In episode twenty of Inside Covid-19, a two month medical aid holiday for hundreds of thousands of companies, individuals; reality check of how the lockdown is affecting poor people; evidence that Black Americans and Brits are harder hit by Covid-19; and an in-depth report on how the coronavirus made the jump from animals to humans. – Alec Hogg
First in the Covid-19 headlines today:
- A report released Friday by the Ivy League Stanford University raises serious questions around projected mortality rates of Covid-19, including the prospect of 2m Americans dying, which triggered drastic lockdown actions to slow the spread of the virus. This includes the World Health Organisation’s estimated case to fatality rate of 3.4% which now appears to be far higher than reality. A representative sample of 3,300 residents of Santa Clara Country in California by 17 Stanford team members concluded actual Covid-19 infections were between 50 and 85 times higher than the number of confirmed cases, suggesting most people who contract Covid-19 recover without knowing they were infected. These conclusions were supported by a study published in the New England Journal of Medicine where testing of 212 pregnant mothers showed an actual infection rate 10 times higher than known cases in New York, whose residents have been more actively tested than elsewhere in the US. The Wall Street Journal reports similar proportions of vastly higher actual infections to reported cases are being discovered elsewhere including 30 times in Robbio Italy; 27 times in Denmark and 10 times in Iceland. The research suggests the Covid-19 death toll is far closer to that of seasonal flu than what was initially predicted.
- If scientifically confirmed, this would be welcome news for South Africa as it prepares for a gradual relaxation at the end of the month after a five week lockdown. The confinement achieved the objective of flattening the infection curve and preparing its health services for an inevitable Covid-19 spike when things open up. It has also educating citizens about the need for regular hand-washing, avoiding physical contact when greeting and other forms of social distancing. SA’s Department of Health said China has assisted with the supply of Personal Protective Equipment; India with sending over medication; and that 180 Cuban doctors, specialists in primary healthcare, are coming. On Saturday evening the country had just over 3,000 confirmed cases of Covid-19, a daily increase of 9%. There were two more deaths taking the total to 52, with 108,000 people having been tested.
- Stock markets continue to shrug off the economic impact of the Covid-19 shutdowns on economies. In New York the Dow Jones Industrial Average closed on Friday having enjoyed its best fortnight in more than 80 years, gaining 15%. That cut the Dow’s loss for 2020 thus far to a modest 10% while the tech-rich Nasdaq is only 3.6% below where it started in January. The rebound in share prices suggests last month’s selloff is set to be recorded as the shortest Bear Market in history.
- Globally, confirmed Covid-19 infections are rapidly approaching 2.5m with 162,000 deaths registered, 34,000 of them in the US, 23,000 in Italy, 20,000 in Spain and 19,000 in France. Data on the Johns Hopkins University Coronavirus site says Black Americans and other historically disadvantaged groups are experiencing disproportionately high infection and mortality rates. The University says that while Black Americans represent 13% of the population in US states reporting by race, they account for 34% of Covid-19 deaths.
Last week, Discovery announced a number of measures to help members during the Covid-19 crisis, including financial assistance for individuals and small businesses. The relief comes through the offer of a 2 month contribution holiday without losing any cover. I asked Discovery Health chief executive Dr. Ryan Noach whether there had been many requests for assistance.
Unfortunately we have had many requests, many is a difficult term to contextualise. We’ve got 1.8m principal policyholders on the Discovery Health medical scheme, so in relative terms, a very small proportion of those have reached out to ask for help, but we are genuinely concerned about the state of the economy. There is absolutely a cash flow crunch, it’s our considered view at Discovery that small and medium enterprise is the backbone of our economy and is the antidote to poverty and to creating economic prosperity – the growth of small and medium enterprises – and we are particularly worried about that segment.Â
What exactly is the contribution on a day that you are giving? How does it work?
