Can mandatory medical scheme membership fix affordability?

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JIMMY MOYAHA: The Health Funders Association [HFA] today launched its inaugural State of Medical Schemes report – quite an interesting report that suggests that if we were to have more members join medical schemes we could potentially reduce the costs of medical schemes.

We’re going to be taking a look at this, among other things, with the chief executive officer of the Health Funders Association, Thoneshan Naidoo. He joins us on the line now to see what we make of this.

Mr Naidoo, lovely having you on the show. Thanks so much for taking the time.

Quite an interesting statistic and quite an interesting theory around how we achieve lower medical scheme costs. We know that those costs are quite high and, in some cases, quite unaffordable. Tell us about the State of Medical Schemes report. What was the thinking behind this report?

THONESHAN NAIDOO: Sure. I think that unfortunately quite often medical schemes are painted in a negative light as a grudge purchase: ‘How can these be going up?’ I think we wanted to highlight a few things.

One is: There is extensive value to medical schemes. Medical schemes are there for when you actually need them. And unfortunately many youngsters – which is the issue – see medical schemes as a grudge purchase. [They] think ‘It’s actually a for-profit insurance that scams people’, et cetera.

We want to show you that belonging to medical schemes is actually for the time you need it. If you look through some of the results, we show that some of the highest-cost claims – in fact, the highest cost claim for last year was something that cost R20 million. And this was for a for a 41-year-old person. So it’s not like an old person, it’s actually a young person.

And that’s where medical schemes come in because I can tell you, I don’t have R20 million in my bank account – I don’t know if you do.

But this is where medical schemes come to make sure you’re able to afford [treatment], you get the healthcare, you back to normal, you’re able to think.

But unfortunately, as a youngster – and I’ve been there as well – you’d rather spend R2 000 on a cellphone contract which is flashy and shiny and you can show off, rather than saying ‘Look, I’ve put R2 000 away for my medical scheme contribution’.

So for us, it was about showing the value, but also showing [how], if possible, we implemented these healthcare reforms that were talked about 20, 30 years ago. How much cheaper could medical schemes be today? And that was the ‘what if’ scenario which we talked about, which was mandatory membership and [a] risk equalisation fund.

So one of all shortcomings of medical schemes in our industry is that it is voluntary, and it’s very different to everywhere else in the world where it’s mandatory.

If you’re employed and you earn a salary overseas, it’s mandatory. In South Africa for a number of reasons – and historic reasons – we left it.

So what typically happens – and I’ll give you an example – somebody who is, let’s say, going to have a baby, and is about to fall pregnant, they will be generally young, they’ll join a medical scheme, they’ll contribute to it. If the baby is healthy a few months later, they’ll drop off.

And then they don’t actually partake of it until like the 50s, when they really need healthcare. Now, that is actually anti-selection. And if we can solve that problem – that anti-selection of the young and healthy staying out – we would roughly reduce the current medical schemes by 30% in contributions.

But that means there are approximately nine million South Africans, employed South Africans, who would have to join as mandatory membership.

That’s in a nutshell, where we kind of wanted to highlight the ‘what if’, the issues, and the way forward – and the value that medical schemes provide.

JIMMY MOYAHA: Thoneshan, it’s quite an interesting study and quite an interesting time that the study is coming out, because we’re also having conversations at the same time around National Health Insurance, NHI, where we’re wanting to provide healthcare for every South African.

In a way this report suggests that we should be mandating individuals, as you allude to, to be part of medical schemes. How does that align with, perhaps, our NHI objectives that we have at a national level – these discussions that we’re having at the moment?

THONESAN NAIDOO: Sure. Firstly, as the HFA, we are fully aligned to universal health coverage, and we really want to get that.

Unfortunately, NHI, the way it’s written, is actually going to probably do the opposite. It’s going to create financial hardship for every South African, it’s going to actually double the amount of taxes of people employed, and potentially reduce the cover.

Ignoring all of that aside, the minister, in his affidavits under oath, said NHI is 10 to 15 years away.

So the question is: what do we do from now for 10 to 15 years? What are the solutions we need? We need people, we need solutions that are talking to all 63 million South Africans.

So while this paper is actually allowing the ‘what if’, in a separate conversation what we believe is there’s a primary healthcare product we can introduce as not-for-profit at R400.

We call it low-cost benefit options, and that would give you GP access, medication, basic radiology, pathology, et cetera, for R400 per person [per month].

We’re advocating at the same point, yes, we are for NHI in 10, 15 years.

But in the meantime, the people need healthcare now because primary healthcare is the cornerstone of healthcare.

And if we can get that right, it improves productivity, there will be less absenteeism, it’ll improve, obviously, employees’ productivity, and then that’ll lead to economic growth.

And that’s something we need: more jobs, better economy, growth in the GDP.

JIMMY MOYAHA: Thoneshan, before I let you go, I want to get your thoughts around how we potentially encourage more members to join medical schemes. You touched on a couple of the hindrances that young folks are particularly experiencing where it comes to affordability and making discretionary decisions.

How then do we start to encourage this as less of a discretionary decision and more of a necessity, because that’s supposedly one of the only ways we’re going to get those taxpayers to be part of schemes.

THONESHAN NAIDOO: I want to just explain something very quickly. You know, medical schemes work on cross-subsidisation – 80% of members don’t claim. And that 80%, who actually contribute a surplus, support the 20% who are sick. So the more of those youngsters we get in, it’s a pay-it-forward concept.

Eventually youngsters will get old, they will get sick, and it’s kind of like your Ubuntu moment. You want to take care of the rest of the people, the society, because when you’re old and you need that healthcare somebody else will.

So look at it as a future investment for yourself, because somebody will look after you. That’s number one.

Number two, I think, is something saying this should be the first thing you pay once you get your salary. You just ignore it, you put it away, it’s kind of like your pension, and that’s it.

Because I can tell you, the day you need it is the day you’ll actually hope you had the right cover and the right thing. So for me it’s about just ignore that. This should be your first priority from day one.

I think you know that then you are secure, and you’ve got your health that’s going to be taken care of on the day.

Many people, many schemes and many kinds of things use incentive models to try and keep people young and healthy to join … that appeal to their age, stuff that appeals to their lifestyle – to try and get them to join.

I think those are kind of the three top things I’d like to suggest.

JIMMY MOYHA: Medical aids, medical schemes, could be more affordable if more people were on these schemes. Quite an interesting report by the Health Funders Association.

Thank you to the chief executive officer, Thoneshan Naidoo, for taking us through that report and giving us a sense of what went into it.