Healthcare Financing Flashcards
Health
A state of complete physical, mental and social well-being.
Not just the absence of disease.
Department of Health’s “Ten Point Plan”
- Providing strategic leadership and the creation of a social compact for better health outcomes
- Implementing National Health Insurance (NHI)
- Improving quality of health services
- Overhauling the health care system and improving its management
- Improving human resource planning, development and management
- Revitalising infrastructure
- Accelerating the implementation of the HIV/AIDS and STI National strategic plan
- Implementing mass mobilisation for better health among the population
- Reviewing the Drug Policy
- Strengthening research and development.
Two major classes of health products on offer in SA
- Medical schemes
- Health insurance
Medical schemes
Indemnity business. Medical schemes reimburse their members for actual expenditure on health. Run on a not-for-profit basis and are essentially mutual societies, owned by their members.
Health Insurance
Provided by short-term insurances and life offices.
The products were controversial and many designs have become illegal.
It now covers insurance products such as long term sickness, critical illness and disability cover.
Healthcare expenditure spread in SA
Currently estimated at R108 billion, equivalent to 7,7% of GDP.
- 60% flows to private intermediaries
- 40% flows through the public sector
Healthcare delivery in SA
- About 16-17% of the population are served by medical schemes.
- About 20% of the population are not covered by medical schemes but prefer to use private primary care doctors and pharmacies on an out-of-pocket basis. They are almost entirely dependent on the public sector for specialist and hospital care.
- The remaining 64% are dependent on the public sector.
A Medical Scheme according to the Medical Schemes Act of 1998
The business of undertaking liability in return for a premium or contribution in order to:
- Make provision for obtaining any “relevant service”
- Or in order to grant assistance in defraying expenditure on a health service
- Or to render a relevant health service, directly or by agreement with the medical scheme.
Define “relevant health service” under the medical scheme definition
- Examination, diagnosis, treatment, prevention or advice
- Prescription or supply of medicine, appliance or apparatus
- Ambulance service, accommodation in hospital, maternity or nursing home
- For a physical or mental defect, illness, deficiency or pregnancy.
Minimum amount of members for a med. scheme
6000 members
Explain how a medical scheme is a “not-for-profit” fund
The fund is built up from contributions by the members. The money in the fund belongs to the members. In addition to payments directly relating to the provision of healthcare for members, medical schemes will also have to pay an administrator.
Medical scheme administrator
Responsible for the daily running of the scheme, processing claims and making payments to healthcare providers.
3 forms of Medical scheme management
- Board of trustees
- Council for Medical Schemes
- Registrar of Medical Schemes
Board of Trustees
Each medical scheme is managed by a board of trustees, of which at least 50% are fund members.
The board must ensure that the interests of beneficiaries are protected at all times.
Council for Medical Schemes
Appointed by the Minister of Health.
- Oversees the activities of medical schemes
- Aims to protect the interests of beneficiaries and controls/co-ordinates the activities of schemes accordingly.
- Measures quality, collects information on private healthcare and advises the Minister.
The Registrar of Medical Schemes
The Chief Executive Officer of the Council for Medical Schemes and is also appointed by the Minister.
The Registrar has the power to specify steps to ensure the financial soundness of medical schemes and can direct schemes to ammend their rules or in sever cases put the scheme under curatorship.
Restricted membership schemes
Medical schemes, which are allowed to restrict who may be come a member.
Definitions of restricted membership
- Employment in profession, trade, industry or calling
- Employment or former employment by particular employer, class of employers
- Membership or former membership of profession, professional association or union.
Open enrolment
The obligation of open schemes to accept anyone who wants to become a member, at standard rates.
Prescribed Minimum Benefits
A package of defined treatments for particular defined diagnoses as well as coverage for a set of 25 chronic illnesses. Schemes must provide full cover for the minimum benefits package in at least one setting, which could be a public hospital system.
Community-Rating
The principle by which underwriting and charging according to risk have not been allowed since 2003.
Everyone must be charged the same standard rate, regardless of age or state of health.
Methods to prevent anti-selection in medical schemes
- Waiting periods
- Late-joiner penalties
- Restrict option movements
Explain the idea of co-payments
Medical Schemes define their benefits as a percentage of NHRPL. The member is responsible for the balance of the amount known as co-payment.
Schemes may not charge co-payments for PMBs.
