Medshield Medical Scheme, Daily Maverick

Will South Africans be able to afford medical aid in a shrinking economic environment?

South Africa is said to have some of the most expensive medical aid in the world. According to the World Health Organization, South Africa spends more on voluntary private health insurance (42%) as a share of total health expenditure than any other country. It serves, however, only 16% of the population. The latest data from the IMF shows the South African economy grew by 0.4% between January and March this year. Crippling power cuts, volatile commodity prices and a challenging external environment have contributed to the country’s weak growth performance. The IMF projects that by year-end, real GDP growth will fall sharply compared to 2022, and although they expect growth to pick up again in 2024, the pace is too slow to reduce unemployment, which at 32.9% remains close to an all-time high.

Inflation and unemployment are on the rise, along with a confirmed greylisting status and looming recession. The number of South Africans who can afford a healthcare safety net will likely shrink even further. Our already inundated state hospitals are doing their best to serve incredibly high numbers of patients with minimal resources. With this in mind, many are now asking, will South Africans be able to afford medical aid in a shrinking economy?

What does the greylisting of the SA economy mean for consumers?

 Greylisting is the temporary country listing by the global Financial Action Task Force (FATF). A country on the grey list has been recognised as having compliance issues but has committed to addressing strategic inadequacies to counter money laundering and terrorist financing within a given timeframe. During this time, the FATF closely monitors the country, imposing stringent regulations on them.

Serious potential problems follow this listing, including a lack of trade opportunities, a downgrade of ratings, and a subsequent shrinking economy. Greylisting will most likely damage the country’s reputation, making doing business with other countries extremely difficult. This reduction in foreign investment and access to financial markets can have a ripple effect on the economy and the affordability of goods and services, including healthcare and medical aid.

John Watling

During a greylisting, healthcare providers may face increased costs due to restrictions on foreign investment, which could also lead to higher patient prices. In turn, this might affect the sustainability of a medical scheme or the costs could eventually be passed onto medical aid members through higher premiums or reduced coverage. The affordability of medical aid during and after greylisting and, ultimately, a recession will depend on the severity and duration of the economic downturn and the individual’s financial situation. Many people will likely experience financial hardship and struggle to make ends meet.

How to remain covered during difficult times

Medical aid members need to monitor the situation and be prepared for potential changes in the cost and availability of healthcare. Make sure your medical scheme has a higher-than-average solvency rate, as Medshield does, to ensure your healthcare claims are covered during such challenging times. For even the most basic plan, the principal member of a medical scheme would pay around R1 500 to R2 000 per month. A single parent with a child could expect to spend at least R2 300 monthly. It would require a monthly take-home pay of at least R20 000 for the medical cover not to exceed 10% of the household budget. One financial benefit is that members can claim medical credits on their tax returns. In the current tax year, taxpayers can claim R364 per month for the first two members and R246 for additional members. It would effectively reduce the cost of the hospital plan for two members by R728, improving affordability. The member must submit a tax return to receive the tax credit.

Knowing the available medical aid benefit options that fit one’s pocket is another important way to manage these difficulties and remain covered. A hospital plan like Medshield’s MediSwift is an affordable benefit option that offers ample hospitalisation cover in emergencies but also provides for active and generally healthy people who might require treatment but whose injuries are not severe enough for hospital admission. Other top-of-the-range plans can include comprehensive everyday benefits and private emergency hospital stabilisation benefits, while entry-level plans typically include essential day-to-day benefits only. Without a hospital plan, a policyholder would still rely on state hospitals. Health insurers, for instance, recommend their primary healthcare products as an add-on to a medical scheme’s basic hospital plan. It is thus vital for people to understand the limits of health insurance. The MediSwift plan features physiotherapy and biokinetics benefits, two annual family practitioner visits, and a Medshield Wellness benefit that provides for the flu vaccine and birth control, and tests for cholesterol, blood pressure, glucose and BMI, amongst others.

Individuals must carefully assess their financial situation and healthcare needs before deciding whether to maintain or change their medical aid coverage. You can reduce your day-to-day spending using the Designated Service Provider (DSP) recommended by your medical scheme. These are providers who have an agreement with the scheme on how much they will charge. You are then unlikely to land a bill from the specialist that charges more than your medical scheme rate. The bottom line is that it is the smart choice if you can afford a basic hospital plan. In addition to access to a private hospital, you will receive cover for 271 life-threatening conditions and 26 chronic illnesses and many preventative care benefits.

Making healthcare affordability recession-proof

While some economists believe healthcare is recession-proof, the data is mixed and complex. The actual relationship between healthcare and economic recession is not clear. What is clear is that, in general, South Africans struggle during a recession and often decide to forego medical treatment that they need due to financial constraints. But it doesn’t only rest on the individual to ensure affordability.

In response to a recession, governments and other organisations should increase their support for citizens by expanding the public healthcare system or offering subsidies. Charitable organisations and community groups may also increase their efforts to care for those in need. We should all work together to prioritise healthcare access during economic hardship to ensure everyone can access necessary medical care. Yes, greylisting and a looming recession are our current reality, but we can continue enjoying medical aid benefits with closer management.

Published by Daily Maverick on 20 October 2023. To view online, click here.