Centre for
Actuarial
Research
The Costing of
Prescribed Minimum
Benefits
January 2003
PMB Study Data







Data from Medscheme Data Warehouse
Data covers 2001 calendar year, extracted in July 2002
Data fully run-off, no adjustment for IBNR
90 options
31 schemes
18.071 million beneficiary months of data
Average exposure of 1,505,917 beneficiaries
Centre for
Actuarial
Research
Cluster Analysis
and Applicability to
the Industry
Centre for
Actuarial
Research
Cluster Analysis


Different clusters experience different benefit utilisation,
costs and disease profiles. Provider behaviour differs by
cluster, even within the same hospital facility.
Four distinct clusters:
 High contains options with older, 'whiter' members with
high utilisation;
 Medium-older contains options with medium utilisation
and older members;
 Medium-younger contains options with medium
utilisation and younger members; and
 Low contains options with younger, 'blacker' members
with low utilisation.
Centre for
Actuarial
Research
Cluster Analysis
8.8%
High
9.6%
Medium-older
Medium-younger
Low
10.1%
71.6%
Centre for
Actuarial
Research
Cluster Analysis




Study contains more Low cluster beneficiaries than the
industry.
For industry comparisons, use Weighted industry price.
 This uses 50% of the costs of the Low cluster and
100% of the other clusters.
Low cluster is more relevant to the emerging low-cost
option environment.
High cluster is used to give an upper limit to the PMB
price. Would only be applicable to a few high utilisation
options.
Centre for
Actuarial
Research
Cost of PMBs
Centre for
Actuarial
Research
Claim Value by Status
Included
32.1%
Not Classifiable
Out
55.1%
12.8%
Centre for
Actuarial
Research
Proportion of Total Cost of
PMBs by Disease Chapter
Mental Illness Other
2.6%
Haem-Infect 3.2%
CNS
9.5%
3.9%
Eye
3.9%
ENT
1.6%
Obstetrics Neonate
17.3%
Respiratory
10.5%
Gynaecology
4.5%
Genitourinary
2.7%
Endocrine
2.2%
Skin/Breast
3.4%
MS/Trauma
6.3%
Cardiac
12.8%
HSP
3.2%
GIT
12.2%
Centre for
Actuarial
Research
Total
Other
Mental Illness
Haem-Infect
Obstetrics - Neonate
Gynaecology
Genitourinary
Endocrine
Skin/Breast
MS/Trauma
HSP
GIT
Cardiac
Respiratory
ENT
Eye
CNS
Average Cost
Average Cost of PMBs by
Disease Chapter
R 20,000
R 18,000
R 16,000
R 14,000
R 12,000
R 10,000
R 8,000
R 6,000
R 4,000
R 2,000
R0
Centre for
Actuarial
Research
Cost of PMBs
by Age
Centre for
Actuarial
Research
Incidence of PMB Admissions
by Age
450
400
350
Incidence
All Ages
250
200
150
97.6850
100
All ages
75+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15- 19
10-14
5-9
0
1-4
50
0- 1
Incidence
300
Centre for
Actuarial
Research
Average Cost of PMBs by Age
18,000
16,000
14,000
10,000
R9 127
8,000
6,000
4,000
Average
Cost for All
Ages
All ages
75+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0
1-4
2,000
0-1
Average Cost
12,000
Centre for
Actuarial
Research
Raw PMB Price by Age (pbpa)
R 5,000
R 4,500
R 4,000
R 3,500
Average
Price for All
Ages
R 3,000
R 2,500
R 2,000
R 1,500
R 1,000
R 891.56
pbpa
R 500
All ages
75+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0-1
R0
Centre for
Actuarial
Research
Raw PMB Price by Age and
Cluster (pbpa)
R 6,000
Total
High
Medium-older
Medium-younger
Low
R 5,000
R 4,000
R 3,000
R 2,000
R 1,000
75+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0-1
R0
Centre for
Actuarial
Research
Adjustments to the
Raw Price of the
PMB Package
Centre for
Actuarial
Research
Adjustments to Raw Price