4 Cases to which the high rate of increase in contributions can be attributed:
- Medical inflation
- Over-utilisation by members
- Over-servicing by health care providers
- Fraud
Medical inflation
The increase in the cost of goods and services in the medical marketplace has exceeded the general rate of price inflation the in the market.
On of the contributing factors is that drugs and equipment are often imported, and the declining exchange rate has forced up local prices.
Over-utilisation by members
Members often feel that they must claim more to “make use of” their higher contributions. This “use it or lose it” philosophy threatens the viability of medical schemes.
Over-servicing by health care providers
Health care providers are mostly remunerated on a fee-for-service basis, and thus the only way they can increase their income is by providing more (sometime unnecessary) services.
Fraud
Fraud ranges from a member giving their medical scheme membership card to another family member, to systematic money lending by practitioners who fictitiously bill the scheme for procedures not carried out.
Defined benefits
- Day-to-day medical costs
- Chronic medication
- Major medical costs
How are medical schemes built on a foundation of cross-subsidies?
The healthy always subsidise the sick. Legislation requires that the young subsidise the old.
Health insurance
Insurance designed to ease the financial burden caused by adverse changes in health, due to either sickness or injury.
Demarcation of health insurance
The drawing of the line between health insurance and medical schemes business.
Objectives of demarcation regulations
- Specify types of policies that may be sold in the long- and short term insurance market.
- Provide that a health insurance policy must not be directly linked to the cost of medical care and not harm the medical schemes environment
Why are demarcation regulations required?
To strengthen the social solidarity principle that underpins medical schemes.
Solidarity principle
The principle under which contributions are paid equally or according to some other factor such as income or employment status.
Mutuality principle
The principle under which contributions are paid according to individual or group risk.
The policy holder pays a premium determined by the holder’s age, health status or income.
Basic principles of health insurance policy
- Binding contract issued by an insurance company.
- Promises to pay for certain stated benefits when the individual is ill or injured.
- Premium is directly related to the age, health status or income of the individual.
- Policies are subject to underwriting
Basic principles of medical schemes
- Regulated in terms of the Medical Schemes Act
- Non-profit organisations, belonging to their members.
- Operate through collective pooling of good and bad risks, and may not discriminate based on age or health status.
- Contributions apply universally to all, and may only vary in respect of the cover provided.
- Different benefits options are priced differently, depending of the level of cover afforded.
Explain the Health insurance vs. Medical scheme problem
It is contented that certain health insurance products cause harm to the medical schemes environment by attracting younger and generally healthy members out of medical schemes.
If left unchecked, this could result in increasing costs for the older and less healthy who remain dependent on medical schemes for their cover.
How do regulations address the Health insurance vs. Medical scheme problem
Regulations provide for types of policies that will be allowed to be sold.
They provide that a health insurance policy must not be directly linked to the cost of the medical care and must not cause harm to the medical schemes environment.
Which health insurance products will be allowed
To the extent that a health insurance policy provides for loss of income and contingency expenses associated with a health event but are not directly related to medical expenses.
Restrictions will be imposed on the marketing of health insurance policies to ensure that the public clearly understand that the policy is not a substitute for a medical scheme. They may not include the term “medical” and “hospital” or any derivative thereof in marketing material.
Managed care
Using management techniques in the delivery of healthcare.
To provide appropriate care to appropriate people in an appropriate setting at an appropriate cost.
Capitation basis of contracting doctors
Instead of paying on a fee-for-service basis, the doctor receives a fixed payment each month for all the patients under his or her care, whether they are ill or not.
Managed care plans provision
Generally provide benefits without financial limits, but the care must be obtained from a particular preferred provider.
Distinguish between social health insurance and national health insurance
SHI: Only those who contribute are entitled to benefits.
NHI: Taxpayers would be the contributors but everyone would be entitled to benefits.
Payment structures
- Fee for service
- Capitation
- Fixed fees
Principles for a National Health Insurance system
- Medical schemes form the basis
- Compulsory membership for formal sector employees and dependants
- Schemes may not exclude high risk
- Basic package (PMB) of care to be statutorily defined
- Contributions for basic package: income-related
- Pooled in central Equalisation Fund
- Schemes have option to provide benefits over & above Basic Care Package
- Long term goal for all citizens, including unemployed, to be covered under the NHI system.
