Towards cost-effective delivery Within an insurance system

Health Insurance: cost drivers Technology Billing arrangements (fee-for-service) Trust-based relationships between patients & professional practitioners Licensing & educational standards

Medical scheme: cost trends  Benefit category % annual growth in excess of CPIX 1997 to 2007 Private hospital 6.6 Medicine 0.5 Medical specialists 5.4 Other benefits 3.2 Non-healthcare 11.7 GP & GP-coordinated care 4.3 Total benefit expenditure 5.0 Total contributions 5.9

Medical scheme: cost drivers Patient days Growth in “procedure” inpatient cases intervention radiology, endovascular surgery, computerised simulation scanning, prostheses (joints), non-invasive endoscopic surgery Billing in excess of NRP (PMB & non-PMB) PMB “code gaming” Number of scripts; items per script Medicine price difference (State v Schemes)

Cost strategies: International In-the-box innovation coordinate patient demand, specialised care-giver teams, bulk discounts, eliminate spare capacity Prioritise benefits clinical efficacy, emphasise primary care Level of care access management Eliminate perverse billing incentives

Demand curve based on a 10% affordability threshold (People that don’t have cover ~ 41m, not cumulative) Thousand people Average Contribution per Beneficiary per Month Using a 10% affordability threshold, 65% of people without cover have a price point of R50 per beneficiary per month or lower Source: GHS 2007 * Affordability is based on medical aid contributions of at most 10% of household income

Cost strategies: South Africa Expenditure (pbpm: 2008) Polmed PHMS LIMS CIF Hospitals 225 179 Specialists 60 58 GPs /primary healthcare 88 45 41 31 Medicines 138 80 36 2 Dental 30 20 7 5 Optometry 8 12 1 Radiology 28 25 Pathology 35 Maternity benefit (supplement to wages) HIV/Aids/health promotion 4 Emergency transport Administration 29   46 Total costs before reserves & marketing 587 453 120 53

Cost strategies: South Africa Mining industry: GPs employed by the medical scheme GPs manage referrals to specialists Mines own & manage facilities Formulary-based procurement of medicines Work place health promotion & preventative care coordinated with curative health delivery

Cost strategies: South Africa Clothing industry: Prioritised benefits (primary care) Primary care clinics Contracted GPs Medicine formulary Partner with public sector for chronic medicines Referral to selected public sector facilities (diagnostics, admissions)

Discussion points Minimum benefits Technology (selection) Structuring professional practitioner teams Reimbursement Centres of excellence