Uncertainty in Definition of the PMB Package
 Recoding the OUT Group
 Recoding the NC Group
Costs of hospital management programme
Costs of hospital and related claims administration
Costs of chemotherapy and dialysis
Costs related to HIV/AIDS
Estimate of the cost of ambulatory care
Costs of ambulatory administration
Reduction for cost of delivery in the public sector
Centre for
Actuarial
Research
Full Price of PMB Package

Four components :
 In-patient PMB package price based on full data in
study (high degree of certainty)
 Portion of price for which uncertainty exists in PMB
definition (proportion to include of NC and OUT)
 Margin added for ambulatory costs
 Non-healthcare costs.

Note: Prices should not be used blindly in pricing work.
Contact a professional for assistance.
Centre for
Actuarial
Research
Full Price of PMBs (excl CDL)
R 2,500.00
Non-healthcare costs
Ambulatory package
Uncertainty in PMB definition
In-patient PMB package
R2 432.41
R2 010.90
R1 956.01
Per Beneficiary Per Annum
R 2,000.00
R1 479.04
R1 489.49
R 1,500.00
R1 343.43
R1 100.08
R 1,000.00
R 500.00
R 0.00
High
Medium- Medium- High and
older
Younger Medium
Low
Total
Study
Weighted
Total
Centre for
Actuarial
Research
Conclusions
Centre for
Actuarial
Research
Improvements to PMB Definition




All stakeholders need an unambiguous definition of the
PMB package.
The Council for Medical Schemes is requested to
reconsider the definition of PMBs in the Regulations and
to include clear diagnosis and procedure codes in an
amendment as soon as possible.
Tighter definition of PMBs would ensure more focussed
attention on accurate coding from providers and
administrators.
Attention should be given to the nature of the chapters and
to bringing them in line with clinical practice or a particular
coding standard.
Centre for
Actuarial
Research
Comprehensive Crosswalk



