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How medical schemes spend your money

Medical Aid

How medical schemes spend your money

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The South African medical aid industry raked in over R151 billion in 2015 from member contributions (premiums). Because a lot of members, particularly those who are young and healthy generally don’t claim, we sought to establish how schemes spend the money they collect.

Hospitals and Specialists take the lion’s share

Looking at the 2015/16 annual report of the Council for Medical Schemes (CMS), about R138.6 billion or 92% of all contributions made in 2015 were used to pay member claims incurred in that same year. Of the R151 billion collected, 34% was paid to hospitals for member admissions. This represented R51.5 billion paid for hospital facility usage, hospital medicines, consumables utilised during an admission and theatre fees.

How medical scheme contributions are utilised

Specialist health practitioners received 21% of the total collections – R32. billion in monetary terms. These specialists would include paediatricians, physicians, anaesthetists, pathologists, radiologists, ophthalmologists, and surgeons among others.

Medicines accounted for 15% of the amount paid towards member claims. This R22.3 billion includes amounts paid for chronic medicines, prescription medicines and over the counter medicines but excludes medicines charged as part of the hospital accounts.

A further R10 billion is spent towards allied and supplementary health professionals such as physiotherapists and biokineticists. This represents 7% of the total amount paid by medical schemes towards member claims and is most often paid from members’ MSA funds.

General practitioners received R8.6 billion – 6% of the total amount paid towards claims. As an aside, the Council for Medical Schemes noted that schemes that paid more towards general practitioners had to pay less towards hospital claims whilst those that paid less towards GPs tended to pay more for hospital admissions.

Dentists and dental specialists accounted for 3% of claims paid with a combined expenditure of R4.2 billion.

The rest of the claims paid were towards disease management programmes and health management services; other health services such as ambulance and blood transfusion services; medical technology and ex-gratia claims (claims not necessarily covered by the scheme but paid at the discretion of the trustees due to special circumstances).

Since 92% of contributions were spent on direct health care needs, the remaining 8% was used to pay for the administration of the schemes; to build up regulatory reserves required to ensure that the schemes would be able to pay claims in the event of a catastrophe that resulted in increased member claims; and other expenses such as managed care expenses and broker commissions.

The amounts quoted above provide a combined industry view and variations would be observed for different schemes. In order to understand how your scheme covers specific health conditions and events, reading through the benefit rules and the plan marketing material would provide good insight. These documents are usually not the lightest read but it’s better to know what you are covered for than to discover that you don’t have certain cover when you need it the most.

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Thando

Thando is currently the Group Actuary at Clinix Health Group, having previously served as Actuary in Discovery Limited's R&D Lab. Thando loves tech, design, reading and is very passionate about the development of the African continent. Thando also runs Litmail, a tech startup in the e-communication space. All views expressed are Thando's own and neither reflect nor are influenced by the views of affiliated companies.

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