending high cost treatments with little

likelihood of a positive outcome

PRESCRIBED MINIMUM BENEFITS continued

• Should we be incentivising clinicians to limit expensive

treatment?

• If we do not, is the bill simply maximised as it has to be paid?

• In the current environment unnecessary costs are being

added

• Necessity to have co-ordination of care for what is at the

moment a very fragmented delivery system

• We require clear, ethical and realistic protocols that are

nationally supported and drawn up by an independent

clinical body, with no link to hidden financial gains

PRESCRIBED MINIMUM BENEFITS continued

• CASE STUDY 1

• Baby born at 25 weeks, weighing 510 grams, respiratory difficulties

• Born with brain damage incompatible with life – missing temporal

and occipital lobes

• Suffered a stage 4 intraventricular brain haemorrhage

• Stopped breathing after a few weeks and was resuscitated

• Suffered and struggled for months and passed away at 7 months

• Cost to the collective of R3.2 million

PRESCRIBED MINIMUM BENEFITS continued

• CASE STUDY 2

• Patient underwent an uncomplicated right carotid

endarterectomy

• Developed a cardiac arrest and remained in a depressed

conscious state

• Showed no signs of recovery, no reaction to pain, verbal

commands, no spontaneous eye movement

• The neurologist at a point confirmed that the patient had suffered a “hypoxic brain injury” and was in a vegetative

state

PRESCRIBED MINIMUM BENEFITS continued

• Not responding to external stimuli and showed slow

frequency activity

• The patient remained in ICU fully ventilated for a further 3 weeks

• At this point palliative end-of-life care should have

been instituted

• Case cost R2 million of which R600 000 was incurred

after the neurologist confirmed the patient was in a

vegetative state

• Excessive treatment costs did not change the final

outcome

CONCLUSION

• Is the self-administered mutual society a better option

than private healthcare run by companies listed on the

Johannesburg Stock Exchange?

• We believe it is a more cost effective and fairer model

• It supports the intentions of moving healthcare into the

domain of a social good

• It will create a transparent environment where competition

in the sector will work for the people it is meant to serve

• Lowering of costs will support the constitutional imperative

of universal coverage and can run concurrently and

support NHI