Benefit Design BBB for the Future Dr Siva

Benefit Design (BBB) for the Future Dr Siva Pillay 24 July 2007 BHF Conference

Opinion Two Things Make People Change: * If They See the Light or * If They Feel the Heat

National Health Act • PHC & District Health System route • Relationship between public and private health establishments (s 45) (1) The Minister must prescribe mechanism to enable a coordinated relationship between private and public health establishments in the delivery of health services Medical Schemes Act (2) The national department, any provincial department or any municipality may enter into an agreement with any private practitioner, private health establishment or nongovernmental organization (according to PFMA & MFMA)

National Health Act • Eligibility for free health services in public health establishments (s 4) (3) Subject to any condition prescribed by the Minister, the State and clinics and community health centers funded by the State must provide: (a) pregnant and lactating women and children below the age of six years, who are not members or beneficiaries of medical aid schemes, with free health services; (b) all persons, except members of medical aid schemes and their dependants and persons receiving compensation for compensable occupational diseases, with free primary health care services; and (c) women, subject to the Choice on Termination of Pregnancy Act, 1996 (Act No. 92 of 1996), free termination of pregnancy services.

Tax Subsidy Framework Contribution subsidy “Pillar 1” Government Existing tax expenditure subsidy A B E Income-based contribution Member Community-rated Employer Contribution Risk Equalisation Fund Risk- equalised subsidy D Medical Scheme C Contribution = C minus (A+B)

Conclusion for BBB: • All emergency care • Primary Health Care (PHC) – PHC that is still to be Regulated – the Standard & Norms policy document – that which is provided by the State at present • Children <6 years (including immunization) • Pregnant and Lactating mothers • TOP …. . Have to be part of a BBB - which basket will have to include the PMBs “Cradle to Grave” cover

Topic: Importance of PHC in a BBB Health Charter requirements PMB and revisions if any LIMS etc, etc Lets challenge the traditional thinking!! Lets look at what has been achieved!! Lets look at what CAN be achieved!!

The ‘Market’ - Stakeholders • Consultants Schemes / BOTs Administrators • Brokers • MHCO • Unions • IPAs Bermuda Triangle Employers Members • FFS system Providers No Co-Responsibility or Co-operation Relationship of Mistrust

Themes that will be addressed: 1. Purchasing Healthcare • • • Challenging the market Schemes providing care Challenging Hospital costs 2. Administration for Quality / Managed Care – – – True management of health Preventative care Service Provider buy-in Cost =/= Quality

Opinion • Its is not the fittest or strongest that survive • It is not the most intelligent that survive It is the animal species that adapted best to the environment that survived !!!

Case Study Managed Healthcare Plan Published Case Study by MSH 1996 - 2000

VWSA Criteria (This was the Bottom Line!) • • Management signed contract with Care. Corp Health care had to be 30% cheaper No intermittent contribution increases Benefits had to be guaranteed for the full year • VWSA had to be absolved of any risks and most importantly, • Annual increases should be less than 10 % or CPI

Costs (1995): • • • • GP R 16. 00 Medicines R 22. 00 Specialists R 21. 00 Hospital R 40. 00 Radiology R 7. 00 Pathology R 4. 50 Optical R 5. 00 Dentistry R 9. 00 Auxiliary R 6. 00 Outside claims R 4. 00 Reserves R 4. 00 Admin. Fees R 14. 00 UDIPA admin fee R 1. 50 Total R 154. 00 Closest competitor was R 190. 00 at 10. 39 % 14. 29 % 13. 64 % 25. 97 % 4. 55 % 2. 92 % 3. 25 % 5. 84 % 3. 90 % 2. 60% 9. 09 % 0. 97 % 100 % that time

Financial Report Budget versus claims for per discipline GP & Meds: Specialist: budget R 12 287 369 R 4 231 899 claims R 11 462 512 R 3 248 159 Profit of 28% on budget at Rams Tariffs and at Blue Book prices !!

Financial Report Surplus in Bubble: • • • Hospitals Auxiliary Outside areas Reserves Total: 30/12/96 R 1 370 392 R 881 630 R 721 310 R 1 754 000 R 3 727 332 This was above the 28% surplus over budget in GP capitation!!

Financial Report Management and Union Perspective • • Contribution decrease Benefits improved and guaranteed Stability Transparency with joint responsibility 1997 increase 0 % 1998 increase was 7. 5% 1999 increase was 10%

Hospital Results: • The independent assessment done by MSH speaks for itself • Our cost for Hospitalization (even with 30% RDP contribution) was: 1995 = R 32. 00 per soul per month 1996 = R 35. 00 1997 = R 39. 00 1998 = R 42. 00 and we had >R 1. 3 m surplus for distribution!

