On the proposed amendments to the National Health Act

The Board of Healthcare Funders of Southern Africa welcomes the Amendment Bill and supports in principle the proposal of a collective bargaining process.

It seems that the Minister of Health has taken to heart some of the issues raised by the medical schemes industry at the Healthcare Indaba in September 2007, as the Bill proposes an enforced cap for a tariff on Prescribed Minimum Benefits (PMBs).

Currently there is little transparency in pricing and costs of healthcare services because the NHRPL process is voluntary. The bargaining chamber process will compel transparency as all submissions will be subject to rigorous and robust scrutiny to arrive at fair and reasonable prices for healthcare services.

Lynne Carlisle: Business Day,

WIDESPREAD changes to SA's present range of prescribed medical benefits (PMBs), formally under review, have been proposed to the government by the medical schemes sector to make private healthcare affordable to more South Africans and extend cover to members.

Heidi Kruger, head of corporate communications at the Board of Healthcare Funders (BHF), says the concept of a standard, basic set of health services provided by every medical scheme for the protection of its members is laudable.

However, she says the current set of PMBs set out in the Medical Schemes Act of 1998, which consist of 271 referred-based conditions and 25 chronic conditions, have had many unintended consequences, including:

SAPA,

SOUTH Africa's National Health System is on track and striving to meet the Millennium development goals by 2015, according to Health Minister Manto Tshabalala-Msimang. She said the national health plan had been on track since 1994. Tshabalala-Msimang made these remarks when she addressed the national consultative health forum on primary healthcare. The forum will deliberate on the progress the country has made in implementing primary healthcare in line with the Alma Ata Declaration which was adopted 30 years ago. The declaration focused on delivering healthcare to billions of people around the world by 2000. Tshabalala-Msimang said access to primary health services had improved with the removal of user fees and the building of an additional 1 600 clinics around the country. She said the immunisation drive in the country was at a record 85 percent. Tshabalala-Msimang said the country had improved access to water, sanitation and electricity. On HIV and AIDS, the minister said a 2006 antenatal survey showed a decline in HIV prevalence amongst the youth and pregnant women under the age of 20. She said TB rates were showing a decline while TB patients successfully finishing their treatment were on the increase.

Adele Shevel, The Times

WHILE the battle continues over the real drivers of healthcare spend, the Council for Medical Schemes is positioning brokers' independence as the next target in the fight against rising healthcare costs. The view of the Council for Medical Schemes is that the way the relationship between brokers and some medical scheme administrators is structured leads to lack of independence on the part of brokers. This impacts on consumers in that they are not provided unbiased information. Alex van den Heever, senior adviser to the council, said that some schemes had contracts that prevented brokers from speaking negatively about any particular scheme or administrator. The intention is to facilitate a significant paradigm shift. The document, which is set to be released later this month by the council, will be available to the public. One issue is that it is often not clear whether a broker is offering advice about a range of products, or is marketing a particular product. Selling a particular product should not be the same as offering independent advice. The council intends to resolve this problem this year. There were many "grimy" arrangements, according to Van den Heever, who said that for instance, there were administrators who had subcontracting arrangements with third parties. In some cases administrators did this to buy an independent broker's loyalty, Van den Heever said.

He added that legally, brokers' remuneration must be fixed at 3% of contributions, but some found ways of supplementing this. Also prohibited are upfront commissions which are often done through co-selling a product with insurance and linked products and sales. But this is also done at times. Van den Heever said that the systemic issue was not the level of the fees, but the nature of the advice. He said that council was working through each major component of medical scheme costs to look at whether there was a systemic problem and how these could be addressed. Last week the council released a report pinpointing the major cost drivers that are responsible for rising healthcare costs. It puts private hospitals at the top of the list, followed by medicines and specialists. The Hospital Association of South Africa (Hasa) came out with a statement questioning the accuracy and methodology of the research, and said it did not concur with its findings, for various reasons. Kurt Worrall-Clare, CEO of Hasa, said the research claimed that market consolidation had led to higher prices - but no alternative pricing methodology had been made regarding what the costs would have been had there been no consolidation. Also, the state-imposed moratorium on private health establishments that came into effect in 1996 "had the unfortunate consequence of barring new entrants from the market", said Worrall-Clare.

