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Q&A from the AGM

In last month’s edition we reported back on the AGM, indicating that we would publish questions raised by members in the upcoming issues of MediBrief as they may be relevant to many other members of the Scheme.

Today we are addressing Mr Penhall’s question:

“A great number of the members of the Standard Care Plan are pensioners whose contributions are not subsidised and thus cannot afford the Managed Care Plan. I request that this sector of membership be carefully considered as our income is not increasing at the rate the annual membership fees are going up. I appreciate that medical expenses are increasing at an unbelievable rate. When looking into the future from a pensioner’s aspect it is bleak, your consideration will be appreciated.”

This question raises three key aspects that are, at times, fiercely debated around the Boardroom table.

Firstly, the aspect of Scheme contribution subsidisation by employers.

The Scheme has no influence over employer subsidisation policies or any changes to these policies. Historically, 100% subsidisation on retirement was normal; today 0% subsidisation is the norm. Consequently, the Scheme has a range of pensioners whose contributions are subsidised anywhere between 0-100%, which has given rise to the current inherent difference in the demographics of the three Plans.

As Mr Penhall points out, today, many pensioners choose the Standard Care Plan (SCP) on the basis of affordability. In response, the Trustees are acutely aware of this fact, as well as the implications on the cost of providing services on SCP, the cost of which directly translates into the contribution required.

The second aspect of the question speaks more to the Scheme’s long-term funding policy.

Pensioners, on average, tend to claim 2-3 times more than active employees, largely due to the increased hospitalisation and chronic conditions pensioner members experience.

Under normal circumstances, insurance-based products, including medical schemes, require the young and healthy to cross-subsidise the old and sick so as to remain viable. AMS however does not have enough young employees to cross-subsidise the pensioners, which means the current contributions are not enough to cover the actual costs of paying all provider claims and should be significantly higher than other schemes.

However, the Scheme “artificially” keeps the contributions at normal rates by using the reserves to meet the shortfall. No other Scheme in the country does this on a predetermined ongoing basis – which is the Scheme’s long-term funding policy.

AMS does not actively subsidise a pensioner member on any plan – it may not, the law is very clear – all members must be treated fairly, and no individual member or group of members may be given any form of preferential status. If there is a claims shortfall at the end of the month, money is taken from the reserves to pay claims.

Regarding Mr Penhall’s question, the third aspect is the most vexing of the lot. The Scheme and Board are painfully aware of the fact that pension increases barely match CPI, yet medical inflation runs at CPI plus 3%, or more.

Even salaries are not keeping up with medical inflation. The reasons here are three-fold, very simply: member expectation, provider expectation and new technology.

To illustrate the point, and we have used these examples before, in the past a stomach ulcer was possibly diagnosed using a simple black and white x-ray after a patient had swallowed copious amounts of barium meal. This intervention was carried out once, maybe twice, in a patient’s lifetime, but certainly not frequently. Today, technology has advanced significantly and a gastroscope is done under anaesthetic routinely, as part of preventative care once a member reaches 40-50 years old to check for cancer and other abnormalities, including ulcers. This means the frequency and the cost have each increased by probably 3-4 times, maybe more. The fact that doctors earn significantly more doing a scope, does not detract from the fact that it is much better medicine and we live a lot longer. Further, not too many doctors or members would settle for anything less. Consequently, members expect more, doctors expect more, and it costs much more, none of which is reflected in the CPI basket of goods. And this is but one example – hence, medical CPI is much higher than the normal household CPI.

We can assure Mr Penhall and all members: the Scheme does everything it can to try to curb unnecessary costs whilst trying to ensure market-related benefits. Measures include using provider networks, aggressively negotiating rates through DH and at times, “cost-sharing” with members through co-payment structures or providers in capitated agreements.

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