OUT-OF-POCKET EXPENDITURE

AUTHORS Carrie-Anne Cairncross Martin Moabelo Michael Willie Sipho Kabane

PEER REVIEWER: Anja Smith

The cost of health care is constantly increasing. This is a consequence of an ageing population, an increase in the burden of disease, increasing utilisation of health services, including provider-driven healthcare services, and the increase in cost of health services. There is also an increasing trend with regard to direct expenditure of members of medical schemes, which adds a financial burden to them. Phenomena such as voluntary use of non-designated service providers (DSPs), benefit design and lack of product knowledge are some of the underlying reasons for an out-of- pocket (OOP) payment.

This study evaluates the increasing trend in OOPs incurred with regard to various disciplines in the context of medical schemes’ benefit design.

Longitudinal descriptive analysis was used to draw meaningful insights into and identify features of the OOPs incurred by scheme members. The annual statutory return data of the Council for Medical Schemes (CMS), collected for the period 2013-2019, were used to examine trends in OOPs in the medical schemes industry. OOPs are calculated as the difference between the claimed amount and the amount paid from the medical scheme’s risk benefit.

The results show that OOPs incurred by members have increased at an annual rate of 7.9%, from an estimated R22.3 billion in 2013 (R2 562.83 per beneficiary per annum (pbpa)) to over R35.2 billion in 2019 (R3 913.94 pbpa), in real terms. OOPs made up just over 18% of the total amount claimed from medical schemes in 2019; this increased from 15.5% in 2013.

OOPs incurred for medicines dispensed increased annually by 7.8% between 2013 and 2019, from R7.4 billion to R11.6 billion, respectively. Claims billed for medicines dispensed constituted 40.6% of total out-of-hospital claims and only 17.1% of the total amount claimed in 2019.

OOPs incurred for hospital services increased at an annual rate of 14.9% between 2013 and 2019, from R1.1 billion to R2.4 billion. Hospital services make up approximately 61% of in-hospital claims and 36.6% of total amount claimed in 2019.

The findings of this study suggest the need for innovative strategies such as a basic benefit package, standardisation of benefit options, inclusion of primary health care services as part of prescribed minimum benefit (PMB) entitlements and a review of medicine benefits and hospital benefits, to deal with escalating levels of OOPs.

Medical scheme beneficiaries may face health care costs that are not covered by their schemes. These may arise due to the specific benefit option not covering the service required, the beneficiary having depleted their medical savings account (MSA) and other benefits, co-payments, and services charged above scheme rate. When these costs arise, they must be settled by the beneficiary and are deemed OOP expenditure. These might lead to beneficiaries foregoing services or getting into debt, which creates financial protection concerns [1] [2].

The CMS defines an OOP, in its annual report, as the difference between the amount claimed by the service provider and the amount paid from the risk pool by the scheme. This then includes the amount paid from the MSA as part of OOP [3]. It should be noted that the OOP presented is an underestimate as beneficiaries do not necessarily submit all direct claims paid to their schemes once their benefits are exhausted.

The World Health Organisation (WHO) defines OOPs as 'direct payments made by individuals to health care providers at the time of service use. This excludes any prepayment for health services, for example in the form of taxes or specific insurance premiums or contributions and, where possible, net of any reimbursements to the individual who made the payments’ [1].

The OECD defines OOPs as ‘expenditures borne directly by a patient where neither public nor private insurance cover the full cost of the health goods or service. They include cost-sharing and other expenditure paid directly by private households and should also ideally include estimates of informal payments to health providers’ [4]. The CMS’ definition is not consistent with those of the WHO or OECD, due to the nature of the MSA not being an insured benefit and offering no cross-subsidisation [5] [6].

The purpose of this study was to evaluate the trend in OOPs incurred in respect of various disciplines in the context of medical schemes’ benefit design between 2013 and 2019. We take an in-depth look at OOPs for medicines dispensed and hospital services. Furthermore, it aims to explore and describe the potential impact that OOPs have on scheme members.

OOP has been calculated using WHO definition (OOPw), and the narrow definition (OOPn). OOPw refers to direct payments made by members to health care providers at the time of service use, thus, the difference between the amount claimed and total benefits paid (‘risk + savings’). OOPn was calculated as the difference between the amount claimed and the amount paid from medical scheme risk (‘claimed less risk’). All amounts presented were adjusted for inflation and are expressed in real terms.

This study covers the population of registered medical schemes for the period 2013 to 2019. The analysis is based on 87 medical schemes recorded in 2013, 83 medical schemes in 2014/15, 82 in 2016, 80 in 2017, 79 in 2018 and 78 in 2019. The medical schemes industry had 8.78 million beneficiaries in 2013 and 8.99 in 2019 [3].

Longitudinal descriptive analysis was undertaken to draw insights and features of the OOPs experienced by members of schemes. The annual statutory return data collected by the CMS through the ASR Healthcare Utilisation System for the period 2013 to 2019 were used to examine trends in OOP expenditure in the industry. Medical schemes are required to submit, on an annual basis, aggregated membership, utilisation and expenditure data to the CMS. Tables A2 (Monthly membership), B1 (Analysis of healthcare providers) , B2 (Utilisation of medicines and consumables), B3 (Hospital admissions and expenditure) and B11 (Other benefits) was used to calculate the total amount claimed by providers and OOPs incurred by members [7]. Data from all the B tables were combined and aggregated to hospital setting and discipline code by benefit option which finally consisted of 481 424 observations. The membership data were aggregated and consisted of 124 201 observations. Between 217 and 338 options were reported on for the period under review. All amounts have been adjusted for inflation and are expressed in 2019 prices.

OOPs are not broken down into co-payment and direct payments as these indicators do not exist in the current ASR Healthcare Utilisation System. There were 49 benefit options left unclassified, as schemes no longer existed or were exempted from providing PMBs at the time the benefit option standardisation framework study commenced [6]. It was not possible to assess the proportion of OOPs attributed to the voluntary use of non-DSPs as this information is not captured in the ASR system.

FIGURE 1: OUT OF POCKET EXPENDITURE COMPARING DEFINITIONS