Adele Shevel: The Business Times,

SOUTH Africa's two largest private hospital groups have come out vehemently against the recommendation that medical schemes should bargain as a group and not individual entities. Private hospitals say this would defeat the intention of improving accessibility to healthcare as well as dilute competition. The Council for Medical Schemes has suggested collective bargaining for schemes, which has also been proposed by the Board of Healthcare Funders. Both Netcare and Medi-Clinic say not only would this contravene competition law, but it does not solve the problem of increased demand for healthcare. They say allegations that consolidation among private hospitals has led to concentration of power and expenditure increases is incorrect. The executives were irate that there had been no engagement with industry to collate information. Richard Friedland, CEO of Netcare, questioned whether the report was credible because it was based on "misinformation". Koert Pretorius, CEO of Medi- Clinic South Africa said in a statement that the Department of Health appeared to be biased in favour of the arguments advanced by medical schemes and unwilling to listen to counter arguments and proposals - including positive and innovative proposals on access and affordability - from Medi-Clinic and other private hospital groups. Pretorius said that private hospitals and medical aids were working from different sets of statistics supporting opposing conclusions. Hospitals felt sidelined in that they had not had an equal opportunity to influence legislation. Friedland said consolidation among private hospitals took place because returns in healthcare were not wonderful and single operators were struggling to survive. Private hospitals say rising spending is a product of price and volume, and in the past seven or eight years there has been a huge increase in utilisation. According to Statistics SA, private hospital inflation has come in below CPIX for the past five years. Since 1998, an additional R7-billion has been spent by medical schemes on hospitalisation, and this is attributed by hospitals to increased usage. The fear is that if this is the only information taken into account by the Department of Health, the industry might get regulation based on "misinformation". Private industry is currently tabling what it believes could be a solution to problems of accessibility. But it has not been able to present any model to the health ministry as scheduled meetings have all been cancelled. The model would incorporate several sectors of the healthcare industry, from private hospitals to funders to primary-care providers - and several of these operators are already on board. Friedland said it required "a number of indulgences" from government. This would include allowing private hospitals to buy drugs at state tender prices, which are 25% to 30% cheaper than industry prices. Hospitals are not allowed to mark up prices of medicines and make a profit from these products. It would involve the removal of VAT from the healthcare system and at the current 14% of R75-billion spent on the industry, would release about R10.5-billion. Also required would be a reduction of prescribed minimum benefits, which would reduce the minimum amount covered and costs. Friedland said Netcare could build a network of hospitals to provide this care, without duplicating the very expensive options. The current seven million people covered by medical schemes in South Africa spans Living Standard Measurements 8 to 10. The new model would allow coverage of LSM 4 to 7, covering between nine and 13 million people. This would remove a significant burden from the state. Private hospitals say the driver of access to medical scheme coverage is in fact the growth in number of employed individuals.

Laura du Preez: Personal Finance

THE Registrar of Medical Schemes is taking legal advice on how to respond to a recent Supreme Court of Appeal ruling that blocked his attempt to close down the medical gap cover products of a short- term insurer.

Patrick Masobe, the registrar, described the ruling as being “as clear as mud" and said he would decide by the end of next week what to do about the ruling that could potentially have huge implications for healthcare cover in the country.

In 2006, two years after a demarcation agreement between the registrar's office and life assurance industry put an end to life products that the registrar believed were undermining medical schemes, the same problems with short-term insurance products had not been resolved. As a result, Masobe applied to the Johannesburg High Court for an interdict preventing Alexander Forbes subsidiary Guardrisk Insurance from selling its AdmedGap and AdmedPulse policies.

About 130 000 policyholders enjoy cover under these policies, which offer cover for the difference between your medical bills and what your medical scheme pays out.

Typically, policyholders join cheaper medical scheme options offering cover at National Health Reference Price List (NHRPL) rates (previously known as medical scheme rates) and then take out gap cover to top up this cover to up to three times NHRPL rates - the rate at which many specialists and some hospitals charge for private healthcare.

The registrar has argued that these policies undermine medical scheme cover because they "cherry pick" those who are healthy and are able to get the insurance cover cheaply, leaving older, sicker people in the more comprehensive medical scheme options without the necessary subsidisation from younger, healthier members within their particular option.

In December 2006, the High Court found in favour of the registrar and ordered Guardrisk to close its products within three months. Had it stood, the judgment could have had implications for other short-term insurers selling health policies, including hospital cash plans.

