Social Solidarity In South African Medical Care Systems

Introduction

This essay attempts to analyze the meaning of the “social solidarity” principle in the South African Health System. It also attempts to analyze the relevance of the principle and the implementation of it brought by The Medical Schemes Act (from this point on will be known as the MSA) and the effectiveness of these principles. The paper also wants to answer the question whether social solidarity principles are causing medical aid prices to inflate. The paper starts by analyzing South African history and why social solidarity was necessary to be legislated. It then defines social solidarity in the South African Medical care system and further discusses the social solidarity principles found in the MSA and finally looks at the cost implications of the principles.

This paper gives special attention to Open enrolment, Community rating and Prescribed minimum benefits.The history of South Africa and Social Solidarity Apartheid in South Africa has largely influenced the health care system. The segregating system created racial inequalities in health care, education and other opportunities. Because of these inequalities, class and race in South Africa go hand in hand, black people being mostly the lower class and white people being mostly the upper class. Historically, black people received a poor health system compared to white people and as majority of this country was black (76% of the population), this meant a health system that was already poor was over flooded. This resulted in the infant mortality rate within the black population being 12% while within the white population, it was only 1.2%. From this we can see there was a huge divide between the two health systems. Unfortunately, these issues were carried on to the democracy. And although The Constitution deemed us equal, South Africa remains to have one of the largest class divides.Social solidarity aims to face these issues and to create a balance by spreading out the funding such that the upper class subsidizes the lower classes medical care or the healthy subsidizing the sickly or the young subsidizing the old. The principle suggests that people should gain access to medical care because of their needs and not from their affordability. Because health care is a factor in a countries productivity and therefore the economy of the country, it is fair to say that we should all be contributing towards the South African health system according to our might.

The Medical Schemes Act of 1998 brought new provisions that were designed to achieve social solidarity. Three sections that especially highlighted social solidarity were: Open enrolment, Community rating and Prescribed Minimum Benefits. These will be discussed below.Prescribed Minimum BenefitsSection 33 of The Medical Schemes Act of 1998 states that for a benefit option of any medical scheme to be approved, it needs to have the prescribed minimum benefits included.All South Africans with medical aid are entitled to these benefits, in South Africa there are around 297 minimum benefits. These include both a wide in-house and out-house benefits which includes a comprehensive list of diseases covered that have to be insured. In a 2007 study, it was found that PMB’s makeup an average of 49.4% of benefits. Prescribed Minimum Benefits ensure that everybody has equal access to basic coverage. PMB’s cover the risk aspect of social solidarity. Though everyone is insured against the comprehensive list of diseases, not every person will require those benefits but they will have to pay for them regardless. There is also a group of people who will be using these benefits much more often. Here, the low risk (not so sickly people who rarely use these benefits) will be subsidizing the high risk (people who use the benefits a lot). i.e. pooling high risk and low risk people together for these benefits allows the benefits to not be so expensive.

Though PMB’s have brought about a lot of benefits, a problem they have resulted in is causing medical aid benefit option prices to increase. By the government legislating a basket of benefits to be compulsory, they have forced medical schemes to not offer medical aid options that are below a price that cover the benefits listed and their admin costs. This raises the minimum amount medical aid is offered at and therefore excludes a portion of the population that cannot afford that minimum amount. This contradicts the very basis of social solidarity as it excludes people with low income. PMB’s are therefore a double sword when it comes to social solidarity, and whether the good outweighs the bad is still unclear.

PMB’s cause medical aid to be priced at a minimum of x. Therefore anyone who cannot afford x amount cannot participate in the medical schemes market. It is the same effect open enrolment and community rating have on the medical market. But this will be discussed below.Open enrolmentSection 29(3) of the MSA of 2008 prohibits the exclusion of applicants who are otherwise eligible for membership. Anyone who wishes to join a medical aid can join it, as long they meet requirements such as being employed and any member who wishes to add a dependent can do so. Members also cannot be rejected based on age and past or present medical conditions. This ensures that there is no discriminatory access to medical care. Section 24(2)(e) defines some of the factors that medical schemes cannot discriminate against as race, age, gender, marital status, ethnic or social orientation, pregnancy, disability and state of health. Previously, medical schemes could refuse membership on the basis of health history, age, disability or illness etc. that existed at the time of admittance into the medical scheme. They would in essence cherry pick and choose only low risk people. This excluded the population that was in dire* need of health care. The open enrolment provision in the act ensures that everyone who is eligible for medical schemes is able to utilize them. Open enrolment brings unlimited risk to medical schemes as they cannot measure how much risk they are entering into with beneficiaries, they are blind sighted while beneficiaries usually know their risk. For examples, someone who knows they have a costly chronic disease will take a medical aid for R2500, knowing they will cost the medical scheme much more.

