The Costing of Prescribed Minimum Benefits

1. The Costing ofPrescribed Minimum Benefits January 2003

2. Söderlund & Peprah (1998) • Minimum package defined in terms of diagnosis-treatment pairs. ICD-10 codes for diagnosis element and CPT-4 codes for treatment element. • The “core inpatient package” would cost R 502 pbpa in 1998 prices. • Data on outpatient services could not be broken down into diagnosis-treatment pairs. Assumption that experience of mine hospital users would apply. Expected outpatient costs of R 183 pbpa. • Estimated that total inpatient and outpatient package would cost R 685 pbpa, for those currently without medical scheme cover.

3. Definition of the PMB Package • Söderlund & Peprah (1998) • Minimum package defined in terms of diagnosis-treatment pairs. ICD-10 codes for diagnosis element and CPT-4 codes for treatment element. • 1999 Regulations under the Medical Schemes Act • No codes in Regulation. • Subjective interpretation of PMBs by each scheme.

4. Comprehensive Crosswalk • Included (IN) as a benefit in the PMB package • Excluded (OUT) as a benefit in the PMB package • NC (not classifiable) with respect to the PMB package

5. 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 1,505,917beneficiaries

6. Data Sets Pricing Chapter Analysis

7. Cluster Analysis

8. Cluster Analysis • Different clusters experience different benefit utilisation, costs and disease profiles. Provider behaviour differs by cluster, even within the same hospital facility. • 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.

9. Centre for Actuarial Research Beneficiaries in Study

10. Centre for Actuarial Research Contributions and Benefits Q1 2002 Data

11. Centre for Actuarial Research Proportion of Beneficiaries Over Age 55

12. Centre for Actuarial Research Proportion of African/Black Beneficiaries

13. Applicability to the Industry

14. Centre for Actuarial Research Simplified Age Profiles of the Study and Industry

15. Detailed Age Profile of the Industry and Study

16. Ethnicity Summary

17. Weighted Industry Total • Study contains more Low cluster beneficiaries than the industry. • Re-weighted total to give closer demographic fit to industry data: • 100% High cluster • 100% Medium-older cluster • 100% Medium-younger cluster • 50% Low cluster • Weighted industry total gives exact matching of beneficiaries over age 55; closer to ethnicity • Low clusterismore relevant to the emerging low-cost option environment.

18. Cost of PMBs by Cluster

19. Centre for Actuarial Research Centre for Actuarial Research Admission Count by Status

20. Centre for Actuarial Research Centre for Actuarial Research Claim Value by Status

21. Centre for Actuarial Research Average Cost by Status

22. 100% 90% 80% 70% 60% Proportion 50% 40% 30% 20% 10% 0% High Medium - Medium - Low Total Out older younger Not Classifiable Included Proportion of Status by Cluster

23. Centre for Actuarial Research Incidence of PMB Admissions by Cluster

24. Centre for Actuarial Research Average Cost of PMBs by Cluster

25. Cost of PMBs by Disease Chapter

26. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% GIT ENT HSP CNS Eye Cardiac Endocrine MS/Trauma Skin/Breast Haem-Infect Respiratory Mental Illness Genitourinary Gynaecology Obstetrics-Neonate OUT INCLUDED Proportion of Admissions by Disease Chapter

27. 100% 80% 60% 40% 20% 0% GIT ENT HSP CNS Eye Cardiac Endocrine MS/Trauma Skin/Breast Respiratory Haem-Infect Mental Illness Genitourinary Gynaecology Obstetrics-Neonate OUT Centre for Actuarial Research INCLUDED Proportion of Claim Value by Disease Chapter

28. Centre for Actuarial Research Centre for Actuarial Research Proportion of Total Cost of PMBs by Disease Chapter

29. Centre for Actuarial Research Average Cost of PMBs by Disease Chapter

30. R 25,000 R 20,000 R 15,000 Average Cost R 10,000 R 5,000 R 0 GIT ENT HSP CNS EYE Other Cardiac Endocrine MS/Trauma Skin/breast Respiratory Haem-Infect Mental illness Genitourinary Gynaecology Obstetrics-Neonate Low High Average Cost by ChapterHigh vs. Low Clusters

31. Differences in Cluster Costs • Not simply different costs charged by providers for the same diagnoses. Issue is much more complex. • Very different age and demographic profiles. • Age difference would account for significant differences in diagnoses, e.g. mainly meningitis in Low cluster and stroke in High cluster in CNS chapter. • Condition perhaps not diagnosed as frequently in Low cluster due to differences in access to doctors: Low cluster biased towards GPs , High cluster prefer specialists. • Also benefit design, severity of disease and provider and patient demand.

32. Top Five Disease ChaptersHigh vs. Low Cluster

33. Diagnoses by Disease Chapter • Top 10 diagnoses (ICD-10 codes) in the PMB schedule, ranked by claim value (i.e. total cost), usually account for more than 70% of total cost in each chapter. • Surprising since most chapters contain approximately 100 diagnoses (ICD-10 codes). • Probably a reflection of the state of coding in SA, rather than a true concentration of diagnoses.

34. Pregnancy and Childbirth

35. Cost of PMBs by Age

36. Age Profile of Study

37. Age Profile Beneficiaries Admitted for PMBs

38. Incidence of PMB Admissions by Age

39. Centre for Actuarial Research Average Cost of PMBs by Age R9 127 Average Cost for All Ages

40. Centre for Actuarial Research Average Cost of PMBs by Age

41. Raw Price of PMBs

42. Centre for Actuarial Research Annual PMB Price by Cluster(pbpa)

43. Centre for Actuarial Research Raw PMB Price by Age (pbpa) Average Price for All Ages R 891.56 pbpa

44. Centre for Actuarial Research Raw PMB Price by Age and Cluster (pbpa)

45. Centre for Actuarial Research Raw PMB Price by Wider Age Bands (pbpa) R2710.94 R1264.53 R1 017.71 R 891.56 R 368.69

46. Adjustments to the Raw Price of the PMB Package

47. 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

48. Recoding of OutGroup • Coding originally done by Söderlund was open to debate among healthcare professionals. • No clear definitions in Act so ICD-10 codes placed into IN, OUT or NC on a subjective basis. • Reviewed all 1 614 ICD-10 codes classified as OUT. • New coding moved 19.8% ofadmissions of OUTgroup to INgroup. • Claim value was 27.0% of the original OUT category. • Raw price for PMBs for all clusters increases from R 786.80 pbpa to R 910.14 pbpa, an increase of 13.5%. • Recommendation: allow for 27.0% of the OUT category by value to be included in the final price.

49. Recoding of NC Group • NC group is more complicated to recode, as many conditions need to be linked to CPT-4 codes. • Recommendation:stress-test final price using various estimates of proportion of NC that might be included in a better-defined PMB package. • Recommended estimate is to include 20% of the NC group by value in the final price.

50. Hospital Management Costs