Low-income Group Access to Medical Schemes

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					Low-income Group Access
   to Medical Schemes
    CSIR Conference Centre
          4 May 2005
                     Context
• Working toward the implementation of SHI and
  broader access
• Employed population likely to grow into the future
• The introduction of a subsidy framework will take a
  number of years
• Need to cater now for people able and willing to risk
  pool for health care
• Priority focus is on the R3000-R6000 pm group –
  however, all income groups under consideration
             Process thus far
• Reviewed research initiatives
• Workshop in March
• Workshop report
• Designed and implemented consultation process
• Appointed a co-ordinator
• Set up a dedicated portion of the CMS website
• Co-operating in the development of a household
  survey
• Reviewed potential task groups
• Set up 1- day conference
         Purpose of Process
• To establish a process to identify and
  resolve central systemic obstacles to the
  development of health risk-pools for low-
  income groups in South Africa
         Terms of Reference (1)
•   Investigate the barriers to low-income
    participation in medical schemes including:
    – The subsidy framework
    – Supply-side behaviour and systemic constraints
    – Regulatory impediments
•   Investigate all potential policy options, with
    supporting technical motivations
       Terms of Reference (2)
• Review options required to ensure that the
  resulting market is diverse and does not
  reflect the elements of market concentration
  prevalent in the current health industry
• Review potential Governance models, taking
  due cognizance of proposals put forward by
  the Department of Health and Council for
  Medical Schemes
• Identify specific areas of difference between
  relevant stakeholders
           Terms of Reference (3)
• Attempt as far as possible to identify where a
  consensus has occurred on a specific issue
• Collaborate with independent research projects
• Consult with all groups relevant to this issue, with a
  special emphasis on
   –   Medical schemes
   –   Employers
   –   Trade unions
   –   Low-income employees
   –   Informal sector workers
   –   Medical services providers
   –   Government stakeholders
  Information on Income,
Membership and Affordability

         March 2005
            Target Groups
• Formal employment – but whole family has
  not joined medical scheme
• High Income – over R10,000 pm
• Medium Income – R6,000 to R10,000 pm
• Average Income – R4,000 to R6,000 pm
• Low Income – R3,000 to R4,000 pm
• Below Tax threshold – R2,916 pm (2005) –
  R2,000 to R3,000 pm
• Bargaining Council – approx. R2,000 pm
• Entry level jobs – approx. R1,200 pm
• Pensioners
Income Profile Medical Schemes
                                                                                                                                                   Refuse Sum
                 800,000
                                                                                                                                                   R10 000+ Sum
                 700,000                                                                                                                           R5 000-R9 999 Sum
                                                                                                                                                   R2 500-R4 999 Sum
                 600,000                                                                                                                           R1 800-R2 499 Sum
                                                                                                                                                   R1 200-R1 799 Sum
                 500,000
Bene ficiaries




                                                                                                                                                   R1-R1 199 Sum

                 400,000                                                                                                                           Don't Know or Missing Sum
                                                                                                                                                   R0 Sum
                 300,000


                 200,000

                 100,000


                      0




                                                                                                                                                                   85+
                           0




                                           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
                               1-4

                                     5-9




                                                                                                                                                                         Centre for
                     All Provinces; All beneficiaries.                                                                                                                   Actuarial
                                                                                                                                                                         Research
                     Source: OHS99
                   Income Profile Potential SHI
                                                                                                                                                              Refuse
                 1,000,000
                                                                                                                                                              R10 000+
                  900,000                                                                                                                                     R5 000-R9 999
                  800,000                                                                                                                                     R2 500-R4 999
                                                                                                                                                              R1 800-R2 499
                  700,000
                                                                                                                                                              R1 200-R1 799
Bene ficiaries




                  600,000                                                                                                                                     R1-R1 199
                  500,000                                                                                                                                     Don't Know or Missing
                                                                                                                                                              R0
                  400,000

                  300,000

                  200,000

                  100,000

                        0




                                                                                                                                                                     85+
                             0
                                 1-4
                                       5-9
                                             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
                                                                                                                                                                              Centre for
                      All Provinces; All beneficiaries.                                                                                                                       Actuarial
                                                                                                                                                                              Research
                      Source: OHS99
       National Income Levels
100%                                                                      Refuse
90%                                                                       R10000+
                                                                          R5000- R9999
80%
                                                                          R2500- R4999
70%
                                                                          R1800- R2499
60%                                                                       R1200- R1799
50%                                                                       R1- R1199
                                                                          Don't Know or Missing
40%
                                                                          R0
30%

20%

10%

 0%
                       Potential SHI




                                                       Total Population
                                       Public Sector
         Schemes
          Medical




 All Provinces; Beneficiaries age 20 and older                                           Centre for
                                                                                         Actuarial
                                                                                         Research
 Source: OHS99
Medical Scheme Members and
          Families
           OHS99

       December 2004
 Proportion of Medical Scheme
 Coverage by Household Size
                             35%
                                                                                          Proportion with Some in MS
                                                                                          Proportion with All in MS
                             30%

                                                                    For larger household sizes, there are fewer
 Proportion of Households.




