The medical aid industry is known for confounding consumers with all sorts of complex terms. Among the most confusing of all are references to medical aid, or medical scheme, rates.
Schemes and plans are quoted as covering the costs of in-hospital procedures up to 100%, 200% or 300% of the scheme rate or tariff. You might reasonably think this means that medical aid will cover all healthcare expenses, up to 100% or more. However, this is far from the case.
In this article, we focus on medical aid rates, how they’re calculated and what impact the different tariff options have on medical aid members.
The truth about medical tariffs
Medical expenses in South Africa are not regulated. Doctors, specialists and hospitals can charge what they want, provided the fees are deemed to offer “fair value” to the consumer.
The Department of Health has, however, published a list of recommended tariffs pertaining to specific treatments and procedures conducted in hospitals.
This price guideline, known as the Reference Price List (RPL), is used as a departure point when medical aid schemes determine their tariff or rates structures.
What are medical scheme rates and tariffs?
Medical scheme rates (MSR) are the amounts a medical aid scheme is prepared to pay for specific treatments and procedures. They are usually 2% to 5% higher than the guideline prices published in the RPL, but differ from scheme to scheme.
Entry-level medical aid options usually pay for in-hospital expenses at 100% of the scheme rate. More expensive, comprehensive plans pay up to 300% of the scheme rate, but therein lies the rub.
Specialists can, and do, charge up to five times the scheme rate, and there’s no prohibitive legislation stopping them from working with high profit margins.
How medical scheme rates are determined
Medical aid schemes determine their rates based on risk. They use the number of claims processed over time, and assess the risk of the volume of claims re-occurring. They then weigh that statistic against the available funds, and pay out accordingly.
It’s a fine juggling act, as all legitimate claims have to be paid from one contributions pool. Pay too much for certain procedures, and the solvency and overall claims playability of the medical aid scheme is negatively affected. Pay too little, and members are likely to swop schemes.
In reality, medical aid schemes in South Africa base their rates on affordability, not on what private practitioners actually charge.
The real impact of medical scheme rates
The real impact of medical scheme rates is on your pocket. As we’ve discussed above, medical aids seldom cover in full the costs of specialists, anaesthetists and hospitals.
Even the most expensive, comprehensive plans only cover a portion of what private healthcare providers actually charge. The shortfall is known as the medical, or self-payment, gap, and it’s up to you to cover the outstanding costs.
Sign up for a medical aid option that offers cover at 100% of the scheme rate, and claims will be paid at a little more than the RPL. If the healthcare providers charge the four or five times ‘going rate’, you’ll have a sizeable personal debt to settle.
How to avoid the self-payment gap
There are ways to minimise the impact of the gap between what healthcare providers charge and what medical aid schemes are willing to pay:
- use only network doctors or specialists who are contracted in to your scheme’s MSR
- pre-negotiate fees if providers are contracted out
- sign up for medical aid options with the highest available cover
- invest in a supplementary gap cover product.