Provides a powerful tool for rapid application of PMB
status to hospital admissions based on ICD-10 coding
Strongly recommend that this should be made freely
available to other medical schemes and administrators, in
order to improve their understanding and management of
PMBs.
Recommend utilising this tool, or one developed from this
work, to define and manage the PMB package in future.
Centre for
Actuarial
Research
Centre for
Actuarial
Research
The Costing of the
Chronic Disease
List
January 2003
Registration of Beneficiaries
for Chronic Medicine
Other Chronic
Conditions
22.9%
CDL Conditions
77.1%
Centre for
Actuarial
Research
Prevalence of CDL Registrations
Other 18 conditions
7.6%
Osteoarthritis
3.4%
Anti-Coagulating
Therapy
4.9%
Asthma
12.2%
Hypothyroidism
5.1%
Coronary Artery
Disease
3.8%
Diabetes Mellitus Type
1&2
10.6%
Hypertension
37.3%
Epilepsy
2.6%
Hyperlipidaemia
12.5%
Centre for
Actuarial
Research
Beneficiaries Registered for
CDL Conditions
3 diseases
9.2%
4 or more
diseases
3.3%
2 diseases
25.0%
1 disease
62.5%
Centre for
Actuarial
Research
Cost of Each CDL
Condition
Centre for
Actuarial
Research
Average Cost per Case
Addison's Disease
Anti-Coagulating
Asthma
Bipolar Mood Disorder
Bronchiectasis
Cardiac Failure
Cardiomyopathy
Chronic Obs. Pulmon.
Chronic Renal Disease
Coronary Artery
Crohn's Disease
Cushing's Disease
Diabetes Insipidus
Diabetes Mellitus T1&2
Dysrhythmias
Epilepsy
Glaucoma
Hyperlipidaemia
Hypertension
Hypothyroidism
Multiple Sclerosis
Osteoarthritis
Parkinson's Disease
Rheumatoid Arthritis
Schizophrenia
Systemic Lupus
Ulcerative colitis
Total excl. Hemophilia
no cases
R21 013
0
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000
Average Cost per case
Primary Drugs
Secondary Chronic Drugs
Single diseases only
Other Acute
Centre for
Actuarial
Research
Average Cost per Case
Diabetes, Hypertension
Hyperlipid., Hypertension
Hypertension, Osteoarthritis
Hypertension, Hypothyroid.
Asthma; Hypertension
Anti-Coag, Hypertension
Anti-Coag., Hyperlipid., Hyperten.
Diabetes, Hyperlipid., Hyperten.
Coronary Artery, Hyperlipid.
Top 9 Multiple Diseases
Other Multiple Diseases
All Single Diseases
All CDL Diseases
0
Primary Drugs
1,000
2,000 3,000 4,000
Secondary Chronic Drugs
Multiple diseases
5,000 6,000 7,000 8,000
9,000 10,000
Average Cost per case
Other Acute
Centre for
Actuarial
Research
0.00
0.31
Addison's Disease
Anti-Coagulating Therapy
Asthma
Bipolar Mood Disorder
Bronchiectasis
Cardiac Failure
Cardiomyopathy
Chronic Obs. Pulmon. Disease
Chronic Renal Disease
Coronary Artery Disease
Crohn's Disease
Diabetes Insipidus
Diabetes Mellitus T1&2
Dysrhythmias
Epilepsy
Glaucoma
Hyperlipidaemia
Hypertension
Hypothyroidism
Multiple Sclerosis
Osteoarthritis
Parkinson's Disease
Rheumatoid Arthritis
Schizophrenia
Systemic Lupus Erythromatosis
Ulcerative colitis
Diabetes, Hypertension
Hyperlipid., Hypertension
Hypertension, Osteoarthritis
Hypertension, Hypothyroid.
Asthma; Hypertension
Anti-Coag, Hypertension
Anti-Coag., Hyperlipid., Hyperten.
Diabetes, Hyperlipid., Hyperten.
Coronary Artery, Hyperlipid.
Prevalence
All
Diseases
16.94
0.32
0.02
0.26
0.10
0.49
0.03
0.60
0.07
0.01
4.98
0.43
2.57
0.44
3.81
29.88
2.46
0.02
1.63
0.11
0.86
0.15
0.09
0.19
6.57
4.43
2.19
1.49
1.84
1.28
1.07
1.16
0.83
0
5
10
15
20
25
Incidence per 1000 beneficiaries
30
Centre for
Actuarial
Research
CDL Package by
Age
Centre for
Actuarial
Research
Age of Claiming Beneficiaries
for Selected Diseases
12%
10%
8%
6%
4%
2%
Asthma
Hypertension
Diabetes, Hypertension
Other CDL diseases
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0%
0-1
Proportion of Claiming Beneficiaries
14%
Diabetes Mellitus T1&2
Centre for
Actuarial
Research
All ages
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0-1
Prevalence per 1000 beneficiaries
CDL Prevalence by Age
600
500
400
300
200
100
0
Centre for
Actuarial
Research
All Ages
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0
Average Cost per case pa
Average Cost of CDL by Age
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Centre for
Actuarial
Research
All Ages
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0
Price per beneficiary pa
Raw Price of CDL by Age
2,500
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
0
Centre for
Actuarial
Research
CDL Package by
Cluster
Centre for
Actuarial
Research
Raw Price by Cluster
1000
Price per beneficiary pa
900
800
700
600
500
400
300
200
100
0
High
Mediumolder
All Single Diseases
Mediumyounger
High and
Medium
Top 9 Multiple Diseases
Additional
Low
Total
Other Multiple Diseases
Centre for
Actuarial
Research
Total
High
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0
Price per beneficiary pa
Raw Price High vs. Low Cluster
3,000
2,500
2,000
1,500
1,000
500
0
Low
Centre for
Actuarial
Research
Differences Between Clusters


Age profile differences explain roughly two-thirds of
difference in raw cluster prices.
Other differences are probably due to a combination of
“the four P’s”:
 variation in Prevalence rates of important conditions;
 Presentation or manifestation of conditions;
 Provider choice (GP vs. specialist and the
management or prescribing habits of each); and
 benefits available within the health care Plan.
Centre for
Actuarial
Research
Adjustments to the
Raw Price of the
CDL Package
Centre for
Actuarial
Research
Adjustments to Raw Price









