Rising medical aid costs

A recent Moneyweb analysis of price increases of different products and servicàes that make up the consumer price index (CPI) had several readers asking why medical insurance and medical aid rates gallop ahead of the cost of doctors, dentists, hospitals and medicine.

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It's a good question.

The Statistics SA figures revealed that premiums for medical insurance, including through medical schemes, have increased by nearly 24% since 2021.

The cost of doctors, medical services and medical products increased by around 16% over the same period, and the cost of hospitals by 15%.

Older members

Craig Comrie, CEO of Profmed Medical Scheme, says there is a simple answer to why "health care inflation" exceeds CPI annually.

"Health care inflation is not only driven by the straightforward increase in fees from hospitals and doctors, but also the fact that the population is getting older on average every year and older people require additional services.

"Typically medical schemes may negotiate on [a] CPI basis but what we see is an added 3% per year driven by members accessing more services," says Comrie.

"A simple example (not factual) is our members going to hospital1000 [members] a year for R1 000 per event in 2024, for a total of R1 million for the year. If these same members go to the hospital 1030 per year, the costs increases to R1.03 million, even before considering the increase in CPI."

This increase in expenditure by the medical aid translates directly into higher premiums.

"Health inflation also relies on general demand and supply side issues. If you throw in fewer specialists and doctors, and [a] stagnant and an uncompetitive hospital environment, the really good skills increase their base fees by much more than CPI," says Comrie.