Demand and supply
‘ Demand and supply also plays a significant role in medical inflation vs CPI ,’ says Woodhouse . Changes in lifestyle and medical innovations have increased life expectancy , which means people require medical products and services for longer , increasing the strain on the healthcare sector . In countries with a high incidence of chronic diseases – such as HIV / AIDS , diabetes , heart disease and tuberculosis – pressure is even more severe .
‘ Although healthcare inflation slowed during the COVID-19 pandemic , industry data suggests that since 2023 , healthcare inflation has started to rise to levels equivalent and beyond pre-pandemic levels . Patients who chose not to access healthcare facilities during the pandemic are now comfortable to reschedule elective procedures . Furthermore , patient health is likely to have deteriorated during the pandemic when patients were hesitant to be screened and book consultations with their doctors . These factors are resulting in a catchup of healthcare servicing . This in turn drives a higher demand for healthcare servicing and ultimately healthcare inflation .
On the supply side : Factors such as a low Gross Domestic Product ( GDP ), high inflation and high interest rates increase the cost of healthcare . Supply chain disruptions and labour shortages in the sector have a further detrimental effect .
Unemployment
Unemployment , particularly youth unemployment |
in South Africa is also a contributing factor . Younger |
members are the lifeblood of medical schemes and |
without a consistent intake of younger members , |
cross-subsidisation |
across |
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broader |
risk |
pool is compromised . |
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Managing and improving members ’ health
To counter healthcare inflation and continue growing their membership base , private medical schemes across the world are investigating ways to improve the health of their members and reduce healthcare costs . Through the Bonitas managed care initiatives , focused on preventing and managing lifestyle behaviours , the estimated saving was R1.7 billion in 2023 . Poor diet , smoking and lack of exercise are the three lifestyle factors that contribute to over 80 % of chronic conditions . Mental health issues are rising exponentially in South Africa and this too , has been addressed through various mental health programmes to treat and manage the condition .
This is done through promoting healthy activities and behaviours , investing in preventative measures ( such as healthcare screenings and vaccinations ), developing disease-specific managed care programmes and negotiating preferential rates with network healthcare providers .
Bonitas strategic response to rising costs
Woodhouse says , ‘ these include strategic purchasing , healthcare screening , managed care , Fraud , Waste and Abuse ( FWA ) detection and recovery , as well as offering integrated value to our members . We negotiate with service providers for more favourable rates , including hospitals , GPs , pharmacies and specialists . For example , our hospital spend in 2023 was R6.9 billion and we realised a savings of R475 million through strategic purchasing for our members .
Fraud , waste and abuse
‘ In terms of FWA , we have realised an estimated saving of R1.2 billion through changed behaviour since the commencement of the programme . Banked recoveries reached R52.3 million which , in fact , is only a small portion of the value achieved , as service providers who engage in FWA , are less likely to continue if they are held to account .
Woodhouse says , ‘ We cannot completely mitigate these rising healthcare costs but by continuing to create value through innovation , encourage screening for early detection of disease , our managed care programmes and being a strategic purchaser , we can maintain the fine balance between reducing costs and sustainability .’
Bonitas Member Magazine Issue 4 / 2024
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