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The Costing of Prescribed Minimum Benefits. January 2003. PMB Study Data. Data from Medscheme Data Warehouse Data covers 2001 calendar year, extracted in July 2002 Data fully run-off, no adjustment for IBNR 90 options 31 schemes 18 . 071 million beneficiary months of data

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pmb study data
PMB Study Data
  • Data from Medscheme Data Warehouse
  • Data covers 2001 calendar year, extracted in July 2002
  • Data fully run-off, no adjustment for IBNR
  • 90 options
  • 31 schemes
  • 18.071 million beneficiary months of data
  • Average exposure of 1,505,917beneficiaries
cluster analysis
Cluster Analysis
  • Different clusters experience different benefit utilisation, costs and disease profiles. Provider behaviour differs by cluster, even within the same hospital facility.
  • Four distinct clusters:
    • High contains options with older, 'whiter' members with high utilisation;
    • Medium-older contains options with medium utilisation and older members;
    • Medium-younger contains options with medium utilisation and younger members; and
    • Low contains options with younger, 'blacker' members with low utilisation.
cluster analysis6
Cluster Analysis
  • Study contains more Low cluster beneficiaries than the industry.
  • For industry comparisons, useWeighted industry price.
    • This uses 50% of the costs of the Low cluster and 100% of the other clusters.
  • Low clusteris more relevant to the emerging low-cost option environment.
  • High cluster is used to give an upper limit to the PMB price.Would only be applicable to a few high utilisation options.
claim value by status

Centre for

Actuarial Research

Centre for

Actuarial Research

Claim Value by Status
proportion of total cost of pmbs by disease chapter

Centre for

Actuarial Research

Centre for

Actuarial Research

Proportion of Total Cost of PMBs by Disease Chapter
incidence of pmb admissions by age

450

450

400

400

350

350

300

300

250

250

Incidence

Incidence

200

200

150

150

100

100

50

50

0

0

1

1

4

4

9

9

14

14

24

24

29

29

34

34

39

39

44

44

49

49

54

54

59

59

64

64

69

69

74

74

19

19

-

-

75+

75+

-

-

-

-

0

0

1

1

5

5

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

All ages

All ages

10

10

20

20

25

25

30

30

35

35

40

40

45

45

50

50

55

55

60

60

65

65

70

70

15

15

Incidence of PMB Admissions by Age

Incidence All Ages

97.6850

average cost of pmbs by age

Centre for

Actuarial Research

Average Cost of PMBs by Age

18,000

16,000

14,000

12,000

10,000

Average Cost

R9 127

8,000

6,000

4,000

Average Cost for All Ages

2,000

0

5-9

0-1

1-4

75+

10-14

15-19

20-24

25-29

35-39

40-44

45-49

30-34

50-54

55-59

60-64

65-69

70-74

All ages

raw pmb price by age pbpa

R 5,000

R 4,500

R 4,000

R 3,500

R 3,000

R 2,500

R 2,000

R 1,500

R 1,000

R 500

R 0

0-1

1-4

5-9

75+

10-14

25-29

30-34

40-44

45-49

60-64

15-19

20-24

35-39

50-54

55-59

65-69

70-74

All ages

Centre for

Actuarial Research

Raw PMB Price by Age (pbpa)

Average Price for All Ages

R 891.56 pbpa

adjustments to raw price
Adjustments to Raw Price
  • Uncertainty in Definition of the PMB Package
    • Recoding the OUT Group
    • Recoding the NC Group
  • Costs of hospital management programme
  • Costs of hospital and related claims administration
  • Costs of chemotherapy and dialysis
  • Costs related to HIV/AIDS
  • Estimate of the cost of ambulatory care
  • Costs of ambulatory administration
  • Reduction for cost of delivery in the public sector
full price of pmb package
Full Price of PMB Package
  • Four components :
    • In-patient PMB package price based on full data in study (high degree of certainty)
    • Portion of price for which uncertainty exists in PMB definition (proportion to include of NC and OUT)
    • Margin added for ambulatory costs
    • Non-healthcare costs.
  • Note: Prices should not be used blindly in pricing work. Contact a professional for assistance.
full price of pmbs excl cdl

Centre for

Actuarial Research

Full Price of PMBs (excl CDL)

