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Picture: 123RF/SAMSONOVS
Picture: 123RF/SAMSONOVS

When a 70-year-old member of Medshield medical scheme was treated for acute respiratory distress syndrome in 2018, the bill came to R6.6m.

To put this cost into context, it amounts to a staggering 118 years of contributions by that member. He would simply never have been able to pay that debt without Medshield’s cover, and he almost certainly would not be alive today without the treatment he had received.

“This is why we exist – to protect our members from catastrophic medical occurrences,” says Medshield’s principal officer, Thoneshan Naidoo. “And that’s why you need a medical aid.”

But medical aid cover remains a grudge purchase for many consumers who seem not to place as much stock in ensuring their own well-being as they would in tangible possessions such as their cars.

“People are not placing enough value on their own lives,” says Naidoo. “But when you are sick, you want to know that you’re financially covered and that your healthcare needs are seamlessly taken care of.”

For Medshield, the secret to countering the grudge element to buying medical aid cover is value: finding the optimal balance between affordability, increasing access to medical care, and improving the quality of healthcare.

Underpinning this value proposition is how a member’s contributions are used. And Medshield, a not-for-profit organisation that is one of only three self-administered medical schemes in SA, is able to unlock substantial value for its members.

“Because we’re not driven by a profit motive, we can focus on looking after our members by ploughing money back into the scheme. We’re able to fund richer benefits, reduce contribution increases and lower co-payments, all to the benefit of our members,” says Naidoo.

Despite posting a R100m deficit in its 2018 financial year, Medshield remains in an enviable and sustainable financial position. It has earned its 12th straight AA annual rating by respected ratings agency GCR; its reserves of R1.9bn gives it a solvency level of 38%, well above the statutory requirement of 25%; it paid out R3.1bn in claims in 2018, with an average claims payout figure of 94%; and, despite a flat industry, its membership has grown by 4.1% to 162,000.

Thoneshan Naidoo, principal officer at Medshield. Picture: SUPPLIED/MEDSHIELD
Thoneshan Naidoo, principal officer at Medshield. Picture: SUPPLIED/MEDSHIELD

“What’s more, the average age of our members is reducing, and our new members are on average under 40,” says Naidoo. “This is significant because the older you become, the more you claim. Pensioners tend to claim four times more than younger, healthier members.”

Efficient management is critical, he continues. For every R100 contributed by members (amounting to about R106, including interest earned), Medshield’s expenditure is as follows:

  • R91 goes to paying members’ healthcare claims – which in 2018 included R1.25bn in hospital admissions, just under R1bn in general practitioner and specialist costs, and R430m on medication;
  • R7.80 goes to paying for administrative costs, information technology, office rentals and Medshield’s 260 staff;
  • R1.90 goes to managed care fees for members with chronic diseases; 
  • R2 goes to brokers; and
  • R3.50 goes into members’ savings.

Medshield does a lot with that R7.80 administrative portion. An average day for the scheme entails R9m in healthcare claims payments; processing 10,000 claims; receiving 1,400 calls and 1,500 emails, 300 hospital admission approvals and 74 chronic medication authorisations – and the birth of four new babies.

“When it comes to administrative costs, Medshield is in the lowest quartile of the medical aid industry. The fact that we’re self-administered means we save about R100m annually in costs,” Naidoo says.

“But it’s not about price – it’s about what value you get for the price. We don’t want to be the lowest in the industry, because we do need to invest in our people and technology and ensure we meet the expected high service levels of our members. Which brings us back to the important point that we offer our members the best value for their contributions.”

The medical schemes environment in SA, he continues, is dominated by seven particular trends:

  • increasing healthcare costs, driven by inflation, the use of healthcare services and the spiralling costs of new medications and technologies;
  • better-informed and more empowered consumers, who demand more of their healthcare providers and their contributions;
  • a complex regulatory environment;
  • stagnant industry growth and scheme consolidation – overall memberships have plateaued at 8.9m, and there are almost 30% fewer medical schemes today than a decade ago;
  • variable quality of private healthcare from both hospitals and physicians;
  • fraud, waste and abuse, costing the healthcare industry a whopping R3m an hour in SA, amounting to more than R22bn annually; and
  • new groundbreaking healthcare technologies, which in the age of the Fourth Industrial Revolution enables greater patient-centricity, new treatment options and improved patient outcomes, but also drives up the cost of medical aid contributions.

“Medshield turned a respectable 50 years old in 2018, and even in these tough times we remain true to our values. We drive better quality of healthcare by getting our members to the right hospitals, the right doctors and the right treatments, and we keep costs down and thereby extend our members benefits,” says Naidoo.

“That’s why we can pay a R6.6m medical claim without a quibble. And it’s what we’ll be doing for the next 50 years, too.”

This article was paid for by Medshield.