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INDEXATION OF MEDICAL COSTS FOR SOUTH AFRICAN MEDICAL SCHEMES
Roseanne da Silva
IAAHS 2007IAA Health Section Colloquium
13th – 16th May 2007CTICC
www.iaahs2007.com
Objectives
• Index for private sector medical prices• Experienced by members of a particular
set of medical schemes• In respect of claims submitted for
reimbursement• Opportunities for expansion
Ideal index characteristics
• Representative• Objective• Consistent• Smooth• Ease of understanding (and calculation)
MPI
Inflation is defined as the persistent change in the general price level
The intention of the index is to track the changes in the price of medical services
over time in an objective way.
Currently available measures
• Contribution increases– Per scheme– Report of the Registrar
• CPI– Medical care and health expenses
Medical Scheme Contributions
• Used as proxy for medical costs• But includes:
– Non-healthcare costs– Reserving requirements– Utilisation trends– Impacts of benefit changes– Impacts of demographic changes
Medical scheme interactionsInfluenced by:Claim costsAdministration costsUtilisationBenefitsDemographicsContrib. to reserves
MPI is measure of the change in the price of services provided by the medical service
provider
Index development
• Measuring performance / effects• Monitoring growth• Benchmarks• Identification of problem areas
Price indices• LASPEYRES INDEXIndex =
Where Pit = Price of item i (i = 1,.....,m) in period tPio = Price of item i (i = 1,.....,m) in the base periodQio = Quantity of item i purchased in the base
period
( )( )P QP Q
it io
io io
∑∑
Price indices• PAASCHE INDEXIndex =
Where Pit = Price of item i (i = 1,.....,m) in period tPio = Price of item i (i = 1,.....,m) in the base periodQit = Quantity of item i purchased in period t
( )( )P QP Q
it it
io it
∑∑
Calculation process
• Household surveys (quantities)• Price surveys• Development of representative baskets• Aggregation of baskets
– Items to include– Substitution
• Weight allocations (within and between)• Index calculation
Sources of bias
• Substitution• Outlet substitution• Quality change• New product
(Boskin Commission, 1995)
ILO Manual
• Use of formulae• Frequency and completeness of surveys• Sampling methods• Quality adjustment• Relevance to sub populations• Differing objectives
South African CPI
• CPI• Core• CPIx• Inflation targeting• Weights based on 2000 household survey• 17 groups incl. medical care and health
expenses
Medical care and health expenses
100%7.15%Total: Medical care and health expenses
7%0.47%Insurance
14%0.98%Contributions to medical aid funds
2%0.16%Therapeutic appliances and equipment
37%2.61%Medical and pharmaceutical products
9%0.64%Hospital, nursing-home fees and fee for related services
32%2.29%Doctors fees, nurses fees and fee for related services
% of Medical Component of
CPI basket
% weighting
CPI
Chart of Medical Component of CPI and CPI (Base = 1990) for January 1990 to November 2005
0
100
200
300
400
500
600
700
Jan-9
0Ja
n-91
Jan-9
2Ja
n-93
Jan-9
4Ja
n-95
Jan-9
6Ja
n-97
Jan-9
8Ja
n-99
Jan-0
0Ja
n-01
Jan-0
2Ja
n-03
Jan-0
4Ja
n-05
Medical Component of CPICPI
Pilot study
• Medical schemes administered by sponsor• Service dates:1 Jan 2001 to 30 Nov 2005• Claim extracts:
• Hospital;• Medicine; and• Other (all remaining services providers and claim
types).
