Benefit Design (BBB) for the Future

1. Benefit Design (BBB)for the Future Dr Siva Pillay 24 July 2007 BHF Conference

2. Opinion Two Things Make People Change: * If They See the Light or * If They Feel the Heat

3. National Health Act • PHC & District Health System route • Relationship between public and private health establishments (s45) (1) The Minister must prescribe mechanism to enable a co- ordinated relationship between private and public health establishments in the delivery of health services - Medical Schemes Act (2) The national department, any provincial department or any municipality may enter into an agreement with any private practitioner, private health establishment or non- governmental organization (according to PFMA & MFMA)

4. National Health Act • Eligibility for free health services in public health establishments (s4) (3) Subject to any condition prescribed by the Minister, the State and clinics and community health centers funded by the State must provide: (a) pregnant and lactating women and children below the age of six years, who are not members or beneficiaries of medical aid schemes, with free health services; (b) all persons, except members of medical aid schemes and their dependants and persons receiving compensation for compensable occupational diseases, with free primary health care services; and (c) women, subject to the Choice on Termination of Pregnancy Act, 1996 (Act No.92 of 1996), free termination of pregnancy services.

5. Tax Subsidy Framework Contribution subsidy “Pillar 1” Risk Equalisation Fund Government A Existing tax expenditure subsidy Risk- equalised subsidy B E Income-based contribution D Member Medical Scheme Community-rated Contribution C Employer Contribution = C minus (A+B)

6. Conclusion for BBB: • All emergency care • Primary Health Care (PHC) • PHC that is still to be Regulated • the Standard & Norms policy document • that which is provided by the State at present • Children <6 years (including immunization) • Pregnant and Lactating mothers • TOP ….. Have to be part of a BBB - which basket will have to include the PMBs “Cradle to Grave” cover

7. Topic: Importance of PHC in a BBB Health Charter requirements PMB and revisions if any LIMS etc, etc, etc Lets challenge the traditional thinking!! Lets look at what has been achieved!! Lets look at what CAN be achieved!!

8. The ‘Market’ - Stakeholders • Consultants • Brokers • MHCO • Unions • IPAs • FFS system Schemes / BOTs Administrators Bermuda Triangle Employers Members Providers No Co-Responsibility or Co-operation RelationshipofMistrust

9. Themes that will be addressed: • Purchasing Healthcare • Challenging the market • Schemes providing care • Challenging Hospital costs • Administration for Quality / Managed Care • True management of health • Preventative care • Service Provider buy-in Cost =/= Quality

10. Opinion • Its is not the fittest or strongest that survive • It is not the most intelligent that survive It is the animal species that adapted best to the environment that survived !!!

11. Case Study Managed Healthcare Plan Published Case Study by MSH 1996 - 2000

12. VWSA Criteria(This was the Bottom Line!) • Management signed contract with CareCorp • Health care had to be 30% cheaper • No intermittent contribution increases • Benefits had to be guaranteed for the full year • VWSA had to be absolved of any risks and most importantly, • Annual increases should be less than 10 % or CPI

13. Costs (1995): • GP R16.00 10.39 % • Medicines R22.00 14.29 % • Specialists R21.00 13.64 % • Hospital R40.00 25.97 % • Radiology R 7.00 4.55 % • Pathology R 4.50 2.92 % • Optical R 5.00 3.25 % • Dentistry R 9.00 5.84 % • Auxiliary R 6.00 3.90 % • Outside claims R 4.00 2.60 % • Reserves R 4.00 2.60% • Admin. Fees R14.00 9.09 % • UDIPA admin fee R 1.50 0.97 % • Total R154.00 100 % Closest competitor was R 190.00 at that time

14. Financial Report Budget versus claims for per discipline budget claims GP & Meds: R12 287 369 R 11 462 512 Specialist: R 4 231 899 R 3 248 159 Profit of 28% on budget at Rams Tariffs and at Blue Book prices !!

15. Financial ReportSurplus in Bubble: 30/12/96 • Hospitals R 1 370 392 • Auxiliary R 881 630 • Outside areas R 721 310 • Reserves R 1 754 000 • Total: R 3 727 332 This was above the 28% surplus over budget in GP capitation!!

16. Financial ReportManagement and Union Perspective • Contribution decrease • Benefits improved and guaranteed • Stability • Transparency with joint responsibility • 1997 increase 0 % • 1998 increase was 7.5% • 1999 increase was 10%

17. Hospital Results: • The independent assessment done by MSH speaks for itself • Our cost for Hospitalization (even with 30% RDP contribution) was: • 1995 = R 32.00 per soul per month • 1996 = R 35.00 • 1997 = R 39.00 • 1998 = R 42.00 • and we had >R1.3m surplus for distribution!

