1. Impact of External Factors on the Cost of Healthcare By Gary Scott NAMAF 8 th Annual Conference 23 September 2014 © 2013 Towers Watson. All rights reserved.

2. Presentation Outline A look at the impact of supply side constraints on the healthcare market in Namibia Extent of “medical tourism” in Namibia Lessons from Zimbabwe A look at the impact of medical malpractice insurance on the healthcare market in Namibia Focus on obstetrics Lessons from South Africa Opportunities to work together for a more sustainable solution for Namibia towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 2

3. Medical Tourism in Namibia © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. A look at some data

4. Breakdown of Namibian Specialist Costs Using 2013 admissions across NAMAF medical aid funds towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 4

5. Breakdown of South African Specialist Costs Using 2013 admissions across NAMAF medical aid funds towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 5

6. % of admissions performed in South Africa Using 2013 admissions across NAMAF medical aid funds towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 6

7. Lessons from Zimbabwe Drivers of medical tourism in Zimbabwe (Mrs Linda Mukusha presentation at BHF Conference) No preferred service provider networks where tariffs can be negotiated and agreed, Minister of Health will not allow this No agreement on tariffs with service providers. Three different tariffs in the market, AHFoZ which most funders reimburse on, Association tariffs and ZIMA tariffs (bronze, silver and gold based on American model) Sub-economic subscriptions in comparison to treatment costs Minister of Health increased tariffs by 75% on GPs and about 5% across other disciplines (July 2014) Service providers argue that medical inflation is at CPI +300%. towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 7

8. Lessons from Zimbabwe Drivers of medical tourism in Zimbabwe (Mrs Linda Mukusha presentation at BHF Conference) Hospitals asking for +20% yearly Service providers pass on capital costs to funders through exorbitant marks ups on services +100% to +500% Lack of Specialist skills e.g. heart bypass surgery Lack of Specialist equipment, private institutions affected, i.e. quality Affordability on the part of the patient (benefit limit does not cover treatment costs in Zimbabwe) High loss ratios suffered by medical funders towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 8

9. Lessons from Zimbabwe towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 9 Mrs Linda Mukusha presentation at BHF Conference (cont.)

10. Lessons from Zimbabwe How has the market received medical tourism PATIENTS: are happy they have choice and can get affordable treatment that preserves their benefit FUNDERS: manage claims costs resulting in better financial performance SERVICE PROVIDERS: want all treatments to be done in Zimbabwe except for treatment not available. Raise arguments for post treatment care and externalisation of funds REGULATOR : their position not clear as no comment has been received from the office towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 10

11. What role is specialist costs playing in Namibia Analysis of 2013 in-hospital specialist fees charged as % of NAMAF Benchmark Tariff towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 11

12. Concluding thoughts Medical tourism: Must be seen as a last resort in areas where Namibia has failed to attract / retain the necessary skills Is not practical in many areas of practice such as obstetrics, psychiatry Cannot be preferred to holistic care in an integrated system towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 12

13. Medical Malpractice Insurance © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. Focus on Obstetric care

14. Breakdown of Namibian Obstetric Care Using 2013 admissions across NAMAF medical aid funds towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 14

15. Breakdown of Namibian Obstetric Care Count of deliveries reimbursed by NAMAF medical aid funds in 2013 towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 15

16. Breakdown of Namibian Obstetric Care % caesareans reimbursed by NAMAF medical aid funds in 2013 towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 16

17. Lessons from South Africa – obstetric care Distributions between GP and Specialist in attendance towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 17

18. Medical Malpractice insurance Medical Protection Society (MPS) 2014 rates Obstetrics – private specialist practiceR330,000 Neurosurgery, spinal surgeryR318,190 Orthopaedic surgeonR131,080 Cardiac, general surgeryR130,000 Obstetrics – General Practitioner* R92,260 ENT surgeon R70,530 Procedural – General Practitioner* R15,820 Non procedural – General Practitioner* R8,680 * GP’s spending more than 50% of their time doing work of a specialist nature must pay according to specialist rates towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 18

19. Medical Malpractice insurance Cost of insurance in private sector if spread across the GPs and Specialists doing 10 or more deliveries for NAMAF Schemes in 2013, amounts to: General Practitioners – R1,200 per delivery Specialists– R3,700 per delivery Namibia is paying for historical claims experience of other countries (South Africa has registered claims as high as R24 million, and has a claim incidence rate approaching 10%) MPS premiums for specialist obstetrics have increased from R75,000 to R330,000 in eight years. MPS moving from a claims incurred to a claims made basis of insurance to keep premiums affordable. towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 19

20. Namibian solution? Co-operation between funders and doctors could give rise to a unique solution for Namibia that allows GPs to continue to practice obstetric care in remote regions Insurance pool created for Namibian claims only Cost of insurance shared between funders and doctors Premiums set on a per-case rather than per-doctor basis Cover structured to continue after retirement 24/7 medical legal support and advice Efficient claims handling and legal support to ensure speedy and appropriate compensation towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 20

21. Concluding thoughts Working together: Guard against importing the antagonism between funders and doctors that has developed in South Africa Doctors are well remunerated and medical schemes are well funded in Namibia The focus should be on making the system sustainable for patients in terms of both access to care and affordability towerswatson.com © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only. 21