Hepatitis: The bad economics of medical schemes

On 3 October we published a piece by Mark Sonderup, Wendy Spearman and Nathan Geffen titled When the private sector falls short. It originally appeared in Business Day.

The article pointed out that public sector patients could access hepatitis B and C treatment, but that private sector patients on medical schemes generally had to pay out of pocket. Discovery Health, the country's largest medical scheme, was cited as a particular culprit.

Medical schemes are only obliged to cover the cost of prescribed minimum benefits. Therefore on 13 October, the Treatment Action Campaign wrote a letter to the Council for Medical Schemes requesting that hepatitis B and C treatments be made prescribed minimum benefits.

Jason Urbach, an economist with the Health Policy Unit, a division of the Free Market Foundation responded to our article. We copy it below. We are clearly arguing from very different premises about the role of the state and the private sector, which is a debate far beyond the scope of Quackdown. Nevertheless, there are several problems with Urbach's article which Mark Sonderup has succinctly summarised below.

Does the private health sector fall short?

Author: Jasson Urbach Date: 10 October 2011

Critics of private health care in SA argue that the private sector does not do enough, that it dumps patients on the public sector and is only interested in “money first”. Sonderup, Spearman and Geffen recently argued in the Business Day article, When the private sector falls short, 3 Oct. 2011, that medical schemes are evil because they “do not cover the treatment of many diseases causing many patients to fall into the void between the public and private sectors”. That “it is then ironic that treatments for chronic viral hepatitis are available in the public sector, but access in the private sector is more difficult where chronic viral hepatitis is not a prescribed minimum benefit (PMB)”. However, just because a condition is not a PMB, does not mean medical aids do not cover it. In fact, any legitimate treatment will be covered subject to the rules of the scheme. The only difference is that, if the condition is not a PMB, the scheme is not obliged to pay the doctors in full regardless of what they charge for their services.

Sonderup, Spearman and Geffen then suggest that “The Council for Medical Schemes must take steps to ensure that treatment for chronic viral hepatitis becomes a PMB”. The fact that two of the critics in this case happen to be hepatologists and are arguing that chronic viral hepatitis should be covered as a PMB is equally ironic. They are surely arguing in their own self-interest and wish to have viral hepatitis declared a PMB to enhance their own incomes. It is government that determines which conditions are included in the list of PMBs, not medical schemes, and certainly no one individual scheme. And herein lies an important point. When benefits are determined politically rather than by medical schemes responding to what individuals want, the benefit packages expand and their costs increase. The consequence is that low cost medical schemes that cover the basic needs of low-income people can no longer be efficiently designed and the unfortunate low income earners are denied cover. It is then that they are driven into “the void between the public and private sector”.

Medical schemes are not charities; they are obliged by economic realities and the interests of the members of their schemes to take great care in managing available resources. If scheme managers were to recklessly pay claims that are not included in the agreements with scheme members they would be guilty of dereliction of duty and would threaten the solvency and continued existence of the schemes they are managing. They have to stick to the rules and ensure that they do not bankrupt the schemes.

Eminent economists have declared that because people’s health, or lack of it, lies largely and increasingly within their own - and earlier their parents' - control, many, if not most health risks are actually uninsurable. Risk pooling and intense actuarial and managerial effort is employed in an attempt to overcome the innate problems that are consequently bound to face private medical scheme managers. Theirs is an almost impossible task and regulatory interventions make their task even more difficult, very often to the detriment of the majority of medical scheme members.

Source: Health Policy Unit

Sonderup wrote the following in an email to Urbach (slightly edited):

1. Neither Professor Spearman nor I do private practice. We are fully employed in the public sector. To intimate our intention is to "enhance our incomes" is defamatory. We make no money from treating privately funded patients in the Liver Clinic at Groote Schuur. They are referred to us because of the expertise available at the clinic. I find your suggestion insulting and I’d appreciate it if you correct this untruth please.
   

2. Your understanding of the issues we raised is also incorrect. The Council for Medical Schemes (CMS) determines prescribed minimum benefits (PMBs). Medical funds would fund patients requiring the necessary treatment if a condition is a PMB rather than hide behind the "it is not a PMB" argument and deny treatment.

3. We used the issue of viral hepatitis to highlight a point. Our original unedited paper noted that this was but one example that we used to contextualize the issue. Many other examples abound of patients being denied therapies for treatable liver conditions. In addition I can highlight many other disease conditions where the same problem exists.

4. You significantly point out that medical schemes "are not charities but are subject to economic realities". Let me give you an example of their economics. They won’t pay for hepatitis C treatment but if a hepatitis C patient develops end stage liver disease and requires a liver transplant, they pay because organ transplant is a PMB! An uncomplicated liver transplant costs about R500 000 with the cost of lifelong monthly drug and follow up costs. Alternatively they must also pay if the patient develops liver cancer ... yes again a PMB! All could be potentially prevented with the appropriate management for hepatitis C.

5. Lastly perhaps you could advise on the following. A recent patient in our clinic, a 48 year old father of two, a paramedic on the air mercy ambulance service for 25 years, was diagnosed with Hepatitis C on routine screening when he went to be a blood donor. He acquired this from a needle stick injury many years ago (his parents or himself as you suggest had nothing to do with this). He has early cirrhosis on liver biopsy and his only fault is to be on Discovery. They have denied him treatment. Because he is on a medical aid he cannot access treatment from the public sector. Perhaps you could ask your eminent economists or actuaries or your private medical scheme managers what they suggest we do with this patient?