Haemophilia
Removal of three diseases from final Regulations
Cost of diagnosis and medical management
Adjustment for compliance
Adjustment for limits
Adjustment for co-payments
Costs of chronic medicine management programme
Costs of administration
Reduction for cost of delivery in the public sector
Centre for
Actuarial
Research
Full Price of the CDL
Package
Centre for
Actuarial
Research
Full Price of CDL Package

Four components:
 Medicine component, based on full data in study (high
degree of certainty)
 Portion of price for which uncertainty exists until
package is fully defined and allowance for impact of
package being mandatory
 Amount added for medical management costs
 Non-healthcare costs.

Note: Prices should not be used blindly in pricing work.
Contact a professional for assistance.
Centre for
Actuarial
Research
Full Price CDL Package
R 1,500
Non-healthcare costs
Per Beneficiary Per Annum
Medical management est.
Uncertainty in CDL
R 1,250
CDL Medicine Package
R 1,000
R 750
R 500
R 250
R0
High
Medium- Medium- High and
older Younger Medium
Low
Additional
Total
Study
Weighted
Total
Centre for
Actuarial
Research
Conclusions
Centre for
Actuarial
Research
Price in Mandatory Environment




Expect change in member and provider behaviour from
existing environment.
Uncertainty exists in price until package is fully defined.
Have included an effective 30% margin on medicine
component of CDL package.
Consortium opinion that collective margin of 30% on
medicine component is sufficiently conservative to cover
this uncertainty in the pricing.
Centre for
Actuarial
Research
Need for Mandatory Package
2,500
2,000
1,750
1,500
1,250
1,000
750
500
Community rated price
250
All Ages
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0
0
Price per beneficiary pa
2,250
Centre for
Actuarial
Research
Need for Mandatory Package



Real danger that open schemes will pursue more
aggressive self-seeking behaviour and limit chronic
medicine benefits to discourage older members and
improve their community rate relative to their competitors.
Substantial broker activity and churning of members
worsens this incentive.
A mandatory minimum package of chronic medicine and
management benefits is essential for reducing
opportunistic behaviour by some schemes.
Centre for
Actuarial
Research
Further Policy Issues

Membership of medical schemes needs to be compulsory,
rather than voluntary, for medium to higher income groups
to stabilise the system.

A risk equalisation system between medical schemes,
based on the Prescribed Minimum Benefit package will
reduce the opportunistic profiting from risk selection still
further.
Centre for
Actuarial
Research
Composition of the CDL List


Brief did not extend to consider diseases outside of the
draft list and whether any should have been included.
Need for a process of chronic disease prioritisation in
medical schemes in order to inform the rationing process
in future.
Centre for
Actuarial
Research
Definition of CDL Package





Draft of Treatment Guidelines for Chronic Disease List
Conditions
Based on Standard Treatment Guidelines and Essential
Drugs List published by DoH in 1998.
Appoint task team for documenting and maintaining
treatment algorithms for CDL conditions.
Actuarial and pricing expertise to estimate the price of the
algorithms. Iterative process of refining algorithms.
Project manager to ensure process completed in time for
pricing in August 2003 if implementation is 1 January
2004.
Centre for
Actuarial
Research
Complementary and Traditional
Medicine






Serious concerns about the implications of legislating the
algorithms for CDL conditions.
Only one approach to treatment will receive funding from
medical schemes: entrenchment of an allopathic approach
to treatment, largely based on drug interventions.
Hard won legal freedoms to operate must not be negated by
preventing funding of complementary medicine and African
traditional medicine for CDL conditions.
Allied Health Professions Council with 11 modalities.
Consumers will increasingly question health plans.
Inclusion unlikely to be simple and debate will be vigorous.
Centre for
Actuarial
Research
Centre for
Actuarial
Research
The Impact of PMBs
on Affordability
January 2003
Approach to Affordability



