The council wants to limit increases in Medicare premiums, but that will also limit payouts

– The Council on Medical Schemes recommended capping the increase in contributions to medical aid schemes at 5.7% for 2023.

– Medical inflation typically outpaces consumer price inflation, currently at 7.4%

– Bruce Whitfield gets the scoop from Paresh Prema Alexander Forbes and Profmed CEO Craig Comrae

The Council for Medicare and Medicaid Schemes (CMS) has recommended capping growth in Medicare scheme contributions to 5.7% for 2023.

The number is lower than consumer price inflation (CPI), which currently stands at 7.4%, and medical inflation is usually higher.

The proposed increase is based on the Reserve Bank of SA’s 2023 CPI forecast level.

RELATED: Inflation jumps to 5-year high, breaching Reserve Bank’s target range

It’s a balancing act that must take into account both inflation and affordability, writes Alexander Forbes Paresh Prema in an article for Bizcommunity.

Bruce Whitfield discusses the conundrum with Profmed CEO Craig Comrie and Prema, Head of Technical and Actuarial Advisory Solutions at Alexander Forbes.

Prema explains that the regulator makes recommendations each year as to what should be limited to the increase in contributions.

Obviously, there are many other factors that contribute to health schemes having to increase their contributions, which are also outside of this control.

Paresh Prema, Branch Manager: Technical and Actuarial Consulting Solutions – Alexander Forbes

He says capping increases until 2023 would have serious consequences.

All medical programs must have sufficient reserves and collect contributions at a level sufficient to pay for benefits. These benefits are based on what providers increase their fees by and also pay for prescribed minimum benefits which schemes **cannot** limit – they must be paid in full.

Paresh Prema, Branch Manager: Technical and Actuarial Consulting Solutions – Alexander Forbes

The health schemes somehow got caught in the middle due to the need to increase the premiums by an amount that is not enough to pay the benefit that will be received next year.

Paresh Prema, Branch Manager: Technical and Actuarial Consulting Solutions – Alexander Forbes

Prema says the circular from CMS recognizes that there are elements outside the schemes’ control that need to be taken into account, such as the exchange rate, which affects equipment, the cost of staff and the cost of doing business.

All of this is driven by CPI and at a higher rate.

n CPI, if you look at the CPI, which is now 7.4%, those numbers usually go into negotiations with suppliers at the end of the year.

Seeing as the MPC is forecasting around 7% for the end of the year, we’ll have to see what schemes can negotiate with their providers to reduce these contribution increases… But other benefits could suffer, like your savings account and everyday benefits.

Paresh Prema, Branch Manager: Technical and Actuarial Consulting Solutions – Alexander Forbes

Profmed’s Craig Comrie says the CMS is acting “quite smartly” in trying to put pressure on schemes and perhaps even providers in the industry to limit their growth.

However, the fact that healthcare inflation has always been about 4% higher than the CPI presents a problem.

…if your costs are like this, your premiums will usually have to mimic what you otherwise eat into the reserves, and the sustainability of the schemes will then be in question. The board said that if you struggle, they will actually accept the motivation for a bigger raise.

Craig Comrie, CEO of Profmed

In the future, everything seems to be normalizing [after claims dropped off during pandemic]and unfortunately higher healthcare inflation is normal….

Craig Comrie, CEO of Profmed

…so we can see that premium increases can’t be anywhere from 8% to 10%, unfortunately, over the next 5 or 10 years. This is what the premiums should be.”

Craig Comrie, CEO of Profmed

Scroll to the top of the article to listen to the interview

This article first appeared on CapeTalk: Council wants to limit health care premium rises, but it will also limit benefits