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Medical aids are not-for-profit: Discovery Health

Medical aids are not-for-profit: Discovery Health

CEO of Discovery Health says that customers have a right to question the medical aid scheme’s new tariffs for 2017.

Discovery Health Medical Scheme has announced its new premiums for 2017, which are set to increase between 7.8% and 14.9%.

The average premium increase across Discovery Health Medical Scheme’s plans are 10.2% – significantly higher than last year’s 8.6%, and even higher than the forecast CPI of 6.8%

The increases for individual Discovery Health Medical Scheme plans are as follows:

  • Executive and Comprehensive: 11.9%
  • Coastal Core: 14.9%
  • Coastal Saver: 7.8%
  • All other plans: 9.9%
  • Medical premiums increase to pay for higher claims

Dr Jonathan Broomberg, CEO of Discovery Health, noted in an opinion piece that the recent announcements of above-inflation medical scheme increases have generated significant media coverage and member concern.

“Questioning above-inflation premium increases is understandable,” he said.

“The truth is that premium increases are driven by rapidly increasing claims, including both more claims and higher-cost claims. Unfortunately, medical inflation exceeding consumer price inflation is a global phenomenon, and many developed and emerging economies are experiencing even higher medical inflation rates than is the case in South Africa,” Broomberg said.

Medical aids are not-for- profit

In order to understand why medical scheme premiums increase at a higher rate than Consumer Price Inflation (CPI), Broomberg said it is critical, firstly, to understand the structure and functioning of medical schemes in South Africa.

“Medical schemes do not operate like regular insurers. By law, South African medical schemes are non-profit trusts, owned by their members. Every year, schemes carefully set their premium increases as low as possible to ensure sufficient income to meet claims costs submitted by members, as well as operating expenses,” the chief executive said.

He said that in order to understand what drives medical scheme premium inflation, it’s important to look at trends in medical scheme claims.

Since 2008, CPI has increased by 6.3% a year on average, while Discovery Health Medical Scheme claims increased by 11.4% a year. That means member claims are 5% higher than inflation every year. This explains why premiums increase by at least CPI + 3-4% annually, Broomberg said.

Members claims rising

According to Discovery Health, its own data shows several factors are driving the increases in the volume of services being claimed each year, including:

  • an ageing medical scheme membership (for each year a scheme membership ages, claims increase by 2-3%);
  • increased chronic disease prevalence (20% of DHMS members suffer from chronic diseases, and claim four times more than healthy members);
  • and a growing trend of people staying off medical schemes until they are ill or planning a family.

“This means that the scheme has more older, sicker members and fewer younger, healthier members, thus increasing claims cost per member,” Broomberg said.

“These challenges are aggravated by a rapidly expanded supply of private hospital beds – 23 private hospitals opened since 2008. While this has improved access to healthcare, it has led to increased hospital admissions, further driving up total medical scheme claims,” he said.

Another major factor driving costs is the increasing pace of technology innovation, with large numbers of new, advanced medicines and procedures being launched every year, at much higher costs than the technology they are replacing, the chief executive said.

Two final factors are claims fraud and waste, Broomberg stated. This occurs, for example, when patients are admitted to hospital to avoid paying out of pocket for investigations, or when blood tests or expensive scans are repeated because the results aren’t shared between doctors.

Technology can help: Discovery Health

Health, for example, now has a fully electronic patient record – HealthID- to house clinical history, and is working with doctors, hospitals and the pharmaceutical industry to reduce claims costs while improving quality of care, Discovery Health said.

Tariffs and administration costs do not drive premium increases

Discovery Health said that tariffs paid to highly qualified healthcare professionals typically increase at CPI, and therefore do not drive medical inflation. Doctors only earn more as they work more.

“The cost of administering Discovery Health Medical Scheme is deflationary, as these fees are falling each year in real terms due to cost efficiencies,” Broomberg said.

Addressing the cause will be positive for all

“To fulfil their promise and obligations, medical aid schemes have no choice but to increase premiums to fund improved access to hospitals, technology and care for their member,” Broomberg said.

