1. The Costing of the Chronic Disease List
January 2003

2. CDL Study Data Data from Medscheme Data Warehouse
Data covers 2001 calendar year, extracted in August 2002
Data fully run-off, no adjustment for IBNR
46 options
27 schemes
million beneficiary months of data
Average exposure of 1,341,892 beneficiaries

3. Cluster Analysis and Applicability

4. Cluster Analysis Distinct clusters:
High contains options with older, 'whiter' members with high utilisation;
Medium-older contains options with medium utilisation and older members;
Medium-younger contains options with medium utilisation and younger members; and
Low contains options with younger, 'blacker' members with low utilisation.
Additional not present in PMB study. Single large scheme where the ethnicity is predominantly so-called “Coloured”

5. Cluster Analysis
Different clusters experience different benefit utilisation, costs and disease profiles. Provider behaviour differs by cluster, even within the same hospital facility.
Study contains more Low cluster beneficiaries than the industry.
For industry comparisons, use Weighted industry price.
This uses 50% of the costs of the Low cluster and 100% of the other clusters.
Low cluster is more relevant to the emerging low-cost option environment.

6. Beneficiaries by Cluster
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7. Age Profile by Cluster
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8. Proportion of Options Covering the CDL

9. Industry Benefit Study 2001
Source : CARE Monograph

10. Proportion of Beneficiaries Covered for CDL

11. Chronic Registrations by Cluster
Q data

12. Chronic Registrations High Cluster
Cluster Average 29.7%
Q data

13. Chronic Registrations Medium-older Cluster
Cluster Average 16.9%
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Q data

14. Chronic Registrations Medium-Younger Cluster
Cluster Average 9.3%
Q data

15. Chronic Registrations Low Cluster
Cluster Average 11.4%
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Q data

16. Chronic Registrations Scheme H
Q data

17. Prevalence of CDL Conditions from Registrations

18. Registration of Beneficiaries for Chronic Medicine
Other Chronic
Conditions
22.9%
CDL Conditions
77.1%

19. Prevalence of CDL Registrations
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20. Co-morbidity in Registrations
As Co-morbidity
59.4%
Single Disease
40.6%
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21. Co-morbidity in Registrations
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22. Co-morbidity in Registrations
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23. Beneficiaries Registered for CDL Conditions

24. Single Disease Analysis

25. Registered Beneficiaries Claiming
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Single diseases only

26. Proportion of Total Drug Claims
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Single diseases only

27. Proportion of Total Drug Cost
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Single diseases only

28. Average Cost per Case Centre for Actuarial Research Centre for
Single diseases only

29. Average Cost per Case Centre for Actuarial Research Centre for
Single diseases only

30. Multiple Disease Analysis

31. Registered Beneficiaries

32. Registered Beneficiaries Claiming
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Multiple diseases

33. Proportion of Total Drug Claims
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Multiple diseases

34. Proportion of Total Drug Cost
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Multiple diseases

35. Average Cost per Case
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Multiple diseases

36. Average Cost per Case vs. Sum of Single Diseases
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Multiple diseases

37. Prevalence All Diseases

38. CDL Package by Age

39. Age of Exposed Beneficiaries0% 2% 4% 6% 8%
10%
12%
14%
1-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
Proportion of beneficiaries
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40. Age of Claiming Beneficiaries

41. Age of Claiming Beneficiaries0% 2% 4% 6% 8%
10%
12%
14%
0-1
1-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
Proportion of Claiming Beneficiaries

42. Age of Claiming Beneficiaries for Selected Diseases
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43. Age of Claiming Beneficiaries for Selected Diseases
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44. CDL Prevalence by Age

45. CDL Prevalence by Age

46. CDL Prevalence by Age 600 500 400 300 200 100 0-1 1-4 5-9 10-14 15-19
100
200
300
400
500
600
0-1
1-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
All ages
Prevalence per 1000 beneficiaries

47. Average Cost by Age

48. Average Cost of CDL by Age
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
All Ages
Average Cost per case pa

49. Raw Price of CDL by Age
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50. Raw Price of CDL by Age
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
1-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80-84
85+
All Ages
Price per beneficiary pa