Compare price of components of PMB package to reported
benefits and contributions of medical schemes.
 Industry level
 Scheme level
 Option level
Compare price of PMB package to published contribution
tables for open scheme options. Focus on low-cost options.
Compare price of PMB package to income levels of existing
members and potential members of medical schemes.
Impact of employer and per capita subsidies.
Centre for
Actuarial
Research
Price of the PMB
Package
Centre for
Actuarial
Research
Price of Complete PMB Package
Non-healthcare costs
CDL Medicine Package
Ambulatory PMB package
Inpatient PMB package
R 4,000
Per Beneficiary Per Annum
R 3,500
R 3,000
R 2,500
R 2,000
R 1,500
R 1,000
R 500
R0
High
Medium- Medium- High and
older
Younger Medium
Low
Total
Study
Weighted
Total
Centre for
Actuarial
Research
Private Sector PMB Package
per beneficiary per annum
Price pbpa in 2001 Rand
terms
Inpatient PMB package
Ambulatory PMB package
CDL Medicine Package
Non-healthcare costs
Complete PMB package
Private Sector
High and
Medium
Low
R 1,994.95
R 1,591.46
R 867.47
R 1,073.31
R 1,188.01
R 477.24
R 416.72
R 308.12
R 339.00
R 356.20
R 1,154.35
R 805.33
R 286.33
R 421.58
R 499.09
R 170.96
R 141.97
R 89.55
R 104.82
R 113.47
R 3,797.50
R 2,955.48
R 1,551.47
R 1,938.71
R 2,156.78
High
Total Study
Weighted
Industry
Centre for
Actuarial
Research
Non-Healthcare Expenditure
on PMB Package
Non-healthcare
Expenditure as a
Proportion of …
High
Mediumolder
MediumYounger
High and
Medium
Low
Total
Study
Weighted
Total
Total Inpatient package
3.9%
4.0%
5.0%
4.3%
5.4%
4.9%
4.7%
Total Outpatient package
2.3%
2.3%
2.7%
2.4%
2.7%
2.6%
2.5%
Total CDL package
5.9%
6.8%
6.8%
6.4%
7.8%
7.3%
7.2%
Complete PMB package
4.5%
4.7%
5.4%
4.8%
5.8%
5.4%
5.3%
Well below Registrar’s benchmark of
10% of total expenditure
Centre for
Actuarial
Research
Public Sector Complete PMB
Package
Private sector cost
Total CDL package
Total Outpatient package
Total Inpatient package
R 4,000
Per Beneficiary Per Annum
R 3,500
R 3,000
R 2,500
R 2,000
R 1,500
R 1,000
R 500
R0
High
Medium- Medium- High and
older
Younger Medium
Low
Total
Study
Weighted
Total
Centre for
Actuarial
Research
Public Sector PMB Package
per beneficiary per annum
Price pbpa in 2001 Rand
terms
High and
Medium
Low
R 1,465.44
R 1,173.53
R 648.89
R 798.05
R 881.17
Total Outpatient package
R 251.27
R 207.78
R 129.64
R 151.85
R 164.23
Total CDL package
R 708.76
R 520.56
R 237.08
R 311.83
R 354.66
R 2,425.48
R 1,901.87
R 1,015.61
R 1,261.73
R 1,400.07
Total Inpatient package
Complete PMB package
Public Sector
High
Total Study
Weighted
Industry
Centre for
Actuarial
Research
Price of PMB Package by Age
12,000
Total CDL package
Total Outpatient package
10,000
Total Inpatient package
Complete PMB package
Public sector
6,000
4,000
2,000
All ages
Missing
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0
0
Price pbpa
8,000
Centre for
Actuarial
Research
Price of PMB Package by Age