The long-term solution: make people healthier by combating the four lifestyle diseases that drive 60% of the global health burden.

“The benefits are obvious: a healthier South Africa and lower costs. That’s where our collective fight should focus,” Broomberg said.

More on Discovery

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BusinessTech's Staff Writer is directly plugged into the South African Internet backbone, and spits out press releases and other news as they receive it. They are believed to be cl...
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  • James Dean

    They should break even then day after day month after month year after year which they don’t.

  • Willow

    Do or die.
    Wouldn’t it be wonderful if the public protector could investigate the crooked medical industry, instead of trying to defend the country against it’s own president?

    • NothingNewAtAll

      The president who has robbed us blind and screwed the country harder than borat at a gay pride festival? That one? Zuma?

  • Hiren Patel

    Good on him to bother explaining this, it makes sense. Sounds like the issue is in the underlying medical industry, which Discovery just sits on top of, and is a middle man of sorts.

  • Skyman_12

    So in other words pay your monthly premiums but don’t make use of the services you are entitled to?

  • Cheesy 3.0

    It’s called a ‘scheme’ for a reason.

    • Discovery Health pays Discovery Holdings a huge “administration” fee every year, effectively passing on the profits from the non-profit medical scheme to the profit-making Discovery Holdings company. So the CEO is not *technically* lying, but he isn’t explaining where the money is going either.

      • Runnin Bare

        They call it Creative accounting.

    • Runnin Bare

      Scheme spelt wrong……Scam

  • Mo

    (think my post got moderated) lol if people have issues with it, DONT HAVE IT, change you have the right and entitled to that too.

    But then when you get sick go to a Government Hospital, or pay through your BUM.

    If Government used their resources properly people would not even need to go to Private Hospitals. Yet there so many issues there. Or even better there will be a proper National Health Insurance scheme that not corrupted.

    • brz

      The tragedy is that, until a few years ago, service levels at public hospitals were not so bad (I was a patient myself), but it was allowed to degenerate to the pathetic present levels, where those that can afford it, are forced to use private health care.

  • Musa Keita

    White collar corruption in full swing… discovery members are funding Adrian’s bank and his lavish life in New York…

  • Betterestdayz

    A healthy populace does not make for repeat business…

    • Johan Lewis Last

      Yup. Man-made medicine is not intended to remedy a problem but instead to lessen the pain of the illness. The more you use man-made medicine the less the effects become.

  • Lone Stranger

    If they say that they do not make a profit, I call bulls*!t! They would not be starting a bank if they were not making profit. I am not with Discovery, but I do not like their practices. They, like most medical aid, do also have a lot of stuff they do not cover, even though you are breaking the bank to cover your family.

    • A couple of years ago the operating theatre fee was R68 per MINUTE. And that excludes the costs of consumables and the surgeon and anaesthetist, who both charge separately.

  • CharlieTango

    So Discovery Health is a non-profit organisation? Wow – never knew that.

    • That’s quite right: Discovery HEALTH does not show a profit. But on the other hand. look at the profits of Discovery INSURANCE that collects money for “managing” it. Another story entirely. In years past, it was called “struggle accounting”.

      • Stirer

        Of course Discovery makes a profit! That’s why they are listed on the JSE, and that people buy their shares to invest in them. They have to make a profit to pay dividends to their investors. If dividends don’t come from profits, then every organisation on the JSE is a non-profit organisation.

    • shelly

      aah yes Discovery Health South Africa’s very own doctors without borders, where if you dont have medical aid they will literally tell you to [email protected] to nearest government clinic

  • Ga77a

    So what! The fund may not be for profit. But it still needs to be managed, and who ever does that is very much for profit. I’m sure there is a nice bonus incentive for growing the fund. That is a conflict of interest for the ‘not for profit’ narrative being spun here. More corporate double speak.