51. Proportion of Price by Age
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52. Raw Price of CDL by Wider Age Bands
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53. CDL Package by Cluster

54. Age of Exposed Beneficiaries
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55. Age of Exposed Beneficiaries
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56. Prevalence All CDL Diseases

57. Prevalence by Cluster

58. Prevalence by Cluster
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59. Average Cost by Cluster
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60. Raw Price by Cluster

61. Raw Price by Age and Cluster

62. Raw Price High vs. Low Cluster
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63. High Price Relative to Low Price by Age
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64. Average Cost of Hypertension High vs. Low Cluster

65. Differences Between Clusters
Age profile differences explain roughly two-thirds of difference in raw cluster prices.
Other differences are probably due to a combination of “the four P’s”:
variation in Prevalence rates of important conditions;
Presentation or manifestation of conditions;
Provider choice (GP vs. specialist and the management or prescribing habits of each); and
benefits available within the health care Plan.

66. Adjustments to the Raw Price of the CDL Package

67. Adjustments to Raw Price
Haemophilia
Removal of three diseases from final Regulations
Cost of diagnosis and medical management
Adjustment for compliance
Adjustment for limits
Adjustment for co-payments
Costs of chronic medicine management programme
Costs of administration
Reduction for cost of delivery in the public sector

68. Haemophilia
Patients do not register for chronic medicine. Covered by ‘Blood and related products’ benefit, not Medicines.
Haemophilia Society estimates 2000 patients in SA, which suggests prevalence of 1/
220 people claiming ‘Blood and related products’ benefit; estimate 67 are haemophiliacs.
Average case cost of R2 500 per month (R30 000 p.a.) for ‘Blood and related products’ benefit.
But majority are renal failure patients, erythropoietin for treatment of chronic anaemia.
Recommendation: use estimate of R0.50 pbpa

69. Removal of Diseases from Final Regulations
Anti-coagulating Therapy: 0.7% of total cost
Cushing’s Disease: 0.0% of total cost
Osteoarthritis: 3.1% of total cost
In total, 1.8% of people excluded from any CDL benefit
12.7% now excluded from partial CDL benefits
Recommendation: reduce raw CDL price by 3.7%.

70. Cost of Diagnosis and Medical Management
Prescribed Minimum Benefit:
“diagnosis, medical management and medication, to the extent that this is provided for by way of a therapeutic algorithm for the specified condition, published by the Minister by notice in the Gazette”.
Need to determine and finalise therapeutic algorithms.
Process requires full study of cost implications.
Recommendation: use initial rough estimate of R per beneficiary per annum.  

71. Cost of Diagnosis and Medical Management

72. Adjustment for Compliance
Longitudinal study of new applications with follow-up for one year. 27% of beneficiaries classified as non-compliant used only 28% of the value of the medicines authorised.
Scheme only experienced 71% of the potential cost of the medicines authorised.
Recommend stress-testing price through adjusting margin for compliance.
Recommendation: add margin of 20% of raw price of CDL package for possible increase in compliance in a mandatory environment.

73. Adjustments for Limits
Design of project to attempt to obtain full cost of the CDL conditions without constraints:
Relatively generous chronic medicine limits in schemes.
All members can select option with chronic medicine.
Extracted both chronic and acute usage.
Full tariff amount of item prescribed, not amount paid.
But need small margin where beneficiaries stop claiming during the year because limits have been reached.
Recommendation: add margin of 5% to raw price of CDL package for effect of removing all limits in a mandatory environment.

74. Adjustments for Co-payments
Design of project:
Full tariff amount of item prescribed, not amount paid.
Could be small increase in usage of Primary CDL-NAPPIs relative to Secondary CDL-NAPPIs in mandatory environment, with member co-paying difference in price.
Potentially an increase in usage because full benefit will be paid without constraints from pooled benefits.
Recommendation: add margin of 5% to raw price of CDL package for effect of removing co-payments in a mandatory environment.