But Guardrisk applied to the Supreme Court for leave to appeal and the case was heard last month. The recently released judgment dismisses the High Court order.

The registrar's only remaining legal course of action is to appeal to the Constitutional Court - a route he followed without success in a separate case on an issue over the rules of Genesis Medical Scheme.

The only other way the registrar could prevent a possible proliferation of gap cover products following the Supreme Court ruling would be to recommend that the Medical Schemes Act definition of the business of a medical scheme be amended.

Three clauses

The registrar's initial application for an interdict against Guardrisk was on the grounds that the insurer's products fell within the Act's definition of the business of a medical scheme and the products were not registered as medical schemes and fell foul of other provisions of the Act.

But Guardrisk argued that there were three clauses in the definition in the Act and that its products needed to comply with all of these in order to be regarded as doing the business of a medical scheme.

The three clauses relate to:

a) Providing for members to obtain healthcare services;
b) Assisting members to defray the cost of a healthcare service; and
c) Rendering a health service, either by the medical scheme itself, or by a supplier or suppliers with whom the medical scheme has contracted.

The High Court disagreed with Guardrisk, finding that because its policies defrayed expenditure incurred in connection with the rendering of any health service, it was doing the business of a medical scheme.

But the Supreme Court of Appeal, in a ruling by five consenting judges, says an entity does the business of a medical scheme if it does the activities described in a) and b) and, where applicable, c).

The Supreme Court dismissed the registrar's arguments that an interpretation of the business of a scheme in this way would undermine the purpose and aim of the Medical Schemes Act. It said there was no evidence of this on an analysis of the cost and benefits of Guardrisk's products compared to medical scheme membership and the constitution prevented Guardrisk from discriminating against potential policyholders on the grounds of, among others, age and disability.

The Appeal Court then states that "practical reality has shown that there exists a need for this type of insurance and there seems to be no reason why it should not be permitted". It did not elaborate on this point, but concluded that as a result, it says, the appeal must succeed.

Clarity on gap cover issue?

Masobe says it is not clear from the judgment on what grounds the Guardrisk products regarded as okay, and where the boundary lies between these and other products. The final decision cannot be determined rationally from the reasoning, leaving regulatory uncertainty, he says.

Herman Schoeman, Guardrisk's managing director, says the ruling clarifies what the short-term insurance industry has always argued and will put policyholders' minds at ease about their cover.

Schoeman says insurers need to act responsibly and Guardrisk has no desire to compete with medical schemes, but its products enable policyholders to protect themselves against financial hardship.

He says one of the Guardrisk policies recently paid out R58 000 to a woman who, despite being a medical scheme member, was not fully covered for a heart bypass.

The issue of topping up medical scheme cover with gap cover products is increasingly important in light of the above-inflation increases in medical scheme cover and the costs of medical services.

In addition, the high cost of medical scheme membership is driving consumers to take out other cheaper insurance products such as hospital cash plans - often in place of medical scheme cover. However, you should be very careful about taking out short-term insurance cover in place of medical scheme membership because short-term insurance products are renewable and can be cancelled by your insurer.

Standard Bank recently informed a pensioner couple that their health policy was no longer viable and gave them 30 days' notice of the termination of their cover.

The couple were offered R1 000 as compensation. However, should they attempt to get medical scheme cover at ages 64 and 67 and with one of them being diabetic, they are likely to face late-joiner penalties- possibly as high as three quarters of their contributions - as well as waiting periods, including a 12-month waiting period for the treatment of the pensioner's diabetes.

Tamlyn Stewart: The Times,

WOMEN will have to pay more than expected for the new cervical cancer vaccine, Cervarix, as pharmacies tack on as yet uncapped "dispensing fees".

Dispensing fees are still discretionary. The Department of Health introduced laws three years ago to limit the mark-ups pharmacists were allowed to charge on medicines - R26 for prescription medicines, and R16 for nonprescription medicines.

Pharmacists argued that these amounts were too low and the limits have been suspended until the legal challenge to them is decided.

The head of corporate communications for the Board of Healthcare Funders, Heidi Kruger, said: "We are concerned that the constructive legislation the government brought in to bring down the cost of medicines is not being seen by consumers because there is no clarity on pharmacists' professional fees."

Johan Bothma, national executive director of the community pharmacy sector of the Pharmaceutical Society of SA, said it was "not fair" to pharmacists for manufacturers to advertise their single-exit price - the maximum price they are allowed to charge - because it created expectations among consumers.

