Are medical schemes a rip-off?

Members of medical schemes generally fall into one of two groups – those that have claimed and those that are going to claim in the future.

Of those that are yet to claim from their medical scheme, many often bemoan the fact that it is a grudge purchase. They spend this money every month yet have nothing to show for it.  Insurance cover is, after all, an invisible purchase, until one submits a claim.

Amongst members that have claimed, the minority seem to be satisfied with their medical scheme.  The refrain “rip off” is all too common.  And, what is more, this call is not limited to members – doctors and the press media are joining in. For some reason the hospitals remain quiet on this issue!

Is this label fair?

Just as there are far too many people that disparage medical schemes, there are probably a similar number that actually have no idea just what a medical scheme is and how it works.

Medical schemes have been likened to stokvels, insurance companies and even trusts but little emphasis seems to be placed on two very important facts viz. that medical schemes are ‘owned’ by their members and that they are not-for-profit organisations.  They are required to act fairly and in the best interests of ALL members that contribute a set amount each month into a risk pool of funds from which their claims are settled in accordance with the registered scheme rules.

This all sounds very simple, but who gets what, how and when?

The legal relationship

Every member of a medical scheme has a legally binding contract with the scheme.  The “contract” is set out in the rules of each scheme.  The rules contain details of the contributions payable by each member, the benefits to which they are entitled and the conditions that must be met before a claim will be paid.

Generally, medical scheme rules are stated in the positive which means that if a benefit is not stated, a member has no entitlement to it.

Rules also contain a list of exclusions which are often specific claims that will not be paid (such as cosmetic surgery) or limits and sub-limits on certain types of claims.  The important point is that the rules of a medical scheme are binding on all members of the scheme.  As a result, when the medical scheme makes any kind of decision, such as whether to admit or reject a claim from a member, that decision must be made with reference to the rules of the scheme – the contract between the member and the medical scheme.

The doctor/patient relationship

When you consult a doctor you effectively enter into a contract with him/her and your medical scheme is not a party to that contract.  Clearly medical schemes do not render any kind of healthcare service to their members and their function is simply to administer money – the members’ money. 

Your doctor is the only person that can diagnose and treat you and it goes without saying that without doctors (and, of course, other healthcare professionals) there can be no healthcare industry. 

Usually, after consulting your doctor, he gives you an invoice for his time and advice and legally you are liable to settle this invoice.  If you fail to pay, the doctor is fully entitled to sue you for payment.

If you are a member of a medical scheme and the rules cover the treatment that you received, you may submit the doctor’s invoice to the scheme and they will reimburse your claim on the basis set out in the rules.

If the benefit option that you selected has limits, you will be liable for any shortfall between what the doctor charged and the amount that the medical scheme reimburses in terms of the rules.

Why are doctors so angry?

In most cases a doctor’s single-minded objective is to save lives and to give patients the best care that they possibly can.  On the long road to qualifying and becoming an independent self-sufficient practitioner, a doctor, typically, has had to endure at least 6 years of undergraduate study,  a 2-year internship, a year of community service and the long hours, late night call outs and other inconveniences that accompany this arduous journey. And for those who wish to specialise, further training of anything from 4 to 6 years and more is necessary. During this entire time, the pay is relatively meagre and comes with the average doctor struggling to pay off student loans.

As if all the above is not enough, doctors are now practising in a very litigious environment where the ground is fertile for litigation against the slightest hint of negligence.  Medical mal-practice insurance costs have escalated beyond belief with certain specialities now being forced to pay in excess of R 250 000 per annum to protect themselves against the threat of litigation and to just defend themselves where negligence is often never proven.

One can reasonably see that the average doctor begins each day at least hoping that he will be able to treat his patients in a way that is in keeping with his intensive training and experience.  He consults with his patient and a course of treatment and management is agreed upon only to find that a call to the patient’s medical scheme turns an already stressful day into a nightmare.

The doctor perceives the medical scheme to be engaging with him in a process that adds an enormous administrative burden to his already full day (and for which he feels inadequately remunerated) but worse still by telling him/her how to treat his patient. 

But are they?

The medical scheme sees it differently.  As it has no contract with the doctor and as it does not render any form of healthcare service, all that the medical scheme is trying to do is to assist the doctor and his patient to understand the financial benefits to which the patient (member) is entitled.

Some doctors appear to interpret this information as an indictment on their clinical diagnosis and professional judgement when this should never be the case.

The simple facts are – doctors may treat their patients as they see fit and as agreed between doctor and patient.  That is the first contract to which no medical scheme is party.

The second contract (as between member (patient) and the medical scheme) comes into play as soon as the member raises a query regarding the extent of his entitlement to benefits in terms of the rules of the medical scheme – and remember that these are there to provide consistency and fairness for all members.

The one relationship is a clinical one and the other is a financial one.