                             25%
                                                                    households where all people in the household
                                                                    are on a medical scheme.
                             20%


                             15%


                             10%


                             5%


                             0%
                                   1   2   3   4   5   6   7    8     9   10   11    12     13   14   15    20   25 Over
                                                                                                      to    to   to  30
                                                               People in Household                    19    24   29


                                                   For example: 30.2% of 2 person households have someone
                                                   covered by a medical scheme. 25.0% have both people
                                                   covered. There are thus 5.2% of 2 person households where
Source: OHS99                                      only one person is on a medical scheme.
                Comment
• According to the OHS99 data, there are
  10.771 million households in the population.
• 2.468 million households, i.e. 22.9%, have
  someone covered by a medical scheme.
• If all people in those households were
  covered by a medical scheme, the number of
  people on medical schemes would be 9.1
  million instead of 7.0 million.
                 Comment
• In other words, there are 2.1 million people
  not on medical schemes but in households
  where there are some people already on
  medical schemes.
• The issue is analysed further in the slides
  that follow.
                             Medical Scheme Coverage in
                              Households by HH Income
                            100%

                            90%                                                                                                                                            More than 10 people not covered
                                                                                                                                                                           Six to ten people not covered
                            80%
                                                                                                                                                                           Three to five people not covered
Proportion of Households.




                            70%                                                                                                                                            Two people not covered
                                                                                                                                                                           One person not covered
                            60%
                                                                                                                                                                           All people in HH covered
                            50%

                            40%

                            30%

                            20%

                            10%

                             0%




                                                                                                                                                                   Total
                                   R0 - R399


                                               R400 - R799


                                                             R800 - R1,199


                                                                                R1,200 - R1,799


                                                                                                  R1,800 - R2,499


                                                                                                                    R2,500 - R4,999


                                                                                                                                      R5,000 - R9,999


                                                                                                                                                        R10,000+
                                                                                                                                                          Household Income


                                                                             In HH with income below R2,500 pm only about 60% of HH
                                                                             have all people on medical schemes. This rises to over 85%
                                                                             for the highest income group. Affordability?

Source: OHS99
     Medical Scheme Coverage in
Households by Scheme Status of Person
         with Highest Income   100%

                               90%                                                      More than 10 people not covered
                                                                                        Six to ten people not covered
                               80%                                                      Three to five people not covered
   Proportion of Households.




                                                                                        Two people not covered
                               70%
                                                                                        One person not covered
                               60%                                                      All people in HH covered

                               50%

                               40%

                               30%

                               20%

                               10%

                                0%
                                        Yes            No or Unknown            Total

                                      Person with highest income is on medical scheme



                                                      In 197,000 households (8.0% of HH) there are some people
                                                      on medical schemes but the person earning the highest
                                                      income is not on a medical scheme. In these HH there are
                                                      often large numbers not covered.
                               Source: OHS99
                 Comment
• 2.1 million people not on medical schemes but
  in households where there are some people
  already on medical schemes
• 0.7 million in households where the person
  earning the most is not themselves on a
  medical scheme
• Possibility that the people on schemes are
  covered by a member not living in the
  household or a deceased member e.g.
  children from a previous marriage covered in a
  divorce settlement or a widow that now lives
  with her children
           Comment (cont.)
• Leaves 1.4 million people in households
  where the person earning the most is a
  member. Potential medical scheme
  membership if all these people covered is 8.4
  million lives.
• Analysis of these 1.4 million lives follows.
Households where Highest Income
  Person is on Medical Scheme
                     900,000                                                                                                         Already on Medical Scheme
                                                                                                                                     Not on Medical Scheme
                     800,000
                                                                                                                                     Total
                     700,000

                     600,000
 Number of People.