R2 432.41

R2 010.90

R1 956.01

R1 479.04 

R1 489.49

R1 343.43

R1 100.08

improvements to pmb definition
Improvements to PMB Definition
  • All stakeholders need an unambiguous definition of the PMB package.
  • The Council for Medical Schemes is requested to reconsider the definition of PMBs in the Regulations and to include clear diagnosis and procedure codes in an amendment as soon as possible.
  • Tighter definition of PMBs would ensure more focussed attention on accurate coding from providers and administrators.
  • Attention should be given to the nature of the chapters and to bringing them in line with clinical practice or a particular coding standard.
comprehensive crosswalk
Comprehensive Crosswalk
  • Provides a powerful tool for rapid application of PMB status to hospital admissions based on ICD-10 coding
  • Strongly recommend that this should be made freely available to other medical schemes and administrators, in order to improve their understanding and management of PMBs.
  • Recommend utilising this tool, or one developed from this work, to define and manage the PMB package in future.
registration of beneficiaries for chronic medicine
Registration of Beneficiaries for Chronic Medicine

Other Chronic

Conditions

22.9%

CDL Conditions

77.1%

average cost per case

Centre for

Actuarial Research

Centre for

Actuarial Research

Average Cost per Case

Single diseases only

average cost per case29

Centre for

Actuarial Research

Average Cost per Case

Multiple diseases

cdl prevalence by age

600

500

400

300

Prevalence per 1000 beneficiaries

200

100

0

0-1

1-4

5-9

85+

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

All ages

CDL Prevalence by Age
average cost of cdl by age

5,000

4,500

4,000

3,500

3,000

2,500

Average Cost per case pa

2,000

1,500

1,000

500

0

0

1-4

5-9

85+

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

All Ages

Average Cost of CDL by Age
raw price of cdl by age

2,500

2,250

2,000

1,750

1,500

Price per beneficiary pa

1,250

1,000

750

500

250

0

0

1-4

5-9

85+

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

All Ages

Raw Price of CDL by Age
differences between clusters
Differences Between Clusters
  • Age profile differences explain roughly two-thirds of difference in raw cluster prices.
  • Other differences are probably due to a combination of “the four P’s”:
    • variation in Prevalence rates of important conditions;
    • Presentation or manifestation of conditions;
    • Provider choice (GP vs. specialist and the management or prescribing habits of each); and
    • benefits available within the health care Plan.
adjustments to raw price41
Adjustments to Raw Price
  • Haemophilia
  • Removal of three diseases from final Regulations
  • Cost of diagnosis and medical management
  • Adjustment for compliance
  • Adjustment for limits
  • Adjustment for co-payments
  • Costs of chronic medicine management programme
  • Costs of administration
  • Reduction for cost of delivery in the public sector
full price of cdl package
Full Price of CDL Package
  • Four components:
    • Medicine component, based on full data in study (high degree of certainty)
    • Portion of price for which uncertainty exists until package is fully defined and allowance for impact of package being mandatory
    • Amount added for medical management costs
    • Non-healthcare costs.
  • Note: Prices should not be used blindly in pricing work. Contact a professional for assistance.
price in mandatory environment
Price in Mandatory Environment
  • Expect change in member and provider behaviour from existing environment.
  • Uncertainty exists in price until package is fully defined.
  • Have included an effective 30% margin on medicine component of CDL package.
  • Consortium opinion that collective margin of 30% on medicine component is sufficiently conservative to cover this uncertainty in the pricing.
need for mandatory package
Need for Mandatory Package