  • Riaan

    Although I agree that premiums increase as a result when more cures are found that costs more money, it sounds like the medical schemes resent these cures (just like more available beds in private hospitals) as they now need to pay more claims. What is total rubbish is that they are “not for profit” and “belongs to the members”. Any company listed on the JSE is certainly wanting to maximise profits and, secondly, belongs to its share holders.

    • Chez

      Dead right! Jonathan and Adrian are conmen. I worked for and WITH them; He is set on owning the industry and I THINK it’s anti-competitive really. The increases must be addressed as since a JSE-listed firm CANNOT BE for non-profit!

  • Reality_Bites

    Yeah, the last medical aid I used charged me more in monthly subs than the total costs of me seeing a doctor in a year. If you are sickly, you need it, if not don’t waste money in a bottomless pit,

    • OhGee1

      The problem with that is that most companies force you to belong to this endless money pit.
      It is for that reason, I chose to take a bog standard hospital plan only and pay most of my other expenses cash.
      I only get flu about twice a year, see the dentist twice, the optometrist once and don’t have any chronic ailments.
      Why should I be subsidizing the idiots that do not take care of themselves.

  • Franco Del Palucci

    Here’s a suggestion all medical schemes can implement and save us higher increases each year…as with most 1st world countries you cannot book directly with a specialist. You have to visit your GP first and only he/she can refer you to a specialist of your choice. For instance, so many people book with their ENT specialist (which costs 2-3 times the consultation fee of a GP) to attend to an ear infection. In 90% of the cases your GP can resolve the issue through prescribed meds. instead, people are booking too many unnecessary appts with specialists at a huge annual cost to the private medical industry each year and guess who pays for it in the end?

  • Dave

    What I don’t get with Discovery is that they are collecting more and more information about us. This means they should be able to price premiums better than their competitors. I cant say I have ever seen this happen so why should I continue to hand over my data, so they have “big data,” if I don’t see any benefit. #medicalaidpricesmustfall

  • Tau’ri

    But of course they’re non-profit. What a silly argument to even question it!

  • shelly

    so its like paying for a service that the company don’t want you to use

    • Tau’ri

      It’s like Eskom.

  • Name

    No They are not for profit, They are “Charity organisations” Like Salvation Army ?

  • straight8

    Medical aids coud turn people away in the past. Not anymore, so you get lots of chronically ill people sucking all the money away. Later joiner fees and waiting periods help, but if they make it through alive, they suck like a hoover.

  • Rob Hutchinson

    Correct. Medical Schemes are obliged by law to operate as Not-For-Profit entities, however, Medical Scheme Administrators (such as Discovery Health) are free to make as much profit as they wish, without any justification. Discovery Health Medical Scheme is a separate entity to the Administrator and Managed Care Provider, Discovery Health (Pty) Ltd. The Scheme operates by way of a formal contractual arrangement with
    Discovery Health, with its business model based on Vested® outsourcing. It exists solely to make a profit. Don’t you just love corporate CEO whitewashing talk?

    • Fred Johnson

      Almost up to banks standard- only more vocal!

  • Epah101

    Hahahaha what is it for then? To give back to the public?

  • Fred Johnson

    Beat the system! Live fast, die relatively young and have a great looking corpse! ( and no medical bills!) Then get cremated and don’t be a burden in your loved ones! Cough, cough!

  • Frederick Burger

    He did not name the 4 lifestyle diseases which is responsible for 60% of the claims. I would have been nice to know.

    • Jacques

      2.Heart disease
      4.diabetes type 2
      All of the above was invented by the USA FDA (obviously for profiteering)
      All of the above is blamed on: breathing, smoking, drinking and eating. (That means, stuff that is natural to the human)
      All of the above are huge money generating diseases by inventing and selling useless medication. (read: repeating clients until death do them part).

  • Michael Williams

    As a service provider, can Discovery elaborate why doctor’s fees is only increased in line with inflation rate

  • umpalumpa

    If you wanna get real then don’t put a horse shoe inside a pillow.

  • ToothyGrinn

    Not for profit eh?
    Could have fooled me

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