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Presentation on Bonitas Medical Fund to The Health Portfolio Committee June 2010

Presentation on Bonitas Medical Fund to The Health Portfolio Committee June 2010. Prepared by: Gerhard van Emmenis: Acting Principal Officer. Agenda. Overview of Bonitas Medical Fund History Financial Overview Available options Healthcare Expenditure breakdown Caring for the sick

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Presentation on Bonitas Medical Fund to The Health Portfolio Committee June 2010

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  1. Presentation on Bonitas Medical Fund to The Health Portfolio Committee June 2010 Prepared by: Gerhard van Emmenis: Acting Principal Officer

  2. Agenda • Overview of Bonitas Medical Fund • History • Financial Overview • Available options • Healthcare Expenditure breakdown • Caring for the sick • Legislative Considerations in the Medical Schemes Environment • Health related Legislation • Current Medical Scheme’s Environment • Problem with Optional Membership • Legal Environment • Problem with PMB’s ‘At Cost’ • Tariff Increases • Practical Issues • Summary

  3. Overview

  4. History • Established in 1982 primarily for Black civil servants; • 2/3rds of current membership base are black • Covers approximately 8% of al medical schemes lives (1.4% of total SA population) • Current membership base consists of approximately: • 270 000 members; and • 630 000 beneficiaries • 3rd party Administrator and Managed Care provider: Medscheme

  5. Financial Overview • 2010 • All scheme profits accrue to Fund

  6. Available Options

  7. Healthcare Expenditure breakdown

  8. Caring for the sick • Has cared for over 35 000 HIV patients • Currently over 15 000 members receiving Antiretroviral Therapy • Paid for around 150 000 hospital admissions in 2009 • Around 115 000 patients with chronic conditions are cared for • 3 Main chronic conditions: - high blood pressure; - high cholesterol; and - clotting disorders

  9. Legislative Considerations in the Medical Schemes Environment

  10. Health related Legislation • Medical Schemes Act 1998: Introduced open enrolment, community rating and PMB’s • Draft Medical Schemes Amendment Bill (ON HOLD) - Risk Equalization Fund - Basic benefits package - Low Income Medical Scheme • National Health Amendment Bill (ON HOLD) - Proposed bargaining framework for tariff setting - PMB’s: service providers cannot charge > agreed tariffs

  11. Current Medical Scheme’s Environment • Around 8 million lives covered • Annual contributions of R85 billion (2009) • Total reserves of around R27 billion • Claims increases consistently greater than CPI • Need compulsory membership to widen coverage

  12. Problem with Optional Membership • Upward sloping curve: risk increases significantly with age (note female maternity hump) • Community rating relies on young subsidising old Age • Problem is not enough young people want to join medical schemes – dips from age 20 to 35 • Note – dips less for females because of maternity: anti-selection Age Solution: Need compulsory membership for community rating to work: introduce financial penalties for young people earning above certain threshold

  13. Legal Environment • Court case around ‘grey’ health insurance products: • CMS lost, now sales of GAP products on the increase (against principle of community rating) This will only make more younger people opt out of medical schemes environment • Solution: Ban GAP insurance products clearly in legislation

  14. Problem with PMB’s ‘At Cost’ • Intention of Medical Scheme’s Act could not have been to allow claims with no limit Potential impact of having no ceiling on PMB costs is massive (20% - 30% extra claims) Issue is a drain on resources • Solution: Need DOH to amend Act so that there is clarity - need clear ceiling on PMB claims

  15. Tariff Increases • Competition commission means no collective bargaining with providers (in particular hospitals) Result has been high claims inflation in last few years • Solution: Amend legislation to allow collective bargaining in health environment

  16. Practical Issues • Contribution increases need to be set by August each year This is so as to get Council for Medical Scheme approval before launch of new benefits and contributions in October/November Problem is DOH only releases NHRPL late in year (& after contributions have been set) Means schemes have to make assumptions around NHRPL increases: introduces unnecessary risk into contribution setting process • Solution: DOH to give NHRPL increases for 1 Jan of next year in July of previous year (even if draft)

  17. Summary

  18. Summary • Bonitas funds healthcare for over 600 000 people To address issues around membership of medical schemes: • Introduce compulsory membership (above certain income threshold) • Ban GAP insurance To address issues around the price of healthcare • Put clear ceiling on PMB’s “At Cost” • Allow schemes to bargain collectively with providers Practical issue • DOH to give NHRPL increase mid-year

  19. Questions & Comments

  20. Thank you

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