There are two elements to our contribution relief. One is for small and medium enterprise and one is for individuals. On the SMEs, it’s very simple. We define SMEs – for the purposes of this – as any employer who has between 10 and 200 employees and those employer groups that have been with Discovery Health medical scheme for 6 months or more (and are in good standing with Discovery Health medical scheme). These are eligible to apply for a contribution holiday of 2 months. It would simply mean that they don’t pay any premiums for 2 months or for any of the employees. However during that time they retain full cover so they have the full benefits of the medical scheme throughout that period. These missed contribution payments would need to be caught up as you well understand, the medical scheme is a mutual fund of members reserves – its members money in the fund – and so it’s very important that these members ultimately pay those reserves back and they will have to agree to do so over about the next 12 months that follows – after the lockdown is completed – when hopefully cash flow returns and these businesses can become liquid again.Â
So for 2 months they don’t have to make any contributions, they’re fully covered? Surely that costs something?
That definitely costs something. Discovery Health medical scheme has put aside R2.3b as a fund – from its reserves – to subsidise these missed contributions. Just to give you some context on the economics, the scheme bills just over R6b a month and has reserves of about R19b, so total capital reserves represent roughly 3 months of contributions. The statutory minimum is 25% and if you think each month is about 8.5%, the maths adds up. So this scheme has about 3 months of contributions in reserve and consequently – as you say – this is a cost that has to be funded and is done through a R.3b fund that the scheme is set aside.
So how many SMEs do you have on your books and how many are you expecting are going to take advantage of this?
There are tens of thousands of them. We’ve made some assumptions about how many are likely to take advantage. Only time will really tell. But we’ve limited the capacity of the scheme to handle this funding requirement to R2.3bn.
And what about individuals can they also take a contribution holiday?
The starting point is to say that we absolutely wish we could give everybody on the scheme a contribution holiday, because we are really deeply empathic and do recognise that many individuals are distressed and given the economic ability to do so. We’d love to give everybody a contribution holiday. I think what we do understand, is that at this time, there’s no more important time for the scheme to be liquid and to be able to pay the claims of its members. We were expecting an influx of claims related to Covid-19, if we do have a surge of infections and if that happens the scheme must and will stand by its members and pay those claims. So whatever decisions we take now I have to make sure that the scheme remains solvent and able to pay claims throughout. With that in mind, we’ve had to segment to whom and how much support we can give and so the one group that we have identified that we can support is members who have medical savings accounts – with the medical scheme – and particularly those members where they have a positive cash balance in their medical savings accounts. We’ve received an exemption from our regulator – the Council for Medical Schemes – who’s given the scheme permission to allow members to use these MSA amounts to pay their premiums. What does that mean in reality for you and I? if we have an MSA and we have a positive cash balance we can go onto the Discovery Health website and on the medical scheme page, we can choose 1, 2 or 3 months depending how much MSA we’ve got available. We can use our MSA money to pay those contributions, it means no cash out of our pockets whatsoever during that period, but it does mean using up some of your medical savings account money.
And that medical savings account is usually used for when you go and purchase drugs or other – see the doctors and so on. Is that correct, is that what it’s usually kept aside for?Â
It’s primarily used to fund day to day claims, day to day expenses – just like the ones you described – stuff that happens out of hospital unrelated to chronic diseases, unrelated to what we in the industry called prescribed minimum benefits – so we call it discretionary healthcare expenses, although we recognise with respect that it’s not always entirely discretionary if you’re sick, you need care. To your earlier question how many people does this impact? There are about 270000 individuals who are in a position today to utilize this benefit. So it does reach a large number of people.
If I then have R20,000 in my savings account, I have a R6,000 per month contribution – and even though I might not be going through financial difficulties – I can still opt to take that R20,000 and to allocate that over the next 3 months to sort out my contribution just in case something bad would happen to me.
You’re absolutely entitled to do that. It would mean that for those three months then you wouldn’t have to pay any money at all to the scheme out of your pocket. You’d have to weigh up the decision around if you are expecting or if you do have any day to day health care expenses later in the year – sometime before the 31st of December this year – you would probably have a bigger self payment gap and so at that point in time you would probably have to pay for those expenses out of your pocket as discretionary day to day healthcare.
The point I’m getting at is, it’s not just people who are going through difficult times who can take advantage of this. Isn’t that a risk?