MPI
• Private sector measure• Calculated from medical scheme data• Claim amounts (not tariff)• Extensive baskets of products and
services• All items measured monthly• Adjustments for changing practice
Data issues
• Tariff coding– NHRPL– NAPPI
• Internal codes• Hospital consumables• Frequency definition
Basket Construction
57%63%52%52%48%Radiology51%49%50%47%50%Procedural - Specialist71%70%70%69%69%Pathology64%61%63%64%66%Optometry76%74%74%73%77%Obstetrics & Gynae80%77%76%78%76%General Practitioners54%58%61%65%55%Dentistry72%73%72%72%74%Consulting Specialist82%82%82%81%81%Anaesthetist69%69%69%69%69%Medicine Acute58%58%58%58%58%Medicine Chronic71%73%56%74%79%Hospitals20052004200320022001Basket
MPI calculation
• At per category level and overall• h(n) = hits weighting used in month n• p(n) = price in month n• M(n) = [sumproduct(h(n),p(n))] / sum (h(n))• Index(n) = [M(n) / M(n-1)] * 100
Linking methodology
• In transition month:– A = Weights(1) * cost per hit– B = Weights(2) * cost per hit
• Index in transition month = A/prior month• Index in transition month + 1 =
following month/B
Weightings
100%100%100%100%100%Totals
10%11%11%11%11%Other
26%26%25%25%26%Medicine
29%28%30%31%30%Hospitals
24%25%25%25%25%Specialists
10%10%8%8%8%General Practitioners
20012002200320042005MPI Components
Index weight
Comparison to CPI
7%Not includedInsurance14%Not included
Contributions to medical aid funds
37%36%Medicines9%9%Hospitals
13%Other providers28%Specialists
33%
14%General Practitioners
Medical component
of CPIMPIAt November 2004
MPI compared to CPI and the Medical component of CPI
for January 2001 to November 2005
90
100
110
120
130
140
150
Jan-
01Fe
b-01
Mar
-01
Apr
-01
May
-01
Jun-
01Ju
l-01
Aug
-01
Sep
-01
Oct
-01
Nov
-01
Dec
-01
Jan-
02Fe
b-02
Mar
-02
Apr
-02
May
-02
Jun-
02Ju
l-02
Aug
-02
Sep
-02
Oct
-02
Nov
-02
Dec
-02
Jan-
03Fe
b-03
Mar
-03
Apr
-03
May
-03
Jun-
03Ju
l-03
Aug
-03
Sep
-03
Oct
-03
Nov
-03
Dec
-03
Jan-
04Fe
b-04
Mar
-04
Apr
-04
May
-04
Jun-
04Ju
l-04
Aug
-04
Sep
-04
Oct
-04
Nov
-04
Dec
-04
Jan-
05Fe
b-05
Mar
-05
Apr
-05
May
-05
Jun-
05Ju
l-05
Aug
-05
Sep
-05
Oct
-05
Nov
-05
inde
x
MPI
Medical Component of CPI
CPI
MPI:5 major categories
80
100
120
140
160
180
Jan-
01Fe
b-01
Mar
-01
Apr
-01
May
-01
Jun-
01Ju
l-01
Aug
-01
Sep
-01
Oct
-01
Nov
-01
Dec
-01
Jan-
02Fe
b-02
Mar
-02
Apr
-02
May
-02
Jun-
02Ju
l-02
Aug
-02
Sep
-02
Oct
-02
Nov
-02
Dec
-02
Jan-
03Fe
b-03
Mar
-03
Apr
-03
May
-03
Jun-
03Ju
l-03
Aug
-03
Sep-
03O
ct-0
3N
ov-0
3D
ec-0
3Ja
n-04
Feb-
04M
ar-0
4A
pr-0
4M
ay-0
4Ju
n-04
Jul-0
4A
ug-0
4S
ep-0
4O
ct-0
4N
ov-0
4D
ec-0
4Ja
n-05
Feb-
05M
ar-0
5A
pr-0
5M
ay-0
5Ju
n-05
Jul-0
5A
ug-0
5S
ep-0
5O
ct-0
5N
ov-0
5
inde
x
