Is medical scheme membership expensive or, is private healthcare expensive?

expensive private healthcare south africa

Expensive medical scheme membership and expensive private healthcare in South Africa remain controversial topics.

Did you know that South Africa’s medical specialists are among the highest paid in the world?

The Organisation for Economic Co-operation Development (OECD) is an inter-governmental organisation with its stated objective being to stimulate economic progress and world trade. There are 38 OECD member countries, which include The United States (US), Canada, The United Kingdom, Belgium, Denmark, Finland, France, Germany, Greece, Israel, Japan, Australia and New Zealand, to name but a few.

An interesting fact is that South Africa (SA) spends more on private health insurance than any other OECD country in the world. That’s right…. we spend more on private health insurance than any other OECD country in the world! Think on that whilst considering the parlous state of public healthcare in SA.

An unbalanced relationship

SA’s high level of spending on private healthcare is particularly remarkable given that only around 16% of our population actually belongs to a medical scheme. In contrast, spending on private health insurance covers approximately 61% of the US population, 68% of the Canadian population and 53% of the Australian population.

The major beneficiaries of the high level of spending on private healthcare in SA are private hospitals and the medical specialists that work within them. The high proportion of spending on private healthcare facilities and providers mean that prices set in the private sector have an enormous impact across the private healthcare system. Furthermore, access to private healthcare in SA is largely determined by a patient’s ability to pay, which in turn, is largely through medical scheme membership. Without medical scheme membership, the majority of us would simply not be able to afford private healthcare.

Major value-chain inequalities and irregularities

Considering the small proportion of the population that is served in SA, this scenario has resulted in attracting a disproportionate share of medical specialists to the private sector. The large increases in the cost of private healthcare in SA have also made the pricing of specialist and hospital services a particularly controversial issue, especially in the last decade or so.

While many of the OECD countries have a technically sound price schedule in place that provides clarity for both doctors and patients, no such guidelines exist in SA. On the contrary, doctors and specialists can, and many do, charge any fees they want.

Origin of the open cheque scenario

Up until 2010 we had the National Health Reference Price List (NHRPL) in place, which provided a uniform standard for medical aid tariffs. In layman’s terms this was referred to as “medical aid rates”. In the “good old days” doctors and specialists would typically charge 100% of medical aid rates, or in some instances 200% or even 300% of that “rate”.

In 2010, however, the NHRPL was declared invalid.

In the absence of a regulatory framework in respect of medical expenses, doctors, specialists and hospitals (“the providers”) gained access to a carte blanche type of scenario regarding their billing and fees. In other words, they were given a blank cheque when treating patients.

Mandate for the pay-in-full scenario for PMBs

The Registrar of Medical Schemes has endorsed this practice in taking the view in that regarding the treatment of any Prescribed Minimum Benefit (PMB) condition and in the absence of a Designated Service Provider (DSP) agreement, the claims of all healthcare service providers shall be paid in full by a medical scheme. Yes – IN FULL without limit – no matter how egregious the charges.

Who bears the brunt when doctors overcharge?

When service providers “demand” from a patient’s medical scheme extraordinarily high fees under the “PMB pay-in-full” regime, it comes at a cost to every single member of that medical scheme.

Medical schemes function in a similar way to a bank. It doesn’t treat members. It only pays claims from its members’ available funds. In other words, medical schemes administer money on behalf of members. These funds are made up from members’ monthly contributions and interest earned on investments. The higher the claims paid out by schemes, the less money there will be in its reserves to pay other claims, resulting in higher-than-average contribution increases the following year coupled with a possible reduction in benefits. Medical schemes are not permitted to borrow funds that they must, by law, always remain in a solvent position.

Medical schemes are owned by its members

Medical schemes in SA are not companies that have shareholders. Many medical schemes are administered by companies that do so for a profit as they do have shareholders that expect if not demand dividends. Other schemes undertake their own administration, resulting in a massive saving for members as the scheme does not pay VAT on the administration fee, for example. That all said, every medical scheme is owned by its members who are the effective shareholders of the business. And, because medical schemes may not borrow funds, the scheme’s only sources of income are from contributions paid by members and investment income.

Medical schemes don’t control doctors’ fees

Medical schemes are often accused of being a “rip-off”. But the “rip-off” is not with a medical scheme. Medical schemes in South Africa are price takers. They are not price makers.

Unless medical schemes have specific payment arrangements with certain providers, schemes have to pay whatever fees they charge, IN FULL, under the PMB regime. So when providers’ fees are higher than the scheme’s set tariff, all members of that scheme suffer, as providers’ fees are in fact paid by each and every member via the pool of funds that they contribute to.

Higher fees for medical scheme members

Doctors are the gatekeepers of our entire healthcare system. No one expects them to treat us for free; neither can anyone possibly put a price tag on the saving of a life. But whilst doctors / specialists are certainly entitled to a reasonable fee, one has to question if this fee can be without a justifiable, moral limit simply because a medical scheme is paying as opposed to the patient? Surely, each doctor should have a set amount that he / she believes is reasonable for a specific illness condition. Unfortunately, many doctors charge according to whether the patient has insurance either in the form of medical scheme cover and / or GAP insurance.