"Obviously, [consumers] will be charged more [than the manufacturer's single-exit price by the retailer]," said Bothma.

The medical director of drugs company GlaxoSmithKline, Dr Navin Singh, confirmed that the single exit price of the Cervarix vaccine was R700 an injection.

The vaccine is administered in a series of three injections.

Wynberg Pharmacy, in Cape Town, quoted R864 for an injection and Dischem, at Cresta shopping centre, in Johannesburg, said it would charge R827.60.

The Cancer Association of SA has called on the Department of Health to make the new cervical cancer vaccine freely available to the public.

The Medicines Control Council recently gave GlaxoSmithKline the go-ahead to distribute its cervical cancer vaccine in South Africa.

Rose Jacobs, head of health programmes for the association, told THE TIMES it "should be obligatory that all children in the schooling system complete the inoculation programme, which should include the cervical cancer vaccine". The sooner a child is vaccinated, the better, and 10 years would be an appropriate age, said Jacobs "because children are exposed to sexual activity while young."

She said the vaccine should be made available free to adults at clinics and by gynaecologists.

Department of Health spokesman Sibani Mngadi said the department would first have to determine the subtype of the human papilloma virus (HPV) prevalent in South Africa. This would indicate how effective the vaccine was likely to be in widespread treatment. Only then could the department consider making the drug freely available.

HPV, a common sexually transmitted infection in South Africa, is the cause of most cervical cancers.

Personal Finance,

THE Constitutional Court has dismissed an application by the Registrar of Medical Schemes for leave to appeal against a High Court judgment directing him to register the 2006 rules of Genesis Medical Scheme.

Patrick Masobe, the registrar, had previously been denied leave to appeal the Pretoria High Court ruling by that court and the Supreme Court. His legal options are now exhausted and the scheme's lawyers say that the registrar has now registered the scheme's 2006 rules.

The registrar has refused to register the scheme's rules since 2006, arguing that they are discriminatory.

Genesis successfully challenged Masobe's decision through the Council for Medical Schemes's appeal committee.

Masobe then appealed to the council's Appeal Board, but before the appeal was heard, Genesis obtained the High Court order declaring that Masobe did not have the right to such an appeal.

Masobe asked the Constitutional Court to hear his appeal because the registration of rules like Genesis's could result in "a systemic exclusion from medical scheme cover of the aged and sickly".

Cassian Coquelle, an attorney from Webber Wentzel Bowens, which represented Genesis, says the High Court judgment and the denied applications for leave to appeal could have implications for all rulings made by the Appeal Board where the registrar was the appellant. These rulings could in certain circumstances be set aside, he says.

Application for exemption from the provisions of the Competition Act - 14 March 2008

The Competition Commissioner’s ruling of 2004 which was aimed at promoting more competition in the private healthcare market and driving costs down has had the opposite effect. Instead, since the ruling, expenditure within this sector has soared.

The Board of Healthcare Funders (BHF) has on behalf of its members, 85% of medical schemes in South Africa, applied for exemption from provisions of the Competition Act No. 89 of 1998 that prohibits the medical scheme industry from working as a collective on matters such as setting tariffs and defining patient benefits.

The application seeks to deal with a host of unintended consequences arising from a ruling by the Competition Commission in 2004 that banned collective bargaining in the sector. This has brought about concerns on the continuity and the productivity of the medical scheme industry as a whole.

The key areas which the Board seeks to promote through the application exemption are:

In response to the HPCSA warning to practitioners against colluding with medical aid schemes and preferred provider networks administrators

One of the reasons The Board of Healthcare Funders’ Forensic Management Unit (BHF_FMU) was established, was to ensure that the investigation of fraud and abuse within the private healthcare sector, was conducted in an ethical, transparent and legal manner. The BHF_FMU will under no circumstances condone illegal or unethical conduct by any of its members, however, will strongly support and encourage its members to recover any monies lost due to fraud and abuse. It must be remembered that any monies lost by medical schemes due to fraud and abuse, in fact belong to the members contributing to those schemes and the trustees have an obligation to ensure that these monies are recovered as far as possible. Fraud and abuse contributes significantly to the high cost of private healthcare and in order to ensure the sustainability of the industry needs to be dealt with decisively. The industry is not only under pressure from consumers to control the cost of healthcare, but also from government.