Note that for all age bands over 40, the PMB price by age
exceeds the community-rated PMB price.
This explains the incentive open schemes have to attract
and retain younger and healthier members.
Centre for
Actuarial
Research
Complete PMB Package
for family of four per month
Price per family per month
(2001 Rands)
High
Total Inpatient package
R 556.37
R 466.84
R 291.98
R 345.27
R 373.29
R 98.28
R 84.98
R 59.00
R 66.93
R 71.09
Toal CDL package
R 338.95
R 259.47
R 138.33
R 176.00
R 195.94
Complete PMB package
Private Sector
R 993.59
R 811.28
R 489.31
R 588.19
R 640.33
Complete PMB package
Public Sector
R 638.26
R 525.01
R 321.15
R 383.75
R 416.76
Total Outpatient package
High and
Medium
Low
Total Study
Weighted
Industry
Centre for
Actuarial
Research
Affordability
Relative to Reported
Benefits and
Contributions
Centre for
Actuarial
Research
Beneficiaries 2001
Bargaining
Council
Schemes
3.8%
Restricted
Schemes
28.3%
Open Schemes
67.9%
Source : Registrar’s Returns 2001
Centre for
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Research
Total Benefits
R 5,000
4,833
4,488
4,591
Per Beneficiary per Annum
R 4,500
R 4,000
3,627
R 3,500
R 3,000
R 2,500
2,043
R 2,000
1,462
R 1,500
R 1,000
Source : Registrar’s Returns 2001
All Registered
Schemes
Restricted
Schemes
Open Schemes
PMB High
Cluster
PMB Low
Cluster
R0
PMB Industry
Weighted
R 500
Centre for
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Research
Total Contributions
Savings Contributions
Pooled Contributions
599
R 5,000
433
549
3,798
R 4,000
2,157
R 2,000
4,877
5,192
4,971
All Registered
Schemes
R 3,000
Restricted
Schemes
Per Beneficiary per Annum
R 6,000
1,551
Source : Registrar’s Returns 2001
Open Schemes
PMB High
Cluster
PMB Low
Cluster
R0
PMB Industry
Weighted
R 1,000
Centre for
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Non-Healthcare Expenditure
R 1,000
921
Administration and Managed Care
169
R 800
786
110
R 700
R 600
501
5
R 500
752
676
R 300
Source : Registrar’s Returns 2001
Restricted
Schemes
R0
Open Schemes
113
-
496
171
-
PMB High
Cluster
R 100
90
-
PMB Industry
Weighted
R 200
All Registered
Schemes
R 400
PMB Low
Cluster
Per Beneficiary per Annum
R 900
Other Non-Healthcare
Centre for
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5,475
5,625
5,520
All Registered
Schemes
R 5,000
Private Sector
Public Sector
3,798
R 4,000
R 3,000
2,425
2,157
R 2,000
1,551
1,400
1,016
PMB Industry
Weighted
PMB Low
Cluster
R0
Source : Registrar’s Returns 2001
Open Schemes
R 1,000
PMB High
Cluster
Per Beneficiary per Annum
R 6,000
Restricted
Schemes
Public Sector
Centre for
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Exempt Scheme Benefits 2000
Total Benefits pbpm by Scheme 2000
335
Overall Registered
205
Overall Exempt
501
M EDCOR
76
Electrical Industry (Cape)
10
Natal Furniture Wo rkers Sick B enefit So ciety
40
Furniture & A llied Wo rkers Sick B enefit So ciety(S.W.D.)
36
Natal Hairdressers Sick B enefit Fund
203
Hairmed
344
Scheme
M o to r Industry M edical A id Fund (M IM ED)
87
A uto wo rkers M edical A id Fund (A uto med)
East Lo ndo n B uilding Industry M edical A id Fund (ELB IM A F)
187
Clothing Industry
42
B uilding Industry M edical A id Fund (Western Cape)
Building Industry
128
B uilding Industry M edical A id Fund (Gauteng)
99
B uilding Industry M edical A id Fund (Eastern Cape)
Motor Industry
29
B uilding Industry M edical A id Fund (B lo emfo ntein)
MEDCOR
51
B argaining Co uncil fo r the B uilding Industry (Kimberly)
23
Knitting Industry M edical B enefit So ciety (No rthern A reas)
Hairdressing Industry
26
Clo thing Industry Sick B enefit Fund (Natal)
Furniture Industry
32
Clo thing Industry M edical B enefit So ciety (No rthern A reas)
26
Clo thing Industry M edical B enefit Scheme (FS & NC)
Electrical Industry
21
Clo thing Industry Health Care Fund (Cape To wn)
0
100
200
300
400
500
Rands pbpm
Low cluster PMB contribution for public sector in 2001
Source : Registrar’s Returns 2000
Centre for
Actuarial
Research
Affordability Relative
to Published
Contribution Tables
Centre for
Actuarial
Research
Options Available to Benchmark Family
Weighted industry PMB package for a family of four
Options
R 640.33 per month
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Contributions per fam ily per m onth
Source : CARE Monograph
Centre for
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Research
Primary Care Network Options
843
Fedsure Larona PrimeCure
638
Ingwe PrimeCure
728
Ingwe CareCross
966
Medihelp Nucleus
730
Medimed PrimeCure
824
Medimed ECIPA, UDIPA
657
Metropolitan Primary Plus
576
MSP/Sizwe PrimeCure
780
MSP/Sizwe Ecipamed
904
MSP/Sizwe MediCross
732
NMP PrimeCure
280
Protector Health Primary
480
Protector Health Primary Plus
841
Provia SilverCure
810
Spectramed Spectra Alliance
672
Topmed Bophelo Network
635
Vulamed Standard
321
Low cluster PMB Public Sector
489
Low cluster PMB Private Sector
0
100
200
300
400
500
600
700
800
900
1,000
Contribution per family per month
Source : CARE Monograph
Centre for
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Research
Affordability
Relative to Income
Centre for
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Research
Income Levels
Medical Scheme Beneficiaries
4.6%
3.7%
8.2%
R0
Don't know or missing
R1-R799
R800-R1 800
13.5%
47.1%
R1 800-R2 499
R2 500-R4 999
R5 000-R9 999
R10 000+
Refuse
5.0%
7.4%
5.0%
Source : OHS 1999
5.4%
Centre for
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Research
Income Profile
Medical Scheme Beneficiaries
800,000
700,000
600,000
Refuse
R10 000+
R5 000-R9 999
R2 500-R4 999
R1 800-R2 499
R800-R1 800
R1-R799
Don't know or missing
R0
500,000
400,000
300,000
200,000
100,000
Source : OHS 1999
(blank)
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-45
35-39
30-34
25-29
20-24
15-19
10-14
5-9
1-4
0
-
Centre for
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Research
Possible SHI Income Earners
3,500,000
3,000,000
2,500,000
Part of a medical scheme
2,000,000
Potential
Potential SHI
Part of
a medical scheme
Public
Sector
1,500,000
1,000,000
500,000
Source : OHS 1999
Don't know or missing
Refuse
R10 000+
R5 000-R9 999
R2 500-R4 999
R1 800-R2 499
R800-R1 800
R1-R799
R0
0
Centre for
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Research
Conclusions
Centre for
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Research
Conclusions on Affordability



