1

Prescribed Minimum Benefit compliance and the protection of

beneficiaries

Council for Medical Schemes

PMB Compliance workshop

11 May 2010

2

Contents

• Purpose of the day

• Context– PMB review process

– Industry trends

• Complaints received by CMS

• Compliance concerns

• Impact of PMBs on medical schemes

• Areas of structural non-compliance

3

• Presentations by Professor Pick and Mr. Nkosi• Presentations by stakeholders (position)

– CMS– Providers– Funders

• Discussion with other attendees: HPCSA, patient groups, manufacturers

• Establishment of a task team to develop a code of conduct and to assist with future changes to the PMB system (process)

Purpose of the day

4

CONTEXT

PMB review process

Industry trends

5

PMB review Process (2008)

• Two stakeholder workshops early in 2008

• Three draft consultation documents

• Numerous comments on documents

• Thirteen clinical advisory committees

• Review of clinical advice, presentation to Council

• Review of appeal committee and appeal board rulings

• Draft regulations prepared, approved by Council and submitted to the Minister

Concurrent Processes impacting on revised PMB regulations…

Number of individuals involved

Clai

ms

cost

per

ben

efic

iary

Few Many

Low

HighClaims cost per

beneficiary

Abo

ve-t

hres

hold

ben

efits

fo

r all

PMBs

Belo

w-t

hres

hold

ben

efits

for

spec

ified

se

rvic

es a

nd c

ondi

tions

Hig

h co

st e

vent

s co

vere

d th

roug

hPM

Bs (m

ostly

in h

ospi

tal)

CDL

and

othe

r co

nditi

ons

on c

ateg

oric

al li

st

Spec

ified

serv

ices

Day-to-day expenses on an out-of-pocket basis or paid from MSA

Proposed Essential Care Package

NHI Process

Technical analysis of economic

impact, affordability

pricing, construct,

related reforms

Clinical Advisory

committees

Drafting of Regulations

Stakeholder comments

7

INDUSTRY TRENDS

8

Medical scheme contribution costs have declined in real terms since 2005

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

Ran

ds

Medical scheme per capita expenditure at the same level in 2008 as in 2003

9

Real non-healthcare expenditure in

medical schemes has been in decline

since 2005

0

200

400

600

800

1 000

1 200

1 400

1 600

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

pabpa (R)

Impaired receivables

Nett reinsurance

Broker fees and distribution costs

Managed care: management services

Administration (Risk+Savings)

pabpa = per average beneficiary per annum

Non-health per capita expenditure at same levels as in 2008 as in 2001

10

Industry solvency trends for all

schemes are stable and being sustained

at the levels achieved in 2004

10.0

13.5

17.5

22.025.0 25.0 25.0 25.0 25.0

20.2 20.422.9

29.3

37.339.1 37.9 38.0

36.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2000 2001 2002 2003 2004 2005 2006 2007 2008

Solvency ratio (%)

Prescribed Solvency Level Industry Average All

11

Open scheme solvency levels are stable and

above the statutory solvency levels, with the

levels of 2004 constant to 2008

10.0

13.5

17.5

22.0 25.0 25.0 25.0 25.0 25.0

13.3 13.515.1

20.9

28.529.6

27.7 28.629.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2000 2001 2002 2003 2004 2005 2006 2007 2008

Solvency ratio (%)

Prescribed Solvency Level Industry Average Open

12

Conclusions

• Scheme costs are contained

• Solvency levels are being maintained at healthy levels

• Non-health costs are contained

13

COMPLAINTS RECEIVED BY CMS

14

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2005 2006 2007 2008 2009

Unpaid accounts Benefit limitations

Denial of authorisation Other

Increase in complaints over five years..

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Some schemes may have policies in place to deliberately frustrate access to PMBs…

• Schizophrenia– Claims submitted timeously

– Scheme required a “mental disorder form” to be completed

– Refuse payment because of late submission of completed form

• Heart attack– Authorisation granted for admission and treatment

– Scheme refused payment because the patient’s PMB condition was not registered with the scheme

16

Some schemes impose monetary limits on PMBs...

• Kidney failure

– 74 year old on dialysis through 2009

– Scheme informed member that dialysis and organ transplant is limited to R200,000 per annum from 2010

– Disregard for National guidelines on dialysis

17

Some schemes arbitrarily deny benefits...

• Emergency treatment for a heart attack

– Patient arrived comatose at Hospital

– Emergency treatment performed, drug eluting stents inserted in coronary arteries

– Scheme refused to pay for the stents – stating that there are no benefits for stents in his option, and that drug eluting stents are not cost effective

– No scheme protocol for the use of drug eluting stents

– No evidence provided that the drug eluting stents are not cost effective

18

Some providers may abuse the “payment in full” provisions of Regulation 8

• Overcharging for a device

– Provider charged R3,450 for a device

– Nappi price is R222

19

Some schemes may abuse DSP provisions to deny benefits...

