Low-income Group Access to Medical Schemes

1
Low-income Group Access to Medical Schemes

• CSIR Conference Centre
• 4 May 2005

2
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

3
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

4
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

5
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

6
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

7
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

8
Information on Income, Membership and
Affordability

• March 2005

9
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

10
Income Profile Medical Schemes
All Provinces All beneficiaries.
Source OHS99
11
Income Profile Potential SHI
All Provinces All beneficiaries.
Source OHS99
12
National Income Levels
All Provinces Beneficiaries age 20 and older
Source OHS99
13
Medical Scheme Members and FamiliesOHS99

• December 2004

14
Proportion of Medical Scheme Coverage by
Household Size
For larger household sizes, there are fewer
households where all people in the household are
on a medical scheme.
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 only one person is on a
medical scheme.
Source OHS99
15
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.

16
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.

17
Medical Scheme Coverage in Households by HH 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
18
Medical Scheme Coverage in Households by Scheme
Status of Person with Highest Income
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
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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

20
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.

21
Households where Highest Income Person is on
Medical Scheme
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
22
People not covered in HH where Highest Income
Person is on Medical Scheme
1.4 million people
Relatively few are employed. More unemployed than
medical scheme beneficiaries as a whole. People
living with family while trying to find work?
Source OHS99
23
People not covered in HH where Highest Income
Person is on Medical Scheme
Excludes children under 15 and the employed 0.7
million people
Of those unemployed or not economically
active, 74 are still studying or trying to find
work.
Source OHS99
24
People not covered in HH where Highest Income
Person is on Medical Scheme
1.4 million people
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
25
People not covered in HH where Highest Income
Person is on Medical Scheme
1.4 million people
Where one person not covered, more frequently
find spouse or parent. Where many people not
covered, most are children or grandchildren.
Source OHS99
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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

27
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

28
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

29
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

30
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.

31
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

32
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

33
Workshop Findings

• March 2005

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Areas that need to be addressed

• Principles
• Target groups
• Entry points
• Intermediation
• Supply
• Affordability
• Governance
• Role of regulator
• Subsidies

35
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

36
Principles

• Need to prioritize the informal sector

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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

38
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

39
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

40
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?

41
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

42
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?

43
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

44
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

45
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

46
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)

47
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