GP'sSpecialistsOther service providersHospitalsMedicineTotals
MPI Hospital sub-categories
50
70
90
110
130
150
170
190
Jan-
01Fe
b-01
Mar
-01
Apr
-01
May
-01
Jun-
01Ju
l-01
Aug
-01
Sep
-01
Oct
-01
Nov
-01
Dec
-01
Jan-
02Fe
b-02
Mar
-02
Apr
-02
May
-02
Jun-
02Ju
l-02
Aug-
02S
ep-0
2O
ct-0
2N
ov-0
2D
ec-0
2Ja
n-03
Feb-
03M
ar-0
3Ap
r-03
May
-03
Jun-
03Ju
l-03
Aug
-03
Sep-
03O
ct-0
3N
ov-0
3D
ec-0
3Ja
n-04
Feb-
04M
ar-0
4A
pr-0
4M
ay-0
4Ju
n-04
Jul-0
4A
ug-0
4S
ep-0
4O
ct-0
4N
ov-0
4D
ec-0
4Ja
n-05
Feb-
05M
ar-0
5A
pr-0
5M
ay-0
5Ju
n-05
Jul-0
5A
ug-0
5S
ep-0
5O
ct-0
5N
ov-0
5
Hospital - non surgical consumables
Hospital - ward fees
Hospital - surgical consumables
Hospital - theatre fees
MPI Medicine category and sub-categories
80
85
90
95
100
105
110
115
120
125
130
Jan-
01Fe
b-01
Mar
-01
Apr
-01
May
-01
Jun-
01Ju
l-01
Aug-
01Se
p-01
Oct
-01
Nov
-01
Dec
-01
Jan-
02Fe
b-02
Mar
-02
Apr
-02
May
-02
Jun-
02Ju
l-02
Aug
-02
Sep-
02O
ct-0
2N
ov-0
2D
ec-0
2Ja
n-03
Feb-
03M
ar-0
3A
pr-0
3M
ay-0
3Ju
n-03
Jul-0
3Au
g-03
Sep-
03O
ct-0
3N
ov-0
3D
ec-0
3Ja
n-04
Feb-
04M
ar-0
4A
pr-0
4M
ay-0
4Ju
n-04
Jul-0
4A
ug-0
4Se
p-04
Oct
-04
Nov
-04
Dec
-04
Jan-
05Fe
b-05
Mar
-05
Apr
-05
May
-05
Jun-
05Ju
l-05
Aug-
05Se
p-05
Oct
-05
Nov
-05
Medicine - ChronMedicine - AcuteMedicine
Limitations• Submitted medical scheme claims – not total
spend• Specific medical schemes• Coding practices• Substitution effects – frequency of weighting
changes• Other influences:
– Benefit adjustments– Demographic changes– Regulatory changes– Medical practice– Provider agreements
MCI Adjustments
• Utilisation trends are driven by a number of factors including:– Benefit design;– Changing demographics;– Changing treatment patterns and practices;– Attitudes toward claiming;– Member plan movements;– Changes in medical technology.
MUI
• Calculated from MPI and MCI• MUI = MCI / MPI• Assumes that change not attributable to
price are utilisation• MCI is after adjustment
MCI/MPI = MUI Results
80
90
100
110
120
130
140
150
Jan-
01Fe
b-01
Mar
-01
Apr
-01
May
-01
Jun-
01Ju
l-01
Aug
-01
Sep-
01O
ct-0
1N
ov-0
1D
ec-0
1Ja
n-02
Feb-
02M
ar-0
2A
pr-0
2M
ay-0
2Ju
n-02
Jul-0
2A
ug-0
2Se
p-02
Oct
-02
Nov
-02
Dec
-02
Jan-
03Fe
b-03
Mar
-03
Apr
-03
May
-03
Jun-
03Ju
l-03
Aug
-03
Sep-
03O
ct-0
3N
ov-0
3D
ec-0
3Ja
n-04
Feb-
04M
ar-0
4A
pr-0
4M
ay-0
4Ju
n-04
Jul-0
4A
ug-0
4Se
p-04
Oct
-04
Nov
-04
Dec
-04
Jan-
05Fe
b-05
Mar
-05
MCIMPIMUI
Further work….
• More extensive data pool– Coding consistency!
• Impact of alternative reimbursement mechanisms
• Tracking utilisation• Measuring quality
INDEXATION OF MEDICAL COSTS FOR SOUTH AFRICAN MEDICAL SCHEMES
Roseanne da Silva
IAAHS 2007IAA Health Section Colloquium
13th – 16th May 2007CTICC
www.iaahs2007.com