Covid-19 hospital admissions cost Discovery R85 000 on average

And why it couldn’t offer a blanket premium holiday …
Mortality rates among Discovery Health’s productive, working age group members are ‘very low’, which ought to inform the country’s lockdown policy, says its CEO. Image: Moneyweb

Discovery Health says the average cost of all Covid-19 hospital admissions of members of its schemes (open and closed) is R84 708.

This is based on 248 completed admissions thus far.

In a briefing on Wednesday, Discovery Health CEO Dr Ryan Noach highlighted that the costs vary significantly by the type of admission.

A white paper published by Discovery shows the admissions that have required ventilation cost on average R340 737, while ICU admissions “have the largest variation in cost” with an average of R169 525.

He referenced a member currently in ICU where the cost is already R800 000.

Source: Discovery Health

The group says approximately 23% of confirmed Covid-19 cases across all its medical schemes have been admitted to hospital.

Sector indicators

As the largest medical scheme in the country, it would have useful insights into the outbreak. By May 15, it had a total of 1 539 confirmed cases across its member base. At that stage the majority of the cases were in the Western Cape and Gauteng (41% and 38% respectively). In updated numbers as at May 18, total cases are 1 733 with 824 of those in the Western Cape.

Read: Tips to make your medical aid work for you in 2020

So far, Discovery says the median age of members with a confirmed diagnosis is 41. But, while confirmed cases are “biased” to the age bands spanning 20 to 59, the “age distribution of cases requiring hospital treatment is biased to older ages”.

Notably, 61% of confirmed cases between age 70 and 79 and 65% of those between age 80 and 89 have been admitted to hospital. It says “the admission rate has also been seen to increase with the number of chronic conditions a member has”.

Source: Discovery Health

Discovery notes that older members are at greater risk of complications. “For members aged 60 and above, 37% of cases are considered moderate and 15% are considered severe.”

It says the “vast majority of members below 50” recover from Covid-19 without the need for treatment in hospital.

Source: Discovery Health

There have been 37 deaths as a result of Covid-19 of members of the various schemes administered by Discovery Health.

So far, the average case fatality rate across Discovery Health is 2.4%, slightly higher than that for the country as a whole which is 1.8%.

More than a third of confirmed cases involving members between 80 and 89 years old have been fatal.

Source: Discovery Health

Noach says mortality rates are “very low” among the productive, working age groups and that, like elsewhere, this ought to inform the country’s health, economic and lockdown policy.

He says that based on the group’s modelling, expenses related to the pandemic will cost the entire medical scheme industry somewhere between R7.3 billion and R31.8 billion over the two-year period. He says 2020 and 2021 need to be looked at together.

While this is a “very wide” variation in costs, this spans three scenarios (low, medium and high). These costs include the previously unforeseen economic costs related to Covid-19, primarily out-of-hospital costs (for screening and testing), as well as in-hospital costs which typically run at least double the amount of the out-of-hospital ones for each scenario.

This translates to an additional fixed cost of somewhere between R816 and R3 561 per beneficiary, depending on the scenario

Read: Discovery Health’s 2020 medical aid increases

The impacts in each scheme will, however, vary based on the demographic profile of its membership. Schemes with an older membership base (higher average age and ratio of pensioners) are likely to experience admission rates and costs per admission that are higher than average.

Source: Discovery Health

Noach says the group is “very comfortable that Discovery Health Medical Scheme is in a resilient position” with over R20 billion in reserves.

Reserves

It has stress-tested a wide variety of possibilities and looked for anything that would or could “break” the scheme’s reserves. Even in Discovery’s ‘high’ outbreak scenario its reserves will be able to withstand the additional costs.

But Discovery says these additional Covid-19 expenses “will be offset, to some degree, by relatively lower claims for discretionary and elective healthcare episodes during the lockdown period”. Even with some recovery following the hard lockdown in April, the number of medical and surgical admissions are at roughly half their normal level.

At this stage, it says medical schemes could even generate a surplus in this calendar year, despite Covid-19.

But this surplus would need to be used to cover the additional Covid-19 costs in 2021, as well as to deal with the anticipated catch up in utilisation, explains Noach. He sees this catch up occurring in the second and third quarters of 2021.

Relief

Discovery says it has already offered a ‘few hundred million rands” in premium relief to members.

In the first instance, it reached out to 250 000 principal members with positive carryover balances in their medical savings accounts. It offered these members the option of using these balances to cover premiums or portions thereof to help with cash flow challenges.

It has also engaged with employers with between 10 and 200 staff and offered premium relief for two months. This relief would have to be repaid, interest-free, over the remainder of the year.

Noach says blanket or wholesale premium relief in the medical schemes is “economically” simply “not viable”.