• Maternity

– Member enquired in advance and had her baby at a DSP hospital

– Scheme refused to pay the anesthetist because the particular anaesthetist on call on that day was not a preferred provider

– Procedurally unfair

20

Some PMB claims are paid from Medical savings accounts...

• Baby with cancer– Diagnosis treatment and care paid from savings

account

– Once funds were depleted, member paid out of pocket

– Scheme refused funding, arguing that the baby should have been registered on the oncology programme

– Member completed an appeal form with the scheme, with no response

– Claims settled after patient laid a complaint with the CMS

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COMPLIANCE CONCERNS

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Accreditation of administrators

• Administration systems not aligned with clients’ registered rules– Scheme rates = cost – (x)

– Paid from savings accounts;

– Co-payments settled by members

• ICD Coding complexities often result in incorrect processing of PMB related claims– Poor coding quality (including z-codes)

– Some systems capture only one ICD10 code per claim line

23

Accreditation of administrators (cont)

• Full complexity of Regulation 8 requirements not reflected in system rules:– Payment in full

– Voluntary use of a non-DSP

– Requirement to apply managed care:• Authorisations, protocols, formularies

• No or little indication of interaction between schemes, administrators and providers to manage the adverse effect on members

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IMPACT OF PROVIDER BEHAVIOUR ON MEDICAL SCHEMES IN RESPECT OF OVERCHARGING

Overall difference between charges for PMBs and non-PMBs is only 0.4%

293.3

84.6

94.5

102.2

109

99.7

99.6

97.9

104.4

94.3

104.4

121

160.7

101

112.8

105.1

102.7

105.2

107

307.2

98.7

100.5

104.3

119.4

99.6

99.8

101.8

106.8

92.7

105.4

107.9

160.8

156.1

112.3

100

103.5

104

107.4

0 50 100 150 200 250 300 350

Anaesthetists

General Medical Practice

Obstetrics and Gynaecology

Spec.Phys/Int …

Neurology

Psychiatry

Medical Oncology

Neurosurgery

Ophthalmology

Orthopaedics

Otorhinolaryngology

Paediatrics

Plastic and Reconstructive Surgery

Radiation Oncology/Nuclear …

Surgery/Paediatric surgery

Cardio Thoracic Surgery

Urology

Pathology

Total

Price index (Total claim / RPL tariff x 100)

Non-PMB

PMB

Source: large scheme sample

Overall difference Overall difference

Sample:• 9,975 different service

providers• Total claim value: R609

million• Index = total claim / RPL

tariff x 100

Most medical practitioners charge at the RPL, irrespective of whether or not treatment is for a PMB…

70.3%

67.0%

25.0%

26.3%

4.7%

6.7%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

PMB

Non-PMB

Percentage of total

RPL Above RPL (100% - 300%) More than 300% of RPL

In fact medical practitioners are less inclined to charge RPL for non-PMBs than for PMBs !

Large scheme sample

Most medical practitioners never charge more than the RPL…

48.7%

55.8%

36.7%

22.1%

14.6%

22.1%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

PMB

Non-PMB

Percentage of total

RPL Above RPL (100% - 300%) Over 300% of RPL

Large scheme sample

Most major medical is paid from the risk pool regardless of whether or not it’s a PMB…

818988

9595

84100

8492

8188

8559

9979

8690

9991

81858787

8264

1008385

838484

4490

859190

8685

0 10 20 30 40 50 60 70 80 90 100

Anaesthetists

General Medical Practice

Obstetrics and Gynaecology

Spec.Phys/Int …

Neurology

Psychiatry

Medical Oncology

Neurosurgery

Ophthalmology

Orthopaedics

Otorhinolaryngology

Paediatrics

Plastic and Reconstructive Surgery

Radiation Oncology/Nuclear Medicine/Oncologist

Surgery/Paediatric surgery

Cardio Thoracic Surgery

Urology

Pathology

Total

Percentage paid from the risk pool

Non-PMB

PMB

Up to 9% of PMBs are paid for out of savings accounts

Source: large scheme sample

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Conclusions

• No evidence of systematic abuse by providers of PMBs

• There is evidence of over-charging, but unrelated to PMBs

• Some schemes have accommodated this overcharging regardless of PMBs

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CONCLUDING REMARKS

31

PMB Compliance

• There is no evidence that PMBs destabilise medical schemes

• In the absence of PMBs, members would never be certain what benefits they are covered for and schemes would compete to selectively reduce benefits

• There is evidence of over-charging, but not related to PMBs

• Resolving the problems associated with over-pricing and over-servicing require solution, but not through any diminution of PMBs

• Non-compliance with PMBs therefore represents an important conduct-related matter that requires resolution

32

Systemic non-compliance

• Inadequate enforcement leads to non-compliance resulting from competition between schemes

• PMBs defined as conditions make their prospective identification in the case of out-of-hospital claims difficult – a situation that can be exploited by schemes

• Although there is no evidence of systematic gaming by providers, it is possible for them to abuse a PMB system

33

END