Comparing actual benefit expenditure and contributions to
PMB package: at industry level, PMB package was well
covered.
There should thus be no upward pressure on contributions
from Prescribed Minimum Benefits.
Comparing published options prices to PMB package:
showed conclusively that the current packages on offer by
open schemes were way in excess of the price of the PMB
package for the industry. In some cases the prices were
four or five times the price of the PMB package.
Centre for
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Research
Conclusions on Affordability


The conclusion must be that there is substantial room to
reduce the current benefit offerings in the industry to
something closer to the price of the PMB package plus an
additional amount for routine primary care.
The industry needs to critically examine benefit offerings
for 2004 and begin the designs with a focus on the PMB
package.
Centre for
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Research
Policy Issues
Centre for
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Research
Understanding of PMBs




It has become apparent during this research that the
introduction of Prescribed Minimum Benefits with effect
from 1 January 2000 has barely impacted the industry.
Very few schemes are able to isolate PMB expenditure
from other benefits.
Of even greater concern is how few medical practitioners
seem to have heard of PMBs. Thus at the critical interface
with patients there is little knowledge of the rights of
medical scheme beneficiaries to treatment for the PMB
conditions.
It is certainly not in the interests of schemes to educate
practitioners and this critical role must be taken on
centrally by the Department of Health or the Council for
Medical Schemes.
Centre for
Actuarial
Research
Community-rated PMB Price