Would you consider these charges reasonable?

We have previously shared some examples with our readers – take a look again.

  • An anaesthetist who attended to the removal of an appendix of one of our members charged more than 800% of the scheme tariff. In contrast, the surgeon that removed the appendix charged 200% of the scheme tariff.
  • When one of our members required reconstruction of her sinus canals, the anaesthetist and ENT charged 200% of the scheme tariff. The plastic surgeon, however, charged 800% of the scheme tariff.
  • A few years ago, a surgeon who stitched the eyebrow of one of our members, billed the Scheme the R1,000 per minute, or R60,000 an hour! And no, it was not after hours and it was not lifesaving surgery.
  • Earlier this year, one of our members had a colonoscopy. The gastroenterologist who performed the procedure, billed the Scheme 1,500% of the scheme tariff.
  • The in-hospital psychological treatment of a 13 year old girl recently amounted to close to R170,000.

Dishonest accounting practices?

Another serious problem which medical schemes (or in essence their members) face, is the way in which healthcare providers, or the medical billing bureaus that manage their accounts, are driving up costs by means of irregular billing of codes. This is a term often referred to as “code farming”.

This happens when providers “up-code” or apply “split-billing” – in other words, when billing codes are manipulated by charging for extra codes and / or through the unbundling of codes (billing for several codes instead of one inclusive code) resulting in considerably higher costs. In many cases the doctor is unaware of what is happening as he / she relies on the agency to collect the fees. Perhaps it is that the billing agents work on a percentage of the amount collected?

An example if this is when a gynaecologist performs a laparoscopic vaginal hysterectomy. Instead of using the single billing code for this procedure, he / she uses two billing codes – a separate fee for the laparoscope part and one for the vaginal hysterectomy. Together, the sum (cost) of the two separate codes is greater than the single code. Once again, the members of the medical schemes foot the bill.

Abuse of the PMB pay-in-full scenario

Oftentimes, doctors / specialists deliberately manipulate and abuse the “PMB pay-in-full” regime by fraudulently charging / claiming certain codes. A recent example is where a certain professor who treated one of our members, addressed an email to his colleagues at Milpark Hospital that were treating the same member.

The professor reminded them via an email to ensure that they coded their claims to ensure that Genesis paid the claim as a PMB at whatever amount they claimed. The actual text was as follows:

“Please remember that provided that the ICD-10 codes are comprehensive, and reflect major trauma, the whole issue is covered by the legislation on Prescribed Minimum Benefits (PMB’s) which mandates (requires) the Medical Aid Scheme to pay in full – NOT what they think should be paid!”

It is concerning that the professor found it necessary to remind his colleagues, not to code the treatment in terms of the actual treatment administered, but to ensure coding of the treatment would result in the full payment of PMB benefits.

Fraudulent billing practices

In addition, and in an unrelated matter, the very same professor instructed Milpark Hospital to change its original invoice to reflect a higher ICU fee in place of the High Care Ward fee charged. This change was seemingly made to accord with the professor’s higher charges for ICU.

Excessive billing for services and products is another problem that medical schemes (and their members) are faced with. An example of this would be when a provider uses a certain cost effective prosthesis for a knee / hip replacement, but then claims for a more expensive prosthesis. Another example would be where a provider dispenses cheap medicine, but submits a claim for more expensive medicine.

Why the unscrupulously high fees?

There is no question that private medical care is extremely expensive. Providers run a business and they are absolutely entitled to show profit and to earn a reasonable living. We acknowledge that we need them to save lives and that it is costly to run a practice in line with the laws made by the health department, skilled staff and keeping it medico-legally safe. The sad fact however remains that some providers defraud the members of medical schemes by charging egregiously high fees and / or by manipulating billing codes.

Unjust enrichment from medical scheme members

Providers don’t make themselves rich on their patients’ personal accounts. Their fees are mostly paid by the members of medical schemes.

Some providers defend their charges by accusing medical schemes of not keeping up with inflation. But in reality, medical scheme increases are usually almost twice as much as inflation. Every year, in order to balance its books and to provide for sufficient reserves to cover the high cost of private medical care, most medical schemes have no option but to increase annual contributions with fees almost twice as much as inflation: because they are price takers and not price makers!

What is a reasonable fee?

We all work for a living. And yes, some of us work very hard and are under immense stress. But how many of us could earn R60,000 per hour, which equals R480,000 per day or R2,500,000 per week way back in 2017? Should medical scheme members consider this a reasonable charge that they pay for? (see example earlier)

On the basis that the Registrar endorses providers charging whatever amount they like, it really is good money for the select few that can get it. But this comes at the expense of every member who has to fund this through their contributions.

What can you do?

For planned procedures, always speak to your provider before going to hospital. Ask him / her for a quote for your procedure and then discuss it with your medical scheme. If your provider charges more than what your scheme will cover i.t.o. your selected benefit option, then negotiate the fees charged by him / her.

Members have to start pushing back and negotiate reasonable fees with their providers. It is not right that all members are prejudiced by extraordinary high annual contribution increases just to fund the seemingly unjustifiably high fees charged by some providers.



The Content on this site is not intended to be a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or other qualified health provider with any questions you may have regarding a medical condition.

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