Sadly, many doctors don’t seem able to appreciate this point.  Compounding the problem is the fact that during the tenuous and arduous journey to self-sufficiency as a practising doctor, the course of study at university is entirely devoid of any training that could provide valuable insights into the business aspects of the very complex healthcare industry of which they are such an integral part.  Doctors are simply not exposed to any business skills training or healthcare funding insights that would allow them to better understand each party’s distinct role and function in the system.  The reality is that in our modern world, doctors are running practices that are no different to many other businesses and so it is no surprise that they are overwhelmed when, every day, they are confronted with the difficulties of running their own business! To further compound the problem, many of the organisations to which they are able to turn for some assistance are equally inexperienced or misinformed in these matters and are sadly driven by agendas that do not always stand up to careful scrutiny.

And so here they are, thrust into the commercial world of the administration of medical schemes where huge sums of money are changing hands and massive profits are made by certain parties – excluding of course the medical schemes themselves – remember they are not-for-profit organisations. As I have said above – without any doctors there can be no healthcare anywhere in the world and therefore no medical schemes and no administrators and no huge profits. And yet it seems that when it comes to the money, the doctors are, for various reasons, at the end of the food chain.

Short paid accounts

Adding to the doctors’ woes and having got past the perception that the medical scheme is trying to tell him how to treat their patients, the medical scheme often short pays his account.  To a doctor, almost everything is a Prescribed Minimum Benefit (PMB) and according to the Council for Medical Schemes (CMS) his account must be paid in full without any kind of limit.  Naturally, doctors get angry when the medical scheme says that it cannot and will not pay any amount demanded because it understands the law differently. 

Many doctors will label their interactions with their patients as an “emergency” and therefore a PMB that must be paid in full.  As with other examples, there is a legal definition of an “emergency” that does not necessarily accord with a clinical definition of “emergency”.  The law may see cases as requiring “urgent” treatment but not “immediate” treatment and so the matter may not, after all, be a PMB.  And so the differences between doctors and medical schemes grow.

There is no way that doctors are suddenly going to study law and become lawyers.  Rightly, they are entitled to believe what they read in the press but it is here that things again, take a turn for the worse.  Very few journalists reporting on medical matters are fully conversant with the law and the authorities that are relied upon in the interpretation of the statutes.  All too often, journalists in all good faith report what they believe to be correct and doctors pick up that “stompie” and so the treadmill begins.

In truth, doctors should not have to deal with these issues.  They are trained to treat and to heal and to save lives.  They are not administrators or lawyers but they may well have a case to be angry (even just a little) when they see how much money is being made by other parties (again excluding the medical schemes!) in the health care supply chain.

Where is the rip-off?

Most people today believe that they are entitled to expect that their medical scheme must settle all accounts in full.  However, far too many people forget that medical scheme membership is a private purchase in much the same way as sending your children to a private versus government school or contracting with a private security company rather than rely on the SAPS.

Private medical schemes are just that – private.  The members choose a benefit plan/option and level of contributions that both suits their needs and is affordable to them and should recognise that a certain level of risk needs to be assumed, in relation to the above parameters.

Naturally, medical schemes are capable of assuming any level of risk contemplated – against an appropriate contribution.  The more members want, the more they will pay because it is, at all times, members’ money that goes to settle claims.

Medical schemes are accused of being a rip-off when they refuse to settle a claim in full or at all.  As stated above, members claims are settled in terms of the contract set out in the rules.  Claims are settled from the risk pool of funds into which members contribute. This means that if a claim is rejected (because there is no benefit in the rules to which the member is entitled) or is only settled in part (for the same reasons) the result is that the risk pool is not depleted, thus leaving more funds available to settle legitimate claims provided for in the rules.

When a claim is rejected or part paid, it does not result in a dividend being paid to a trustee or officer of that scheme.  The funds not paid remain in the risk pool to settle the next legitimate claim from a member. 

All members are entitled to the same benefits set out in each benefit option. And, only members are entitled to benefits.  The administrator, if there is one, gets paid a fee to perform specific duties set out in a contract.  The trustees and principal officer of the scheme do not share in any surplus in the scheme at year end.  They are usually paid agreed upon fees that are disclosed to members in the annual financial statements and any possible surplus remains for the benefit of member’s future claims and/or a lesser increase in contributions than would otherwise have been possible in ensuing years.

Remember, nobody has ownership of the scheme apart from its members.  As a result, it is hard to see just where the rip-off is.  The simple truth of the matter is that claims are rejected or short paid because the rules of the scheme are being applied.  Perhaps the member has no entitlement to the benefit that he wants or else a set limit is applied because that is what the rules provide and that is what the member contracted to receive in return for the agreed upon contribution.

The answer may be nothing more than the fact that so many people just do not read contracts (rules, policies, etc).  The typical person waits until he has a claim and then cries foul when he finds that he does not have the cover that he thought that he had or, perhaps, he has only limited cover. Someone has to be at fault and medical schemes present ready on-hand fall guys.

If anybody wishes to take issue with the cost of administration or hospital charges or even what a doctor charges, then aim must be taken at the correct party.  Medical schemes do not set prices – they take prices that are charged by the supplier of the service.  Medical schemes do not perform any kind of healthcare service.  They simply administer money that belongs to the members.  The cry of “rip-off” is misdirected and non-suited.

(Article written by Brian Watson, an Executive of Genesis Medical Scheme, October 2013)