                     500,000

                     400,000

                     300,000

                     200,000

                     100,000

                          0
                               Under 1

                                         1-4

                                               5-9

                                                     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

                                                                                                                                                                              85+
                                                                                             Age Bands


                                                         The missing children and young adults !
                                                         Of those not on a medical scheme, 75% are under age 30
                                                         and 45% are under age 20.
   Source: OHS99
People not covered in HH where Highest
 Income Person is on Medical Scheme
                                                    1.4 million people
                                                Employed
             Children under                      19.5%
                 age 15
                 30.8%



                                                       Unemployed
                                                         13.1%




                                 Not Economically
                                      Active
                                      36.6%
     Relatively few are employed. More unemployed than medical
     scheme beneficiaries as a whole.
     People living with family while trying to find work?


  Source: OHS99
People not covered in HH where Highest
 Income Person is on Medical Scheme
                                         Excludes children under 15 and the
                                         employed: 0.7 million people
                               Not available to Other or Missing
                                    work             1.9%
                     Permanently    3.1%
                   Unable to Work                                School/ College/
                        3.9%                                       University
            Retired/
           Pensioner                                                 28.2%
            11.9%

                   Full-time
                  homemaker
                    5.5%
     Available for
        Work
        2.8%




                                         Looking for Work
                                              42.6%
     Of those “unemployed” or “not economically active”, 74%
     are still studying or trying to find work.


  Source: OHS99
People not covered in HH where Highest
 Income Person is on Medical Scheme
                                                            1.4 million people
                                                 Head of
                           Not Related          Household
                              4.5%                5.9% Spouse/ Partner
                Other Relative                             6.1%
                   15.6%




                                                               Child/ Adopted
                                                                    Child
              Grandchild                                           37.8%
                18.8%


          Grandparents
             0.2%
                   Parents         Brother/ Sister
                     2.9%              8.1%
    Parents make up only a small proportion of lives not
    covered. 57% are either children or grandchildren.
    Parents, grandparents, children, grandchildren and spouses
    – the immediate family – make up 72% of those not covered.
  Source: OHS99
People not covered in HH where Highest
 Income Person is on Medical Scheme
                                                                                   1.4 million people
                         400,000                                                           Not Related
                                                                                           Other Relative
                                                                                           Grandchild
                         350,000
                                                                                           Grandparents
                                                                                           Parents
                         300,000                                                           Brother/ Sister
                                                                                           Child/ Adopted Child
                                                                                           Spouse/ Partner
     Number of People.




                         250,000                                                           Head of Household

                         200,000


                         150,000


                         100,000


                          50,000


                              0
                                   1           2          3         4 and 5   6 and more
                                       People in Household not on Medical Scheme

        Where one person not covered, more frequently find spouse
        or parent. Where many people not covered, most are
        children or grandchildren.


  Source: OHS99
                 Summary
• 2.1 million people not on medical schemes but
  in households where there are other people on
  schemes
• 0.7 million in households where the person
  earning the most is not themselves on a
  medical scheme. Not easy to increase
  membership in these households
            Summary (cont.)
• 1.4 million people in households where the
  person earning the most is already a
  member:
  – 75% are under age 30 and 45% are under age 20
  – 68% are young children, still at school, studying
    or are trying to find work
  – 57% are described as “children” or
    “grandchildren” of the head of household
                Comment
• This analysis raises the issue whether the
  old restriction on medical scheme
  membership to children under 21 (or
  studying at university/technikon) is
  appropriate. The suggestion that school or
  university leavers will have their own income
  is not true – see the number of people in
  households looking for work
                Comment
• The definition of family used by many
  schemes goes only so far as children. Yet a
  substantial numbers of grandchildren have
  no medical scheme cover, while other family
  members are covered
                Comment
• With REF, the problem that schemes had of
  potential anti-selection is almost completely
  removed. Schemes are compensated for
  those with chronic disease. It is probable
  that most of those have already found ways
  to be on schemes and that the group in these
  households is relatively healthier.
• With REF, the problem schemes had of
  allowing parents to join is almost completely
  removed. Schemes are compensated for the
  aged person joining.
       Options going forward
• Re-look at the Act with regard to coverage of
  families
• We should be encouraging households to
  cover everybody. At least, all children,
  grandchildren and parents should be allowed
  to join the scheme – the “immediate family”
       Options going forward
• Any concerns about adverse selection that a
  scheme might have on the issue of parents
  will be dealt with by the REF. At any rate,
  there are relatively few of these cases
• If these issues were resolved another
  972,000 lives would be covered by medical
  schemes
Workshop Findings

