Statement by the Minister of Health at the meeting with Medical Schemes

25 January 2008

The Minister and MECs for Health held a meeting with the Board of Healthcare Funders, the Principal Officers of various medical schemes and medical scheme administrators at the OR Tambo International Airport in Ekurhuleni today.

The meeting was aimed at discussing the challenge of significant increases in tariffs in the private health sectors for 2008. The Department of Health is concerned that most of the schemes have increased their contribution above inflation. These increases range between 9 and 15%.

Concern was raised about medical scheme reserves being significantly higher than the minimum of 25% required by the Medical Schemes Act. The industry average is currently estimated at 38%.

Schemes explained that cost pressures arise from a number of sources, including price increases from suppliers which include:

1. health professional services,
2. cost of hospitalization, including all the medical supplies used;
3. increased utilization rates;
4. aging membership of many medical schemes;
5. and use of high cost medical technologies.

The schemes reported that their individual ability to negotiate effectively with private hospital groups are non-existent. If this is indeed the reality, this is a major cause of concern.

The schemes expressed their full support for the Minister’s view that

1. the cost of private health care costs are high and that these need to be contained as a matter of urgency;
2. that should private hospital groups reduce their tariffs these will be passed onto their members;
3. that they will examine their own operations to explore further options to reduce their administration and other costs; and
4. that the implementation of a national health insurance system will go a long way to addressing issues of affordability and access to health care services.

As you know the Department has agreed to meet with individual private hospital groups a few weeks ago. In the past week the Department has held these bilateral meetings with private hospital groups to better understand their rationale for the increases in tariffs. We are pleased to report that the agreement reached collectively that they will maintain increases at CPIX was confirmed by most hospital groups. Similarly, the medical schemes have also committed to an in principle decision to review their tariff increases and align them with CPIX for those schemes whose 2008 increases are higher.

Another meeting will convened in two weeks to receive progress report from the schemes on the implementation of the outcomes of this meeting.

The Department of Health will continue to work with all players in the health care market to seek to reduce the cost escalation in this sector as a matter of urgency. Whilst we work hard to get agreement on short term measures to contain costs, the Department will also be working with the sector on firming up proposals on the design of a National Health Insurance.

I thank you.