oa South African Health Review - Medical schemes : framework for transformation

Volume 2002 Number 1
  • ISSN : 1025-1715



This chapter analyses trends in the coverage and cost of medical schemes since the mid-1970s, reflecting on the impact of recent legislation on these trends. Although some low-cost options may be drawing lower-income earners into the market, in a general sense medical scheme membership has remained stagnant over the past few years, while the costs of cover have generally continued to escalate unabated. the chapter points out the main drivers of this cost escalation, first and foremost of which is the continued reliance of the industry on the fee-for-service reimbursement system which creates incentives to over-supply. the tools and strategies that the industry is currently using to contain costs are reviewed. It is argued that some of these are successful in controlling utilisation, but several have negative implications for equity. Importantly, very few strategies deal with the problem of over-supply. Only when managed care is implemented properly and throughout the industry - with extensive use of provider networks reimbursed through risk-sharing arrangements - will costs be brought under control and affordable private sector care be made available to low-income earners. This requires tough negotiations between consumers and employers on the one hand, and administrators and health care providers on the other. Government has a role to play as a legislator, a provider of health care, and the largest single employer in the country. All interventions need to be monitored carefully with respect to their impact on the cost and quality of care provided to private patients, as well as their broader contribution to equity in the health sector.

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