Could forcing more South Africans into medical aid make it cheaper?

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JEREMY MAGGS: Medical aid in South Africa is caught in an uncomfortable squeeze. It’s becoming too expensive for many people to join, but the system itself becomes harder to sustain when younger and healthier people stay out. So that’s a real conundrum.

Now there’s a new Health Funders Association report that argues that bringing millions more South Africans into medical schemes could significantly reduce average costs and strengthen the entire risk pool. That does make economic sense, of course. But does that mean effectively forcing people to buy cover they may already believe they cannot afford? It’s a real conundrum.

The chief executive officer of the Health Funders Association, welcome back to the programme, Thoneshan Naidoo, good to talk to you. Are you essentially arguing that medical aid will only become affordable if South Africans are compelled to join?

THONESHAN NAIDOO: There are a number of solutions to try and make medical aids affordable. What we wanted to put on the table really is, here is another avenue, it’s a missing part of regulations that should have been done and was actually asked 25, 30 years ago.

Part of the conflating issues is medical aid schemes are effectively 20% to 30% more expensive because we never made it mandatory for employed people to belong to medical schemes.

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So this is but one avenue of how medical schemes could become cheaper.

JEREMY MAGGS: Let’s test it a little bit though, if people are already staying out because cover is too expensive for many, making membership mandatory would not really solve the affordability problem, would it?

THONESHAN NAIDOO: Well, it’s a cyclical problem. Firstly, if you think about it, people are staying out, but it doesn’t mean that they’re not purchasing healthcare already.

Our data shows that up to 40% of South Africans, so that’s 25 million South Africans, are using private healthcare.

While nine million are medical scheme members, an additional 16 million are using private healthcare but they’re paying cash. It’s because that population believes they’re young, they’re healthy, they don’t need it, until you actually realise [you do].

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With health, cancer is not discriminatory, diabetes is not discriminatory, and even from our data, we’ve seen people who are afflicted with diseases all the way from neonatal. We’ve seen, for example, a case in point, the highest neonatal cost was roughly just under R10 million. So that’s within the medical scheme population. That child was in hospital for 309 days. So without a doubt, there are still public sector people who believe they can survive these things and when they do have these experiences, they’re paying cash. Or if not paying cash, they potentially are deteriorating in health and possibly passing away.

So we say, let us make that already affordable by bringing them in, by allowing another nine million people who are above the tax threshold, it could potentially reduce costs. But I think that’s one opportunity. I do want to stress this; this is a what if scenario.

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From my perspective, obviously on the lower brackets, somebody who’s earning R100 000 [per annum] it’s far more difficult to say you must contribute because at that line you are making trade-offs to put food on the table, do I educate my child at school or do I buy medical aid. And those are really tough.

But the ones who are, let’s say earning above R750 000, there are about 200 000 of those people who earned above that who do not belong to medical schemes. That’s the more easier, I’d say, enrolment opportunity. I think it’s got to be a progressive path.

JEREMY MAGGS: I want to come back to that figure of nine million, I think the fact that the survey says just under nine million. Your modelling suggests that that recruitment could cut expected benefit costs by around 12% to 13%. How confident are you, though, that those savings would actually reach consumers?

THONESHAN NAIDOO: We are fairly confident of it. In fact, to put it this way, our modelling actually used two different approaches. We looked at just age, demographics, and we said if we just included the people, it would be around 10% age. Then one interesting stat that I can talk about, and it’s relevant, is maternity. Maternity people typically, and we’ve seen this with medical aids, when you’re about to have a baby, you join a medical scheme. If there are no issues with the baby or the pregnancy, they immediately leave.

Those are youngsters and they only join again when they’re 50, that’s an additional 3% of potential savings. So that’s the lower limit estimate. Another analysis, which we did a different approach, said it could be up to 30% because we know that restricted medical schemes because [it’s] employer based, you have less choice of opting out. Voluntary medical schemes have increased by 30% because people choose not to. So we estimate, I’d say, between 18% to 30%, up to 30% is where we are.

It’s not one true number, but we believe somewhere in this range is an opportunity, this is just one opportunity. If you think about the other opportunities we have at hand, [like] medicines, the cost of medicines, if you look at the top, the highest [amount paid for] medicine last year was actually for Hunter syndrome and it cost just over R7 million for that one patient. If you look further down the list, it goes all the way, from R4 million or R5 million upwards.

We have an opportunity to collectively say, can we reduce the price of medicines. So obviously that’s an extreme, but let’s look at something that’s more across [the board], HPV (human papillomavirus), cervical cancer, it’s for all women. We have a huge distortion between the price paid in private sector and public sector in terms of multiples. If we can get together and say, let us bring down the price of the HPV vaccine, we can automatically increase access to significantly more millions of South Africans for their healthcare. So those are bargaining tariff price opportunities, outside of this mandatory membership to reduce prices.

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JEREMY MAGGS: I’d like to know how your proposal fits alongside National Health Insurance (NHI). Does it not just create two competing visions for healthcare funding?

THONESHAN NAIDOO: No, absolutely not. I think, firstly, coming out of the affidavit and legal papers, the Minister of Health (Aaron Motsoaledi) has said under oath that NHI is 10 to 15 years away. Our viewpoint is we cannot wait 10 to 15 years to solve healthcare issues. Our people, and when I say our people it’s our South Africans, our 63 million South Africans need healthcare solutions.

We can’t wait 10 to 15 years to solve the healthcare issues.

So what we are putting on the table is one avenue for reducing costs and increasing access for most South Africans. Because fundamentally, when we do that for the whole nation, it’s going to lead to better productivity, growth in the economy, jobs and so on.

So we believe while NHI is 10 to 15 years, we can prepare the grounds because we can eventually at that point in time, this can become the solution for NHI.

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JEREMY MAGGS: I’m going to leave it there. Thoneshan Naidoo, I appreciate your time, chief executive officer of the Health Funders Association.

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