Runaway medical costs – everyone’s problem!

The steep increase in medical costs is a global issue, and the effects can also be seen in South Africa and our Scheme…

The global picture…

The escalation of healthcare costs is an international trend. There are many reasons for this sharp increase. Thanks to technology, we are becoming older, but due to our generally unhealthy lifestyles, we are becoming more and more disease-ridden. That same technology (and the exciting advances that are made each day) is unfortunately quite expensive. It is also a fact that healthcare has become a business – healthcare providers have to claim and hospitals (of which there are an increasing number of private ones) need to fill their beds to stay in business.

The picture in South Africa

In South Africa, we have a few problems of our own contributing to the increase in healthcare costs. Our weak economy means that imported medicines and new technology are especially expensive and most of our healthcare costs are not regulated. The trend of over-utilisation, where many more patients are encouraged to have elective in-hospital procedures, further adds to the financial burden. Prescribed Minimum Benefit (PMB) legislation also has loopholes that allow service providers to exploit the system for their own financial gain. This is why many schemes will probably be forced to implement double-digit contribution increases for 2019.

The Scheme…

As a Scheme, we have not been immune to these rising costs. Claims have been higher than budgeted for, and the Scheme is expected to see a significant decrease in the level of reserves for the 2018 benefit year, with the solvency rate expected to drop from 32.2% at the end of 2017 to around 28.7% at the end of 2018. This will mean that there is much more pressure to rebalance contributions and benefits for the next benefit year and find innovative ways of keeping costs down… much like the rest of the industry is trying to do.

WHAT THE TRUSTEES ARE DOING ABOUT THIS

The Trustees explored various ways in which to curb rising costs, on the one hand, and offer members a way of keeping contributions affordable, on the other hand. We will send more information about these measures as part of our communication for the new benefit year, pending approval by the Council for Medical Schemes.