75. Medicine Management Costs

76. CDL Administration Costs

77. EDL State Tender Price Compared to Private Sector Price
Source: Rothberg and Walters (SAMJ 1996)

78. Savings for Switch to EDL Medicines at State Tender Prices
Source: Rothberg and Walters (SAMJ 1996)

79. CDL Cost in the Public Sector
1995 Committee of Inquiry’s estimate of a 50% reduction in private sector costs is achievable for primary health care medicines. 
Access to Essential Drugs List medicine at State tender prices is a potential policy option.
Recommendation: use estimate of 50% saving in cost of CDL package when delivered in public sector. As policy unfolds, so this estimate can be further refined.

80. Full Price of the CDL Package

81. Full Price of CDL Package
Four components:
Medicine component, based on full data in study (high degree of certainty)
Portion of price for which uncertainty exists until package is fully defined and allowance for impact of package being mandatory
Amount added for medical management costs
Non-healthcare costs.
Note: Prices should not be used blindly in pricing work. Contact a professional for assistance.

82. Full Price CDL Package

83. Full Price PMB Package

84. Non-Healthcare Expenditure
Well below Registrar’s benchmark of 10% of total expenditure

85. CDL Package Relative to Medicine Expenditure
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86. PMB Package Relative to Benefits and Contributions

87. Conclusions

88. Preliminary Conclusions on Affordability
CDL package, both in basic form and with added margins for change in claiming behaviour when mandatory, appears to be affordable compared to medicine benefits.
PMB package (including CDL) appears to be well covered when compared to total benefits and contributions in the industry.

89. Price in Mandatory Environment
Expect change in member and provider behaviour from existing environment.
Uncertainty exists in price until package is fully defined.
Have included an effective 30% margin on medicine component of CDL package.
Consortium opinion that collective margin of 30% on medicine component is sufficiently conservative to cover this uncertainty in the pricing.

90. Need for Mandatory Package
Community rated price

91. Need for Mandatory Package
Real danger that open schemes will pursue more aggressive self-seeking behaviour and limit chronic medicine benefits to discourage older members and improve their community rate relative to their competitors.
Substantial broker activity and churning of members worsens this incentive.
A mandatory minimum package of chronic medicine and management benefits is essential for reducing opportunistic behaviour by some schemes.

92. Further Policy Issues
Membership of medical schemes needs to be compulsory, rather than voluntary, for medium to higher income groups to stabilise the system.
A risk equalisation system between medical schemes, based on the Prescribed Minimum Benefit package will reduce the opportunistic profiting from risk selection still further.

93. Composition of the CDL List
Brief did not extend to consider diseases outside of the draft list and whether any should have been included.
Need for a process of chronic disease prioritisation in medical schemes in order to inform the rationing process in future.

94. Definition of CDL Package
Draft of Treatment Guidelines for Chronic Disease List Conditions
Based on Standard Treatment Guidelines and Essential Drugs List published by DoH in 1998.
Appoint task team for documenting and maintaining treatment algorithms for CDL conditions.  
Actuarial and pricing expertise to estimate the price of the algorithms. Iterative process of refining algorithms.
Project manager to ensure process completed in time for pricing in August 2003 if implementation is 1 January 2004.

95. Complementary and Traditional Medicine
Serious concerns about the implications of legislating the algorithms for CDL conditions.
Only one approach to treatment will receive funding from medical schemes: entrenchment of an allopathic approach to treatment, largely based on drug interventions.
Hard won legal freedoms to operate must not be negated by preventing funding of complementary medicine and African traditional medicine for CDL conditions.
Allied Health Professions Council with 11 modalities.
Consumers will increasingly question health plans.
Inclusion unlikely to be simple and debate will be vigorous.

96. Chronic Medicine Management Programmes
Medicines management is essentially divided into rules-based formulary management and clinically-based member management.
Experience with a large membership base shows that there is no question that a combination of the two yields the best results.

97. Further Research
Combine with PMB study to obtain total expenditure on CDL conditions. Aid in setting industry priorities.
Range of costs for each condition, rather than average costs.
Understand price difference between High and Low clusters.
Current prices of EDL medicines at State tender prices compared to medicines used by beneficiaries in this study.
Costs of treating CDL conditions in the public sector.

98. Centre for Actuarial Research
A Research Unit of the University of Cape Town
(CARE)
Centre for Actuarial Research
A Research Report Prepared
Under Contract for the
Council for Medical Schemes