18. Benefit Plan –Did not decreasedBenefits! • Consultations for full year • Medicines for full year • Chronic Illness plan • Hospital plan with PPP • No co-payments • Included preventative and promotive care • Extended network • Out of area benefits • Dentistry - capitated • Optometry - capitated • Auxillary

19. The Plan: • Hospital Plan with PPP • Capitated and contracted • Pathology; Radiology; Dentistry; Optometry • Individual GPs still competed with each other • Patients could change GP choice within a month • Group system with joint risk pools for Hosp & Specialists • Top-up re-insurance after 110% of group budget • Referral system • Bulk procurement • Admin system

20. Alternative Option: “business of a medical scheme”means the business of undertaking liability in • return for a premium or contribution — (c) where applicable, to render a relevant health service, either by the medical scheme itself, or by any supplier or group of suppliers of a relevant health service or by any person, in association with or in terms of an agreement with a medical scheme;

21. In 2000, with another option with PrimeCure • 40% less than the UDIPA MHCO !! In 2007, right now • R 250 pp pm with public sector option • R 350 pp pm for a combined private – public option

22. Opinion To achieve synergy and minimize competitive waste -- we need to relinquishing some autonomy and develop common trust and unity of purpose In the health sector, this concept is a difficult pill to swallow!!

23. Supplementary BP3 Supplementary BP2 Supplementary BP1 Basic Benefits Package Option 1 2 3 4 5 6 7 8 Standardised Benefit Packages: (Circular 8) Risk-rated with rate banding. Scheme and silo specific. Partial REF? Scheme community-rated with REF, thus effectively industry community rate

24. Emerging Consensus for Benefit Design Supplementary Benefit Packages Additional benefits Additional benefits Additional benefits Common benefits for whole scheme Common benefits Must Include PMBs Network Discounts Restricted network version for lowest income groups Extended access version for highest income groups

25. Member Adult Child A Primary Care Benefits SMHMO A 1 30 25 20 GP Network A 2 40 40 30 Own Choice FFS A 3 60 60 50 B Hospitals State B 1 60 60 40 Contracted-in B 2 90 90 70 Own Choice FFS B 3 150 140 100 C Specialists Contracted-in C 1 50 40 35 Own Choice FFS C 2 70 50 45 D Radiology / Pathology Contracted-in D 1 20 20 15 Dentistry / Optometry Own Choice FFS D 2 60 55 50 E Auxiliary Services Declined E 0 0 0 0 (Limits apply) Saving plan E 1 40 40 30 (Limits apply) Own Choice FFS E 2 60 50 40 Benefit Design

26. Consideration for Future: Hosp. Plan • Must be considered for cost Mx • Present monopolies hold schemes to ransom • PPPs , s21 and other not-for-profit hospitals • JVs with other schemes • Network consideration

27. Govt. Employees Medical Scheme (GEMS) • Have we achieved our objectives?? • State Sector not ready for GEMS • State was to use GEMS & Hosp Revitalization plan to improve hospitals and compete • GEMS was to challenge the market – promote competition • “Deeble plan” • GEMS now contracted to: • Private hospitals • Private Pathologist & Radiologists • Private GP network (PrimeCure)

28. My Vision of the Future! • GP controlled network / HMO with alternative remuneration system • Geographic area co-ordination / co-operation • Controlled access to secondary and tertiary care thro’ networks • GP “controlled” Admin system • Regional Mx with MOU with other regions

29. My Vision of the Future! • Preferred Hosps • Step Down Care • Home Nursing • PPPs for • ICU • Neonatal care • Renal care • Cardiac care • Oncology care • Chronic Patients • Specialist referral • Optical • Dental • Radiology • Pathology • Auxiliary Special Purpose Vehicle Secondary Care • Red Light Theatre • Contract Specialists • State Tenders • Admin Systems • NCQA Control • HEDIS

30. Ideal IT Solution: • Front end integration • Electronic clinical records • Electronic therapeutic protocols • Chronic patient plan electronically linked • Compulsory encounter details recording electronically for quality and outcomes review • Independent monitoring of data sets • Compliance measurements • Electronic referral tracking • Electronic prophylactic care protocols and monitoring thereof

31. NCQA and Outcomes Review • Effectiveness of care • Access /Availability of care • Utilization of services • Satisfaction with care • Cost-effectiveness of care • Stability of plan • Informed health care choices • Plan design and innovation Value of health care is not proportional to the increased costs that is now being paid!!

32. Consideration for Future: • Network contracts with partnerships • Innovative Hospital Plans (s21 hospitals) • Most Important: • Administration system

33. SP friendlyAdministration System

34. Unique PIN # for each patient A1111B1C2D333E5F2 • Optometrist • Dentist • GP • GP / IPA Network • Scheme • Patient number

35. Administration System 3 Dimension Ledger Membership SP Allocation Budgets

37. Get the Balance Right Costs Equity Efficiency Quality “To provide care of the highest possible quality, at the least possible cost” Prof. Edward Hughes

38. Conclusion: Paralysis in analysis Inertia of Initiation

39. Acknowledgement: Thanks to: • Heather McLeod • Council for Medical Schemes • Social Security Committee Report • Actuarial Task Team (Emile & McIntyre) For the generous use of their knowledge, data, information and slides