main drains on medical aid funds

Staff Reporter

Staff Reporter

The greatest contributors to healthcare costs are private hospitals, medicines and specialists, according to a research report from the Council for Medical Schemes released this week.

These three components account for 66percent of the total medical scheme spend.

Where medicine cost increases have been limited by the Single Exit Price regulations, private hospitals and specialists have been the major contributors to the health cost escalation of medical schemes over the past few years, says the report.

For 2006 hospitals contributed 29,7percent to medical scheme costs (excluding specialists and general practitioners).

The report attributes private hospital cost escalation largely to growing market concentration, which it says has increased hospital groups' market power and affected their market conduct relating to pricing, levels of service provision and relationships with specialists and other providers in the healthcare chain.

The council's report rejects the argument of the private hospital industry that these increases are driven mainly by factors such as ageing of medical scheme members, increased morbidity and nursing costs.

Medicines contributed 18,3percent to medical scheme costs and specialists 18percent.

There remain concerns about instances of unusually high administration and managed care costs in specific medical schemes typically related to scheme-specific governance arrangements.

Administration costs account for 9,6percent of the total, with managed care (non-health) and broker fees adding a further 9percent.

The chief executive and registrar of the Council for Medical Schemes, Patrick Masobe, says in the report that any failure to address the central systemic cost factors on the supply side of the health system will lead to a continued deterioration of access to healthcare through medical schemes.