Slindile Khanyile:

MEDICAL aid scheme members in South Africa paid the highest non-healthcare costs in the world, according to Heather McLeod, a professor at the department of statistics and actuarial science at the University of Stellenbosch. McLeod, who delivered a paper at the annual conference of the Board of Healthcare Funders, said these costs made up between 14 percent and 15 percent of medical aids' R60 billion of annual expenditure. This was because of the artificial distinction between schemes and administrators, she said. The country that came closest was Germany at 8 percent, and most countries that have social insurance were sitting at about 2 percent, she said, adding that something as high as 14 percent or 15 percent was the highest in the world. According to the 2006/07 annual report of the Council for Medical Schemes (CMS), the non-healthcare costs bill rose 3.7 percent to R8.3 billion. The figure comprises administration, net reinsurance, own facility costs, broker fees, managed care, trustee remuneration and bad debt. McLeod said the costs had risen from about R20 per member per month in 1974 to about R240 in 2006. In 2006 the average gross administration expenses for open schemes were R78 per beneficiary per month. For restricted schemes, the cost was R50.90. Referring to a study done in the 1980s and the 1990s by researcher Jean-Pierre Poullier for the Organisation for Economic Co-operation and Development, McLeod said that at that time, South Africa was at the same level as countries such as the US, France and Germany. Non-healthcare costs have been questioned by the government over the years as it scrutinised private healthcare. Manto Tshabalala-Msimang, the Health Minister, has said the three drivers of cost escalation were hospitals, specialists and administration fees. Jonathan Broomberg, the general manager for strategic risk management at Discovery Health, said there were many places where non-healthcare costs were higher than in South Africa, such as parts of the US and Canada. Broomberg, who had illustrated earlier how interventions through managed care would save Discovery's members at least R1.2 billion this year, said there was a need for a proper definition of non-healthcare costs. In the absence of those savings, the premiums would be much higher, because for every R1 that was paid to managed care, the scheme was saving R2.80. Data released in 2005 by the National Health Expenditure Accounts in the US showed that administration costs by private insurers made up 14.1 percent of spending. Stephen Harrison, a senior specialist for strategy at the Council for Medical Schemes (CMS), said the costs had levelled off, but there were still some isolated areas of high abnormal costs that related to governance. He said the CMS was still concerned about the brokers issue and whether consumers were getting proper value for money. Later this year, the CMS will put out a discussion document and ask for the public's comments on brokers, he added. There are more than 9 000 brokers, who are paid 3 percent of monthly premiums. Harrison said that medical scheme governance had to be strengthened to ensure that decisions were in the interest of members.