Community rated price

need for mandatory package48
Need for Mandatory Package
  • Real danger that open schemes will pursue more aggressive self-seeking behaviour and limit chronic medicine benefits to discourage older members and improve their community rate relative to their competitors.
  • Substantial broker activity and churning of members worsens this incentive.
  • A mandatory minimum package of chronic medicine and management benefits is essential for reducing opportunistic behaviour by some schemes.
further policy issues
Further Policy Issues
  • Membership of medical schemes needs to be compulsory, rather than voluntary, for medium to higher income groups to stabilise the system.
  • A risk equalisation system between medical schemes, based on the Prescribed Minimum Benefit package will reduce the opportunistic profiting from risk selection still further.
composition of the cdl list
Composition of the CDL List
  • Brief did not extend to consider diseases outside of the draft list and whether any should have been included.
  • Need for a process of chronic disease prioritisation in medical schemes in order to inform the rationing process in future.
definition of cdl package
Definition of CDL Package
  • Draft of Treatment Guidelines for Chronic Disease List Conditions
  • Based on Standard Treatment Guidelines and Essential Drugs List published by DoHin 1998.
  • Appoint task team for documenting and maintaining treatment algorithms for CDL conditions.  
  • Actuarial and pricing expertise to estimate the price of the algorithms. Iterative process of refining algorithms.
  • Project manager to ensure process completed in time for pricing in August 2003 if implementation is 1 January 2004.
complementary and traditional medicine
Complementary and Traditional Medicine
  • Serious concerns about the implications of legislating the algorithms for CDL conditions.
  • Only one approach to treatment will receive funding from medical schemes: entrenchment of an allopathic approach to treatment, largely based on drug interventions.
  • Hard won legal freedoms to operate must not be negated by preventing funding of complementary medicine and African traditional medicine for CDL conditions.
  • Allied Health Professions Council with 11 modalities.
  • Consumers will increasingly question health plans.
  • Inclusion unlikely to be simple and debate will be vigorous.
approach to affordability
Approach to Affordability
  • Compareprice of components of PMB package to reported benefits and contributions of medical schemes.
    • Industry level
    • Scheme level
    • Option level
  • Compare price of PMB package to published contribution tables for open scheme options. Focus on low-cost options.
  • Compare price of PMB package to income levels of existing members and potential members of medical schemes. Impact of employer and per capita subsidies.
non healthcare expenditure on pmb package
Non-Healthcare Expenditure on PMB Package

Well below Registrar’s benchmark of 10% of total expenditure

price of pmb package by age

12,000

10,000

Total CDL package

8,000

Total Outpatient package

Total Inpatient package

6,000

Price pbpa

Complete PMB package

Public sector

4,000

2,000

0

0

1-4

5-9

85+

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

Missing

All ages

Price of PMB Package by Age
price of pmb package by age62
Price of PMB Package by Age
  • Note that for all age bands over 40, the PMB price by age exceeds the community-rated PMB price.
  • This explains the incentive open schemes have to attract and retain younger and healthier members.
beneficiaries 2001
Beneficiaries 2001