The statutory reserves in schemes are only equal to three months’ premiums, he explains.

“A premium holiday would wipe out all reserves, which is precisely what you wouldn’t want in a time like this.”

Listen to Nompu Siziba’s interview with Board of Healthcare Funders MD Dr Katlego Mothudi:

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Why are actual numbers of patients not mentioned instead of percentages?

If we assume that a member on average pays a premium of R2000 per month (which I would think is underestimated) and that there are 2.7 million members, that would give us R5.4 billion in revenue per month.

If around 5% (overestimated) of positive cases require hospitalisation and we have had 18000 positive cases over the past 3 months then that would give us around 900 hospitalised at R84 708 each giving us the drop of R76 200 000 in the revenue ocean of R5 400 000 000.

Or the staggering amount of 1.4% of revenue. Realistically, it’s likely less than 1%.

Perhaps Discovery will pitch for a bailout too?

At this stage, 23% of cases across its membership base have required hospitalisation. It’s literally stated in the article. Be careful of plucking numbers like “5% (overestimated)” out of thin air.

What about all other medical costs which haven’t gone away just because of the additional medical costs of Covid? And the relief they are offering now (reduced revenue from what you calculate). And the uncertainty of how many hospital cases there may actual be. The man is just explaining the medical schemes’ position. relax

@TheSpark Assuming that Covid-19 claims are the only costs that medical schemes are incurring right now, is very naïve. There are thousands of other claims every month that still happen in spite of Covid-19, like chronic medication claims (for PMB conditions not paid from savings), operations (people are still receiving knee replacements and many other operations), administration costs of the schemes (which is a point of contention amongst many I will concede), cancer treatment and many other claims.

So you assume then that all other illnesses and ailments have gotten scared of the new sheriff in town, Covid-19, and have gone into hiding shaking in their boots.

How very naive, perhaps consider changing black market cigarette suppliers and easing up on the pineapple beer?

Our thoughts are with Discovery during this difficult time…..
My question is, after all these years and years of paying for my family. When the pandemic peaks, is there going to be ventilators and high care space if one of us needs it??NO- Not necessary, as private and public medical have agreed to pool resources. WTF? So the 000 000 ‘s paid to them, to cover for this kind of event has very likely been for nothing. Wonderful

Wow, Discovery is letting people use their own money to pay their premiums. How generous!

No doubt Discovery will find a get out clause in their minuscule print to avoid paying claims.

@Dr Gonzo Have you enquired from other medical schemes what they have done to help clients with their premiums? Do you realize that Discovery is liable for the management of the schemes finances and had to get the approval of the Council for Medical Schemes in order to implement this? If you want to pick on medical schemes, pick on all of them because if you look hard enough you will find someone that is unhappy with every single one of them.

The mind boggles, this whole medical savings thing ? Do people not understand its their own money??

My heart bleeds for Discovery, along with the flow from my wallet

The Case Fatality Rate for South Africa is not 1.8% – it’s double that.

You have to take into account that there are some people who have been diagnosed only recently (who are included in the total number of people tested positive) who will still die from the disease in the coming weeks.

Although I haven’t seen any figures for South Africa, the CDC in the USA says that the median time between being diagnosed positive and dying from the disease is 13 days (i.e. 50% of people in the States have passed away before 13 days and 50% of people have died after 13 days from date of diagnosis). That suggests you should compare the number of people who have died from the disease (up until today) with the number of people that were confirmed Covid-19 positive 13 days ago. This gives a better indication of the Case Fatality Rate, although it still isn’t the most accurate method.

I wonder what the comparison costs will be when treated at a government/state hospital?

The difference would be like life and death..

People are not visiting doctors. Surgeries are not happening. People are scared of hospitals, scans, visiting their physio’s and going for follow up appointments etc etc.

Specialists are sitting twiddling their thumbs as hospitals are only dealing with emergencies and Covid cases. Everything else is on hold.

Discovery health is smiling through this.

You are factually provably wrong, operations and procedures are happening in hospitals across the country. Elective procedures will be postponed due to the unnecessary risk.

One must remember that Discovery does not benefit if the claims are low and the reserves remain unused. It gets its money from Vitality and a fixed admin percentage on premiums. The reserves belong to the fund and not to Discovery. These statistics are useful in understanding the underlying costs of Covid for users of private medicine and in knowing that the funds can cover future costs. Whether the private health sector has the capacity to provide treatment to all of Discovery’s members is another issue entirely.

That last sentence was the essence of why we pay. every month. But now we may need it,, chances are we will be sharing capacity with the states shortfall, as well as the private shortfall.
Don’t you love insurance.

Must be a Discovery broker

End of comments.

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