Medical schemes are able to do this and mitigate the risk by the law of large numbers. For whatever number of high risk people join the scheme, there will be people who join the medical scheme and only claim when they have flu. The members of a scheme usually offset each others risks. Creating social solidarity.The South African Constitution states that we all have the right to access quality health care, and this right should certainly not be infringed because of arbitrary factors. But it can be argued that allowing individuals into medical schemes without rating them exposes medical schemes to unlimited risks. Medical schemes have now tried to mitigate these risks using late joiner penalties and waiting periods. These are extremely important in ensuring the financial sustainability of medical schemes, but they do not eliminate the financial risk of medical schemes. Medical schemes now raise benefit option prices so that they have a big enough sum to be able to mitigate their risk. High risk individuals will not mind this as it will probably still be lower than if they paid for treatments out-of-pocket, but low risk individuals might start exiting medical schemes, increasing the amount of out-of-pocket individuals.

Community RatingSection 29(1)(n) states that medical schemes can only determine a persons contributions based on income and number of dependents and nothing else. Medical schemes in South Africa are not allowed to rate a persons risk and decide whether they are high risk or low risk to determine how much they should pay. It is illegal to rate someone because of sex, age, past or present state of health’s. Risk rating systems are plagued by cherry picking, where medical schemes target the healthier low-risk members of the public. Community rating allows high-risk individuals to enjoy affordable health care and to be protected against financial applications from illnesses.Community rating allows income cross-subsidization between low-risk and high-risk people which aids in making sure that all members on a benefit option contribute the same amount for the same benefits regardless of risk. In risk rating, the medical scheme will rate each individual according to different factors such as age, medical history, living in a highly polluted area etc. they then use this risk profile to set a premium that would pay for the risk the medical scheme is taking. The issue with this is that the people who really require medical care would opt to not take medical aid because their contributions would be exorbitant, they would then pay out-of-pocket for medical care which would force them to pick treatments they will forgo to save on money and would sometimes postpone certain treatments to save up for it while their condition might be becoming worse.

In a country like South Africa where nearly half of the population lives under the poverty line, this kind of system could never work. Community rating doesn’t rate applicants, rather they rely on the notion that if you take a big enough pool, there should be a good balance between low and high-risk individuals, the low risk individuals will be paying x amount but not use the benefits much, while the high-risk individuals will also be paying x amount but will use much more benefits, they offset each other. This is how social solidarity is achieved.Community rating and risk rating cannot both survive in one market. Low risk people would gravitate towards risk rating medical schemes as they would have lower premiums than if they were in a community rating system as they would be rated accordingly. High risk individuals would navigate towards community rating as here they wouldn’t be risk rated therefore their premium would be lower. The risk rating schemes would thrive as they would only have low risk individuals but community rated medical schemes would suffer and go bankrupt paying out claims for high risk members. Therefore community rating can only survive in monopolistic markets. Competitive markets, unlike monopolistic markets , have competitive prices to draw more people in to their businesses. Monopolistic markets tend to set the prices to their benefit as they know people don’t have much option except to do business with them. This results in higher prices for medical aid.Open enrolment and community rating are linked and work hand in hand. Open enrolment ensures that no one is discriminated against when joining a medical scheme and Community rating ensures peoples are not risk rated and discriminated against when setting their contribution prices.

Conclusion

Social solidarity is vital in addressing the inequalities in the health sector of South Africa. Open enrolment, Community rating and Prescribed Minimum Benefits provisions in the Medical Schemes Act work together to ensure that the old and sickly are well taken care of in terms of medical care. These provisions implement social solidarity in different ways; PMB’s and open enrolment work through risk cross subsidization while community rating works through income cross subsidization. These three provisions have taken strides in terms of achieving social solidarity yet have caused an increase in medical aid, which causes an exclusion to the low income earners. Imposing on the social solidarity principle.

Reference list:

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