Medical schemes spent so little in 2020 their extra reserves can cover SA’s entire vaccine bill

Business Insider SA
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  • Spending by medical schemes has been dropping fast during the coronavirus disaster, as members avoid healthcare of all kinds.
  • Up the end of September, medical schemes spent more than R10 billion less than they had in the previous year, numbers released this week show.
  • The extra surplus that has created could, all by itself, likely cover the entire bill for vaccinating all of South Africa against Covid-19
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The additional reserves South Africa's medical schemes have amassed during the coronavirus disaster are now sufficient to cover the entire estimated cost of vaccinating the entire population against Covid-19, new data released this week shows.

At the end of September, medical schemes had reported reserves of R92.8 billion, the Council for Medical Schemes said in a regular update that aggregates their regulatory filings. That is up nearly 35% on the position in 2019.

The difference between reserves in 2019, and those in 2020, come to some R24 billion – right in the middle of the range of expectations for the total cost to vaccinate all of South Africa.

See also | 70% AstraZeneca and 5% Pfizer: These are the vaccines you’re most likely to get in SA

But that money is held in trust for 8.9 million beneficiaries of medical aid schemes, as opposed to the 40 million people the government hopes to see vaccinated in hopes of reaching community immunity against the novel coronavirus.

Discussions are ongoing for the exact mechanism by which medical schemes will subsidise at least some of the doses of vaccine, and possibly the rollout logistics infrastructure, for use beyond their membership.

An initial agreement put the subsidy at 30% of the total cost of the vaccination drive, while a roughly similar approach called for one-for-one support, with medical schemes coving the cost of vaccinating an equal number of uninsured people.

However, various administrators have expressed concern about the legality of any subsidy mechanism – and about the precedent it would set, at a time when it is not yet know how often Covid-19 vaccines may have to be updated and administered again.

Where the money came from

Membership numbers for medical schemes dropped slightly between 2019 and 2020, by 0.2% overall, but the combined payments by the remaining members totalled 7% more. 

At the same time payments by the schemes were far below budget, as South Africans avoided any form of elective medical procedure, and also skipped out on some critical care. A graph from the CMS, on the ratio of "relevant" healthcare spend to contributions, shows just how unprecedentedly low spending fell.

CMS ratio

The rand impact came to a surplus of R18.7 billion across all registered medical schemes in South Africa – compared to a R2.5 billion surplus the year before. That is a surplus 1,151% above budget. 

Schemes have also been left highly liquid. By the end of September they held nearly R20 billion in cash and cash equivalents between them.

Since President Cyril Ramaphosa promised that Treasury will find the money for vaccines, speculation on funding mechanisms have included a wealth tax, or an increase in the fuel levy.

These suggestions have not been particularly popular.

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