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Balancing the books – the problem with Prescribed Minimum Benefits

Most households have to balance a budget every month.  Those special purchases have to be planned as monthly expenditure must be less than the household’s monthly income.  When the books don’t balance you’re in trouble and you may have to resort to borrowing or else digging into your savings’ reserves.


Borrowing comes at a cost and loans have to be repaid.  However, there has to come a time when you have excess income with which to repay the loans.

Medical schemes face similar problems with some very nasty differences.  Generally speaking, medical schemes have no idea just which members will get sick or have an accident or when that may happen.  And so a lot of guessing has to take place which is also a reason why medical schemes must have big reserves – to cater for the unexpected.

In order to try and limit the amount of guesswork required, it is important for medical schemes to at least have some idea of what illness and accidents can or may cost.  Reliable estimates can be made of how long a mother needs to stay in hospital after having a baby.  By agreeing a tariff with the hospital, a reasonable estimate of that cost can be established.

The bigger problem arises with the charges of doctors and other specialist healthcare service providers.    The Registrar of Medical Schemes interprets the Medical Schemes Act as allowing doctors to charge any fee that they like – “pay in full” is the refrain from Pretoria under the guise of the PMB legislation.  Well, imagine your household budget in similar circumstances; you know what your income is but you have no way at all of calculating your expenses.  This type of situation would throw many a household into a real quandary – just as it is doing to many medical schemes.

It is for this reason that medical schemes have rules that place limits on benefits.  No one can survive an open cheque scenario which is what The Registrar appears to advocate.  Let’s face it, approach anyone and offer them a fixed fee or the option of charging anything that they like; well, a no-brainer as they say which is exactly what is happening in some quarters in the healthcare industry right now.

Public hospitals publish a tariff of fees for all to see.  It is the Uniform Patient Fee Schedule and medical schemes can use it to at least get an idea of what various procedures will cost in the state.  But when members go to private healthcare facilities, cost estimates are all but impossible because of the “pay in full” regime.

Medical schemes take prices. They do not set prices.  Put differently, your medical scheme does not tell the doctor what to charge; it does nothing more than administer money on behalf of the members that have contributed to it and then apply the rules so that members get what they contracted for when they joined the scheme.  In order for the medical scheme to be able to balance its books and comply with the law, it must be able to limit costs.  The “pay in full” regime is just not sustainable.

In closing, you may be wondering what happens when the medical scheme does not settle the whole account and you are left with a balance.  At present, the higher the claims paid by the medical scheme the higher the contributions payable to the medical scheme.  Conversely, low claims will lead to lower contributions.  If medical schemes do not settle the entire account charged by your doctor, you should negotiate with him the same way that we negotiate with any service provider.  The Consumer Protection Act requires doctors to discuss their fees with you in any event.  At the moment, all of the members of the medical scheme are carrying the higher claims – even those members that hardly ever submit a claim.  The concern is that as contributions rise ever higher, cash strapped members that don’t claim will decide to resign and leave the high claimers on board.  With fewer, high claiming members left, contributions will soon rise to unacceptable levels because a small group of service providers is allowed to charge whatever they like.

It is a numbers game.  Go figure.

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