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Funding for private healthcare sector in crisis

South Africa’s medical schemes are currently evaluating and drafting their premiums for 2017. Double-digit inflation increases and potential benefit cuts are on the cards, putting financially strained consumers under even more pressure. Medical aids have attributed premium hikes to ageing memberships, sicker patients, new technology and increasingly so, an excess of private hospital beds. One healthcare expert has a comprehensive explanation for what he is calling a systematic affordability crisis.

The primary driver is a growing excess of private hospital beds in South African metros; “We are now approaching four private hospital beds per 1 000 medical scheme members. In some parts of the country we have as many as six beds per 1 000 people. This is twice or three times higher than the ratios seen in efficient systems with good community delivered healthcare services.” says Dr Brian Ruff, founder and CEO of healthcare management company PPO Serve.

“Unlike other goods, where costs go down if there is an oversupply, in healthcare oversupply leads to cost increases. When an insurer pays, it is just too easy to spend money without worrying about the value,” says Ruff, who has worked in the healthcare industry for more than 30 years.

South African medical aid subscribers are seeing dramatic, above-inflation growth of premiums every year – between 2005 and 2014, medical aid contributions jumped at a pace 50% higher than the inflation rate. In 2016 and 2015, the average premium rate hike of South Africa’s seven largest schemes ranged between 7.26% and 10.92%, exceeding the inflation rate of 6% over the two-year period. “This year’s increases will be worse,” warns Ruff, “and there are likely to be even further benefit cuts.”

Underlying the inflated premiums are deeper systematic problems; “Private healthcare in South Africa is structured so that doctors work alone rather than in teams and are remunerated for the quantity of services they deliver rather than for quality of the outcome,” says Ruff. “Rather than competing with individuals, teams should compete with teams, with the goal to avoid unnecessary hospitalisation.”

This will require different arrangements with medical schemes; “Schemes should embrace an integrated team-based healthcare model in which specialists, general practitioners, nurses, and other practitioners such as psychologists, proactively work together to look after a patient collectively is needed,” he says.

Individual competition leads to gaps in care; “Inefficiency has high costs – for every player in the field. We need to give medical practitioners the means to generate sufficient income, while providing patients with quality, multi-disciplinary care, free from over-servicing.”

Restructuring, says Ruff, will lead to lower premiums, which will make private medical aid more accessible to more people, in turn re-invigorating an industry in crisis.




Distributed by Be-cause Integrated Communications

Emma Proctor

021 447 1082 / 072 930 4412


Distributed on behalf of PPO Serve

Brian Ruff: CEO

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