The comparison of options prices in open schemes for the
benchmark family shows a wide divergence of prices.
Members should be facing a common community-rated
price for the PMB package and not a price determined by
each scheme according to its own demographic profile
and illness burden.
Now that a price has been conclusively determined for the
PMB package for the industry, this can facilitate work on a
risk equalisation mechanism between schemes that
covers the benefits in the PMB package.
Centre for
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Research
Future Pensioner Philosophy
43%
Do Not Offer Benefits
to New Employees
60%
26%
Cap Company
Contribution
16%
15%
Cash or Benefits in
lieu of Medical
Cap Benefits
6%
12%
1%
1999
2001
4%
7%
Eligibility Criteria
Changed
0%
10%
20%
Source : OMHC Health Survey 2001
30%
40%
50%
60%
Centre for
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Research
Vulnerability of Pensioners



From the study findings, it is evident that pensioners are
already vulnerable and that they will increasingly find
contributions to medical schemes difficult to afford, given
that medical contribution increases have exceed pension
increases.
Added to this is the changing structure of employee
benefits in such a way that future pensioners will be
unlikely to have a subsidy for medical benefits in
retirement.
The study describes the subsidy issue as a future time
bomb and this issue needs to be placed on the agenda
now.
Centre for
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Impact of Per Capita Subsidy
Single Adult
No subsidy
Family of Four
R 800 pa R1 000 pa
R 800 pa R1 000 pa
No subsidy
subsidy
subsidy
subsidy
subsidy
Complete PMB Package Price
pmpm in 2001
R 124.26
R 57.59
R 40.93
R 321.15
R 54.48
-R 12.18
Effective price to the member
R 124.26
R 57.59
R 40.93
R 321.15
R 54.48
R 0.00
0.5%
0.6%
1.3%
2.3%
3.7%
12.2%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Monthly Income Bands
OHS99
More than R10 000
R5 000 to R9 999
R2 500 to R4 999
R1 800 to R2 499
R 800 to R1 800
R 1 to R 799
Proportion of Income
1.1%
1.5%
3.0%
5.2%
8.6%
27.8%
0.5%
0.7%
1.4%
2.4%
4.0%
12.9%
0.4%
0.5%
1.0%
1.7%
2.8%
9.2%
2.9%
3.8%
7.7%
13.4%
22.1%
71.8%
Centre for
Actuarial
Research
Per-capita Subsidy




The study also attempts to put into context the per capita
subsidy mooted in the Taylor Committee report.
It was demonstrated that this subsidy could have
enormous impact on the affordability of healthcare for lowincome families.
This impact is subject to the final amount of the subsidy
and the exact form it will take.
There is no doubt that a subsidy of this nature has a farreaching impact on affordability of the PMB package for
low-income groups and clarity on proposals is now
needed.
Centre for
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Research
Public Sector Contracting



The price of the PMB package in the public sector, which
lies at the heart of affordability for the low-cost options and
the Bargaining Council schemes, now needs further work
by the public sector itself.
Medical schemes need to know at what price they can
contract for the delivery of benefits in the public sector and
these contracts need to be facilitated at a national level.
The impact of this additional substantial network to the
current hospital networks offered by the private sector
should have a galvanising effect on hospital benefit
negotiations for 2004.
Centre for
Actuarial
Research
Total Expenditure on
Prescribed Minimum Benefits




To put the size of the business in context, total expenditure
on the PMB package using the Weighted industry price
would have been R 14.573 billion in 2001.
The estimated price for delivery of the package in the
public sector would have been R 9.460 billion.
This covers only registered schemes.
A further amount of R 0.268 billion would be added to the
public sector total for those Bargaining Council schemes
reporting in 2001.
Centre for
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Research
Centre for Actuarial Research
(CARE)
A Research Unit of the University of Cape Town
A Research Report Prepared
Under Contract for the
Council for Medical Schemes
Centre for
Actuarial
Research