State may look to GEMS for affordable healthcare ideas
New research into the loss of medical aid tax credits as part of implementation of the National Health Insurance scheme has raised fresh cost fears for those who choose private healthcare over taking their chances in the public sector.
The research by economics consultancy Econex showed that potentially a quarter of those who belong to medical schemes and their dependants - close to twomillion people - could find membership unaffordable without the credits.
The research found that removing the subsidy would hit the lowest-earning medical scheme members hardest, but even among the wealthiest 20% contributions could become unaffordable for some.
Not cast in stone yet
The research is based on estimates and averages, and the actual implications of withdrawing the subsidy will see each of us assessing the monthly loss.
For a family of four all under the age of 65 and with no disabilities, the tax credits subsidise contributions by R12120 a year. Even if the loss of this subsidy doesn't push your medical scheme spending over the affordability threshold that Econex set at 12.4% of household income, you may well be among those who have to consider a cheaper medical scheme option what is known as "buying down".
While Econex's research should be welcomed for enriching the debate about funding healthcare, there is no finality yet on whether these subsidies will indeed be withdrawn completely.
At a recent Government Employees Medical Scheme symposium, Mark Blecher, the chief director for health and social development at the National Treasury, said the Treasury would make the first announcements about the reform of medical tax credits in the budget next year, but that changes to the subsidies would be gradual as NHI benefits were rolled out.
Blecher said it was important that taxpayers saw some benefit from NHI as the tax credits were withdrawn.
He also pointed out that the amount the government spent per person on tax credits for medical scheme members was about 80% of the R3900 it spent a year on providing healthcare for those who use public sector facilities (according to data from the national budget for 2016).
Removing the tax credits in such a way that medical schemes become unaffordable for lower-income earners who then turn to the state for healthcare could therefore end up costing the government more.
These are the issues to which the Treasury's tax officials are applying their minds and the proposals that will be announced next year are likely to be much more nuanced than a blanket withdrawal of the credits.
However, medical scheme members should accept that as South Africa moves towards more equitable healthcare spending, they will have to make sacrifices or spend more for the freedom to choose private healthcare providers.
Rationing in healthcare is as certain as death and taxes, said Christoff Raath, the joint CEO of Insight Actuaries and Consultants, the actuary for GEMS.
A gem of an idea
Delegates at the symposium were given some insight into the thoughts of GEMS managers about how its options could help lead medical scheme members into a future NHI.
In particular, the scheme's discounted mid-range option - which offers private hospital cover and day-to-day benefits with limits - was showcased; it achieves savings by restricting freedom of choice without cutting benefits.
In GEMS's so-called efficiency-discounted Emerald Value option, members must choose to use only one family practitioner because the numbers show members who doctor-hop cost the scheme more.
They can only see a specialist if referred to one by a family practitioner, but their visits to a specialist when there is a need to see one is not restricted.
They are also obliged to use only certain hospitals with which the scheme has negotiated favourable tariffs.
The scheme offered this option to its members this year at a 10% discount and with costs coming in 15% lower, it will next year increase the contribution discount to 12%, Raath said.
Contributions for this option for this year range from R2066 a month for an adult member to R2563 a month, depending on income.
GEMS principal officer Guni Goolab said that if the saving achieved by restricting choice without cutting benefits on its Emerald Value option was extrapolated for all medical scheme members, the saving could be around R20-billion.
Some R151.2-billion was spent on health benefits for medical scheme members last year, according to the latest Council for Medical Schemes annual report.
GEMS's low-cost Sapphire option provides primary healthcare benefits (for visits to a GP, dentistry and optometry) in the private sector. Some 75% of the hospital benefits on this option are provided in state hospitals and 25% - largely maternity benefits - are provided by the private sector, Goolab said.
Pay in line with income
He said this was in line with the NHI white paper that suggested maternity care would increasingly be provided by the private sector.
Contributions on this option range from R877 a month to R1086 a month for an adult member depending on income, and many government employee members of this option enjoy a full subsidy.
Raath said a future NHI benefit package could look something like the Sapphire option with users paying in line with their income, and the Emerald Value option could be the model for a voluntary top-up for those who can afford it.
Blecher said GEMS was an important influencer that should provide leadership. The scheme spends R30-billion on healthcare benefits - or 0.7% of South Africa's GDP - for the 1.8million people it covers, which is more than the government spends on healthcare per province in all but two of the nine provinces.
Blecher noted that GEMS spent on average R16799 a year per person covered on healthcare expenses - five times more than the public sector spent on South Africans who use its healthcare facilities. He said Sapphire option members could get better value for money if they were not cross-subsidising other GEMS options.
But when it comes to how much the state will pay for a citizen's healthcare, Raath pointed out that the needs of the group were often not the same as those of the individual.
Group v individual
If you or a member of your family have been diagnosed with cancer, and can choose between treatment A that costs R10000 and has a 60% chance of success, or treatment B that costs R50000 and has an 80% chance of success, you are likely to choose treatment B.
But if you are a trustee or the decision-maker in a public health system looking after a population of 10 000 people with cancer on a fixed budget of R100-million, treatment A could save 6 000 people while treatment B could only be offered to 2000 people and would save only 1600 of them. The trustees or decision-makers would therefore choose treatment A, he said.
The government will make decisions about healthcare for all South Africans - an individual's decisions about what to spend on healthcare are much more personal.
• Du Preez is Money editor at Tiso Blackstar