Benefit Plan – Did not decreased Benefits! • • • Consultations for full year Medicines for full year Chronic Illness plan Hospital plan with PPP No co-payments Included preventative and promotive care Extended network Out of area benefits Dentistry - capitated Optometry - capitated Auxillary

The Plan: • Hospital Plan with PPP • Capitated and contracted – Pathology; Radiology; Dentistry; Optometry • Individual GPs still competed with each other • Patients could change GP choice within a month • Group system with joint risk pools for Hosp & Specialists • Top-up re-insurance after 110% of group budget • Referral system • Bulk procurement • Admin system

Alternative Option: “business of a medical scheme” means the business of undertaking liability in – return for a premium or contribution — (c) where applicable, to render a relevant health service, either by the medical scheme itself, itself or by any supplier or group of suppliers of a relevant health service or by any person, in association with or in terms of an agreement with a medical scheme;

In 2000, with another option with Prime. Cure • 40% less than the UDIPA MHCO !! In 2007, right now • R 250 pp pm with public sector option • R 350 pp pm for a combined private – public option

Opinion To achieve synergy and minimize competitive waste -- we need to relinquishing some autonomy and develop common trust and unity of purpose In the health sector, this concept is a difficult pill to swallow!!

Standardised Benefit Packages: (Circular 8) Risk-rated with rate banding. Scheme and silo specific. Partial REF? Supplementary BP 3 Supplementary BP 2 Supplementary BP 1 Basic Benefits Package Option 1 2 3 4 5 6 7 8 Scheme communityrated with REF, thus effectively industry community rate

Emerging Consensus for Benefit Design Supplementary Benefit Packages Additional benefits Common benefits for whole scheme Network Discounts Additional benefits Common benefits Must Include PMBs Restricted network version for lowest income groups Extended access version for highest income groups

Benefit Design Member Adult Child A Primary Care Benefits SMHMO GP Network Own Choice FFS A 1 A 2 A 3 30 40 60 25 40 60 20 30 50 B Hospitals State Contracted-in Own Choice FFS B 1 B 2 B 3 60 90 150 60 90 140 40 70 100 C Specialists Contracted-in Own Choice FFS C 1 C 2 50 70 40 50 35 45 D Radiology / Pathology Dentistry / Optometry Contracted-in Own Choice FFS D 1 D 2 20 60 20 55 15 50 E Auxiliary Services (Limits apply) Declined Saving plan Own Choice FFS E 0 E 1 E 2 0 40 60 0 40 50 0 30 40

Consideration for Future: Hosp. Plan • Must be considered for cost Mx • Present monopolies hold schemes to ransom • PPPs , s 21 and other not-for-profit hospitals • JVs with other schemes • Network consideration

Govt. Employees Medical Scheme (GEMS) • Have we achieved our objectives? ? • State Sector not ready for GEMS • State was to use GEMS & Hosp Revitalization plan to improve hospitals and compete • GEMS was to challenge the market – promote competition • “Deeble plan” • GEMS now contracted to: – Private hospitals – Private Pathologist & Radiologists – Private GP network (Prime. Cure)

My Vision of the Future! • GP controlled network / HMO with alternative remuneration system • Geographic area co-ordination / co-operation • Controlled access to secondary and tertiary care thro’ networks • GP “controlled” Admin system • Regional Mx with MOU with other regions

My Vision of the Future! • Chronic Patients • Specialist referral • Optical • Dental • Radiology • Pathology • Auxiliary • Preferred Hosps Special Purpose Vehicle Secondary Care • Step Down Care • Home Nursing • PPPs for • Red Light Theatre • Contract Specialists • State Tenders • Admin Systems • NCQA Control • HEDIS • ICU • Neonatal care • Renal care • Cardiac care • Oncology care

Ideal IT Solution: • • • Front end integration Electronic clinical records Electronic therapeutic protocols Chronic patient plan electronically linked Compulsory encounter details recording electronically for quality and outcomes review Independent monitoring of data sets Compliance measurements Electronic referral tracking Electronic prophylactic care protocols and monitoring thereof

NCQA and Outcomes Review – Effectiveness of care – Access /Availability of care – Utilization of services – Satisfaction with care – Cost-effectiveness of care – Stability of plan – Informed health care choices – Plan design and innovation Value of health care is not proportional to the increased costs that is now being paid!!

Consideration for Future: • Network contracts with partnerships • Innovative Hospital Plans (s 21 hospitals) Most Important: • Administration system

SP friendly Administration System

Unique PIN # for each patient A 1111 B 1 C 2 D 333 E 5 F 2 • Optometrist • Dentist • GP / IPA Network • Scheme • Patient number

Administration System 3 Dimension Ledger Membership SP Allocation Budgets

Scheme / Administrator Specialists Hospitals Optometry Dental Regional / MHC Admin Path Radiology GP Networks Occ. Health SMHMOs

Get the Balance Right Costs Equity Efficiency Quality “To provide care of the highest possible quality, at the least possible cost” Prof. Edward Hughes

Conclusion: Paralysis in analysis Inertia of Initiation

Acknowledgement: Thanks to: • Heather Mc. Leod • Council for Medical Schemes • Social Security Committee Report • Actuarial Task Team (Emile & Mc. Intyre) For the generous use of their knowledge, data, information and slides