     March 2005
Areas that need to be addressed
•   Principles
•   Target groups
•   Entry points
•   Intermediation
•   Supply
•   Affordability
•   Governance
•   Role of regulator
•   Subsidies
                Principles
• Schemes will be community rated
• The approach should try to avoid having the
  rich risk pool separately from the poor where
  possible
• Mandatory/voluntary – what priority for the
  short-term (2-3 years)? Voluntary
  environment must be reasonably successful
  before mandatory environment can be
  considered
                 Principles
• Need to prioritize the informal sector
                    Target groups
• All people who would like to risk pool for some healthcare but
  cannot due to affordability constraints
   – Formal sector
   – Informal sector
• All people who are able to afford membership but choose to
  remain without cover
• Priority group
   –   Income R3000 pm – R6000 pm
   –   Income groups below R3000 pm
   –   Uncovered public sector employees
   –   Existing members of bargaining council group
• Higher income groups must remain in formal fully regulated
  market
• Define the target group more generically
                 Affordability (1)
• Many low-income groups may have substantial
  levels of unmet need due to affordability barriers –
  any review of out-of-pocket payments may under-
  state true demand/need for services
• Possibly segment market into:
   – Those able to afford comprehensive cover; and
   – Those unable to afford comprehensive cover
• Consider relaxation of PMB requirement
   – Minimum level set – but significantly lower hospitalization
   – What benefits? Do we need to consider a modular
     framework? (e.g. hospital high frequency = a module)
   – What process to determine minimum benefits?
      • Preference determination
      • Needs analysis
      • Combination
              Affordability (2)
• Allow standardisation of benefit designs – across
  whole market to allow compatibility with the REF
• Consider discounts on tariffs paid by public
  hospitals – these discounts are only to permit a
  transfer of the government subsidy to eligible low-
  income groups in private risk pools (public hospital
  financial framework needs to be supportive)
• Contributions remain community rated
               Affordability (3)
• Are there technical constraints requiring smaller risk
  pools to group together using an over-riding pooling
  mechanism? If so, what is the pooling mechanism?
• Are these significant barriers to risk-pooling within
  the SA context?
• Exemption from certain administrative fees?
• Volume-related discounts on medicines for low-
  income schemes? – Or, should consideration be
  given to gaining access to state tender drugs at
  cost?
                Entry points
•   Employers
•   Unions
•   Associations
•   Burial societies
•   Other collective arrangements

• Question: Is facilitation required by
  Government? Or, can the market cope once
  benefit flexibility is permitted
                Intermediation
• Entry points
• Third-party administrators:
   – Scheme sponsors?
   – Member intermediation and marketing?
• Brokers: is there a need to adjust the regulation of
  brokers? Or, is the retail approach too expensive for
  low-income groups?
• Are there sufficient incentives in the market for
  schemes to perform the intermediary role
  unassisted?
• Do we require commercial incentives only?
             Supply-side (1)
• Provider costs are barriers to entry if PMBs
  complied with
• Hospitals are the central provider problem
  within private health market
• There is a need to incorporate a strategic
  vision for dealing with the fragmentation
  resulting from partial benefit cover in a low-
  income setting
             Supply-side (2)
• Consideration can be given to the
  registration of restricted schemes defined by
  “participating income segment”; these
  schemes can become eligible for standard
  straight-line discounts in public sector UPFS
  tariffs. This will allow low-income schemes to
  capture a portion of the in-kind public sector
  subsidy in their medical scheme benefit
  structure
              Governance
• To achieve effective
  segmentation/demarcation, low-income
  schemes may need to be separate from
  existing commercial schemes (i.e. not an
  option of an existing scheme)
• Nature of Board and other elements of the
  governance framework
              Role of Regulator
• Rules for moving between segmented environments
    – Ensure compliance
• Revise waiting period provisions
• Approval of registration
• Approval of benefits and contribution tables
• Take action against any anti-selection
• Take action against risk-selection
• Revise dependant provisions to ensure extended
  family access
• Extent of prudential requirements (capital, solvency)
                Subsidies
• Subsidy to facilitate risk pooling (paid to
  insurer? – HIVOS project proposal)
• Subsidy to achieve an income transfer – SHI
  framework only (is there a role for Tax
  Expenditure Subsidies?)
• Discounting public sector services for
  selected income segments
• Temporary subsidy to assist in movement
  from the “known” spot transaction market to
  the “unknown” risk-pooled market