Managed health care (MHC) arrived in SA a decade ago. In the early days, medical schemes believed the controversial US cost-containment strategy could cut their costs by 20%- 40% by eliminating fraud, abuse and overservicing. But, despite some successes, MHC has failed to bring annual premium increases in line with inflation and MHC costs have risen rapidly.
In 1997, R27 was spent per beneficiary per month on total administration costs. By 2001 this figure had risen to R66/month.
MHC has proved insufficient to tackle the root causes of cost escalation - overservicing and the high prices charged by providers. But does that mean it has failed?
WHAT IT MEANS
 MHC has not reined in premium increases
A red card for industry red tape
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Panellists debated this question at the Mx Health Quarterly Healthcare Review recently.
Heather McLeod, associate professor in public health & family medicine at the University of Cape Town, who was unable to attend the discussion, argues that MHC has not failed in SA. Rather, its implementation has hardly begun. The problem, she explains, is that SA is trapped in the old fee-for-service system, whereby schemes guaranteed payment to doctors and other health-care providers. Because a faceless third party is paying the bill, there is a perverse incentive for patients to overutilise medical services and for providers to overservice.
Under managed care, savings are generated by ensuring that only necessary, cost-effective treatment is prescribed in line with clinical protocols and drug formularies. To ensure these rules are adhered to, schemes contract doctor networks that agree to play by MHC rules in exchange for patient volumes and/or a premium on the standard consultation fee and/or a share in down-the-line savings to the scheme.
McLeod says schemes in SA have introduced all the easy MHC tools such as hospital pre-authorisation and chronic medicine programmes, but there is still little contracting and risk-sharing between funders and provider networks.
In the US, MHC includes the use of selective networks of contracted providers; ways of encouraging members to use the networks; and some risk-sharing with those networks. "This is the crucial and missing part of MHC in SA, because it is only through developing MHC programmes, which give doctors a stake in the outcome and force them to weigh up their decisions clinically and cost-effectively that you get the change in behaviour that brings the real win," she argues.
By US standards, SA still has a fee-for-service environment that is loosely managed. A study by US consulting actuaries Milliman USA found that in such an environment funds could expect to pay R100 for a claim compared with R80 in a moderately managed environment where there was some risk-sharing. The real win comes in a vertically integrated environment (where doctors, hospitals and a funder are located within one organisation such as some of SA's mine hospitals). There the cost falls to R50.
This explains why cost escalation persists in SA in the face of rapidly rising managed-care costs.
What is required, according to McLeod, are mechanisms that reduce the cost of delivering care and the share of contributions represented by nonhealthcare expenditure.
Though Charles Well, chairman of Bankmed board of trustees, said there was a need for MHC, he did not accept it was necessary for low-claimers to be managed. "In our scheme only 6% are high-claimers out of 93 000 principal members, so why do we spend millions on MHC?" he asked.
Along with many other panellists, he believed schemes needed to develop relationships of trust with GPs, who then played a gatekeeper role, eliminating the need for hospital pre-authorisation.
"If we reduce MHC costs and pay a better capitated fee to the GP, the patient will be happier and this will give schemes a better name," he argued.
Fedhealth CE Jeremy Yatt argued that MHC was not the real cost-driver. The increase in the utilisation of treatment - expensive new technology now keeps people alive longer - is the reason for increasing costs.
"Thanks to MHC, the average length of a hospital stay did fall [when MHC was first introduced]. But since then, the average cost per life per month is up 20%. However, we can't conclude that MHC isn't working because we don't know what the escalation would have been in its absence," he argued.
Yatt said MHC would always be necessary "because people need to know that a referee is watching to ensure they play by the rules".
Board of Healthcare Funders MD Humphrey Zokufa said medical aid was a grudge purchase. "People pay a lot of money for it and then when they get sick a lot of barriers spring up, so the perception is that the industry doesn't care about them," he said. "If MHC can lower premiums, it will raise schemes' credibility. But costs haven't come down and membership hasn't grown, so MHC hasn't delivered."
Johan Human, an actuary at Arch Actuarial Consulting, agreed that the right approach would be to empower GPs to act as gatekeepers. However, he said the industry lacked the tools to demonstrate whether MHC was delivering value for money and the desired improvement in health outcomes.
Mx Health clinical executive Dr Lebo Maroo was emphatic that health care should not be denied to sick people in the name of MHC. To cut costs and induce behavioural change, she said, schemes should place more emphasis on preventative care that would prevent greater costs down the line.