Source : Registrar’s Returns 2001

total benefits

Centre for

Actuarial Research

Centre for

Actuarial Research

Total Benefits

Source : Registrar’s Returns 2001

total contributions

Centre for

Actuarial Research

Centre for

Actuarial Research

Total Contributions

Source : Registrar’s Returns 2001

non healthcare expenditure

Other Non-Healthcare

R 1,000

921

Administration and Managed Care

R 900

169

786

R 800

110

R 700

R 600

501

Per Beneficiary per Annum

5

R 500

R 400

752

676

R 300

496

171

R 200

-

90

113

-

R 100

-

R 0

PMB High

Cluster

Cluster

PMB Low

Schemes

Restricted

PMB Industry

Weighted

Schemes

All Registered

Open Schemes

Centre for

Actuarial Research

Non-Healthcare Expenditure

Source : Registrar’s Returns 2001

public sector

R 6,000

5,625

Private Sector

5,520

5,475

Public Sector

R 5,000

3,798

R 4,000

Per Beneficiary per Annum

R 3,000

2,425

2,157

R 2,000

1,551

1,400

1,016

R 1,000

R 0

PMB High

Cluster

Cluster

PMB Low

Schemes

Restricted

PMB Industry

Weighted

Schemes

All Registered

Open Schemes

Centre for

Actuarial Research

Centre for

Actuarial Research

Public Sector

Source : Registrar’s Returns 2001

exempt scheme benefits 2000
Exempt Scheme Benefits 2000

Source : Registrar’s Returns 2000

options available to benchmark family

Centre for

Actuarial Research

Options Available to Benchmark Family

Source : CARE Monograph

primary care network options

843

Fedsure Larona PrimeCure

638

Ingwe PrimeCure

728

Ingwe CareCross

966

Medihelp Nucleus

730

Medimed PrimeCure

824

Medimed ECIPA, UDIPA

657

Metropolitan Primary Plus

576

MSP/Sizwe PrimeCure

780

MSP/Sizwe Ecipamed

904

MSP/Sizwe MediCross

732

NMP PrimeCure

280

Protector Health Primary

480

Protector Health Primary Plus

841

Provia SilverCure

810

Spectramed Spectra Alliance

672

Topmed Bophelo Network

635

Vulamed Standard

321

Low cluster PMB Public Sector

489

Low cluster PMB Private Sector

0

100

200

300

400

500

600

700

800

900

1,000

Contribution per family per month

Centre for

Actuarial Research

Primary Care Network Options

Source : CARE Monograph

income profile medical scheme beneficiaries

Centre for

Actuarial Research

Centre for

Actuarial Research

Income Profile Medical Scheme Beneficiaries

Source : OHS 1999

possible shi income earners

Part of a medical scheme

Potential SHI

Public Sector

Centre for

Actuarial Research

Possible SHI Income Earners

Source : OHS 1999

conclusions on affordability
Conclusions on Affordability
  • Comparing actual benefit expenditure and contributions to PMB package: at industry level, PMB package was well covered.
  • There should thus be no upward pressure on contributions from Prescribed Minimum Benefits.
  • Comparing published options prices to PMB package: showed conclusively that the current packages on offer by open schemes were way in excess of the price of the PMB package for the industry. In some cases the prices were four or five times the price of the PMB package.
conclusions on affordability80
Conclusions on Affordability
  • The conclusion must be that there is substantial room to reduce the current benefit offerings in the industry to something closer to the price of the PMB package plus an additional amount for routine primary care.
  • The industry needs to critically examine benefit offerings for 2004 and begin the designs with a focus on the PMB package.
understanding of pmbs
Understanding of PMBs
  • It has become apparent during this research that the introduction of Prescribed Minimum Benefits with effect from 1 January 2000 has barely impacted the industry.
  • Very few schemes are able to isolate PMB expenditure from other benefits.
  • Of even greater concern is how few medical practitioners seem to have heard of PMBs. Thus at the critical interface with patients there is little knowledge of the rights of medical scheme beneficiaries to treatment for the PMB conditions.
  • It is certainly not in the interests of schemes to educate practitioners and this critical role must be taken on centrally by the Department of Health or the Council for Medical Schemes.
community rated pmb price
Community-rated PMB Price
  • The comparison of options prices in open schemes for the benchmark family shows a wide divergence of prices.
  • Members should be facing a common community-rated price for the PMB package and not a price determined by each scheme according to its own demographic profile and illness burden.
  • Now that a price has been conclusively determined for the PMB package for the industry, this can facilitate work on a risk equalisation mechanism between schemes that covers the benefits in the PMB package.
future pensioner philosophy

43%

Do Not Offer Benefits

60%

to New Employees

26%

Cap Company

Contribution

16%

15%

Cash or Benefits in

lieu of Medical

6%

12%

Cap Benefits

1%

1999

4%

Eligibility Criteria

2001

Changed

7%

0%

10%

20%

30%

40%

50%

60%

Future Pensioner Philosophy

Source : OMHC Health Survey 2001

vulnerability of pensioners
Vulnerability of Pensioners
  • From the study findings, it is evident that pensioners are already vulnerable and that they will increasingly find contributions to medical schemes difficult to afford, given that medical contribution increases have exceed pension increases.
  • Added to this is the changing structure of employee benefits in such a way that future pensioners will be unlikely to have a subsidy for medical benefits in retirement.
  • The study describes the subsidy issue as a future time bomb and this issue needs to be placed on the agenda now.
per capita subsidy
Per-capita Subsidy
  • The study also attempts to put into context the per capita subsidy mooted in the Taylor Committee report.
  • It was demonstrated that this subsidy could have enormous impact on the affordability of healthcare for low-income families.
  • This impact is subject to the final amount of the subsidy and the exact form it will take.
  • There is no doubt that a subsidy of this nature has a far-reaching impact on affordability of the PMB package for low-income groups and clarity on proposals is now needed.
public sector contracting
Public Sector Contracting
  • The price of the PMB package in the public sector, which lies at the heart of affordability for the low-cost options and the Bargaining Council schemes, now needs further work by the public sector itself.
  • Medical schemes need to know at what price they can contract for the delivery of benefits in the public sector and these contracts need to be facilitated at a national level.
  • The impact of this additional substantial network to the current hospital networks offered by the private sector should have a galvanising effect on hospital benefit negotiations for 2004.
total expenditure on prescribed minimum benefits
Total Expenditure on Prescribed Minimum Benefits
  • To put the size of the business in context, total expenditure on the PMB package using the Weighted industry price would have been R 14.573 billion in 2001.
  • The estimated price for delivery of the package in the public sector would have been R 9.460 billion.
  • This covers only registered schemes.
  • A further amount of R 0.268 billion would be added to the public sector total for those Bargaining Council schemes reporting in 2001.
slide90

Centre for Actuarial Research

(CARE)

A Research Unit of the University of Cape Town

A Research Report Prepared

Under Contract for the

Council for Medical Schemes