Discovery Health, SA’s biggest medical-scheme administrator, says that savings from a huge drop in hospital claims during the national lockdown will not be enough to offset a surge in costs as the Covid-19 epidemic deepens.
Discovery Health administers 3.5-million of SA’s 8.9-million medical scheme members. It counts Discovery Health Medical Scheme (DHMS), the biggest open scheme in the country, as one of its 19 clients.
Discovery Health CEO Ryan Noach said on Wednesday that hospital admissions in April fell 50% compared with last year, and were down 40% year on year since some of the restrictions were eased when the country moved to alert level 4 in May. He declined to put a rand value to the savings.
The drop was precipitated by surgeons and patients postponing nonessential surgery for fear of infection. SA has recorded more than 17,000 Covid-19 cases since the first one was identified in early March.
Discovery Health estimated Covid-19 would cost the medical schemes industry R7.3bn to R31bn, equivalent to R816 to R3,651 per beneficiary, over the next 18 months, depending on the severity of the pandemic, said Noach.
The industry as a whole had sufficient resources to withstand the shock as it could make use of its deep cash reserves, but schemes with an older age profile and low solvency ratios could find themselves in a "precarious" financial position.
Medical schemes are required by law to keep 25% of their annual contribution income in reserve to buffer them against health crises such as Covid-19, but not all schemes meet this solvency threshold.
"If there is a serious outbreak, which impacts solvency across the industry, we anticipate the regulator will support the industry to recover the reserves steadily over a period of years to follow. So in the short term it would not mean a big jump in premiums," Noach said.
The fall in hospital admissions among Discovery Health clients is broadly in line with analysis by 3ONE Consulting Actuaries, which found a 30% reduction in claims in April compared with 2019, among six of its client schemes.
It declined to name the schemes, but said they were three open and three restricted schemes, with about 250,000 beneficiaries.
"Should claims savings continue, they may go a long way to offsetting the potential direct costs of Covid-19 treatment.
"However, the longer-term claims impact is highly uncertain due to the uncertainty regarding Covid-19 progression, and the degree to which elective procedures have merely been delayed, and downstream [costs] due to scheme members having inappropriately avoided necessary primary care," said 3ONE managing partner Carl Yssel.
Discovery Health has so far seen 1,733 members of its client schemes diagnosed with Covid-19, 824 of them in the Western Cape, and 37 deaths.
Early indications were that people older than 50 were more likely to be admitted to hospital, and those over 70 were at greater risk of death, in line with international experience.
There have been 412 hospital admissions, including 79 admissions to intensive-care units, and 39 patients had required ventilators. The average cost incurred by a ventilated patient was R340,000.
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