It is a risk but it’s not for us to make that decision on behalf of members. Our role is to empower members with a means to give them some financial relief in this cash flow crunch period. And then it’s on an opt in basis. Any member who has the MSA balance – like the example you gave – is welcome to elect an opt in to use it.
Dr Noach, what about the person who does get Covid-19 or wants to go for a test. Are they covered?
If they get Covid-19 – all confirmed diagnoses are fully covered – right at the beginning of March. Even before the first South African infection was recorded, Discovery Health medical scheme launched a new benefit – the World Health Organisation outbreak benefit – through quite nimble action from our regulator, we got it approved in a matter of 2 days and through this benefit we provide full funding for any confirmed cases of Covid-19. That indemnifies the member entirely against the testing, the consultations and the treatment, the whole lot. Since then – now 3 weeks later – the Council for Medical Schemes actually released an update to the legislation through a circular by which they declared Covid-19 a prescribed minimum benefit and as such all schemes are obliged to cover it. So you are definitely covered if you have a confirmed infection for sure. Your question relating to testing? At the moment, if you are tested and you’re negative, it is paid for out of your day to day benefits. Almost all of the Discovery Health medical scheme plans have a pathology – day to day benefit – in their design and from the usual pathology costs, this funds the negative test. It’s quite tough for the medical scheme to consider paying all of that out of risk, because it is our hope and our belief that testing will become ubiquitous. We actually need an environment where everybody is being tested all the time if they feel they should need to be and that becomes quite a difficult thing to fund sustainably at this point.Â
What about those who land up in the hospital in ICU? That’s a very expensive exercise.Â
Are they covered as well fully covered from the risk funds of the scheme as I described earlier, pursuant to the council’s declaration of Covid-19 as a prescribed minimum benefit, it’s actually an obligation now conferred upon schemes to fund it in full. Certainly the Discovery Health medical scheme will fund all of those costs in full. You’re right, it is a very challenging economic situation. If we have a wave of infections and a large number of ICU admissions – like many other developed health care economies have seen – this could be a huge economic burden on the scheme and that goes to explaining why having reserves – in the case of healthcare catastrophes – to pick up the cost on behalf of members and give them the indemnity that they seek, is so very important.
Just explore that a little more. What if we were Italy and had the numbers that they’re seeing or even the United States, would the scheme be able to manage it?
Absolutely and without question in the case of Discovery Health medical scheme. The answer is yes. Our actuarial team has done substantial outbreak modelling – and linked to that – economic forecasting for what different outbreak patterns look like. Before we knew that we would have the flat curve that we’re living through now, our model was based on what many other countries have been experiencing – including particularly the Italy model which was very topical at the time – and I’m pleased to tell you the Discovery Health medical scheme has the financial strength and wherewithal to properly indemnify its members, even in the case of that type of severe outbreak.
How many people in total in South Africa are covered by the various Discovery Health offerings?Â
Discovery Health medical scheme indemnifies about 1.8m principal members and if you look at their families – their beneficiaries on the plan with them – it’s about 2.6 to 2.7m lives. So there’s 2.7m lives covered by the Discovery Health medical scheme. In addition, Discovery Health – which is the administrator of the medical scheme – also administers 18 other medical schemes and that represents about another 700,000 lives. Those are lives typically in employer based medical schemes or restricted funds, where an employer has their own medical scheme for their employees – typically large employer groups – in the total industry across South Africa, there are about 9m lives insured by medical schemes across the industry. We’re all relieved that our curve has been flat to date – and that the growth in infections has been very slow – we are deeply thankful for the very decisive and commendable measures that our presidency has taken. It was brave to call a lockdown early, probably braver than any of us or braver than I could have been, they did a very commendable thing and in hindsight is has proven to be correct. Call that lockdown early, sustain and extend the lockdown. Now we’re at the point of trading off the economic cost of the lockdown versus the health costs. I hope those two voices are equally heard at the table. I’m a doctor and I understand the health perspective but I’m deeply concerned about the economic perspective. We need those voices to both be strong at the table and we need to find a balance between that economic trade-off. I fear further extensions of the lockdown – purely on the basis of the health risks – would actually be more damaging in the medium to long term considering the severe consequences of the economic lockdown.
So how do you see the best possible situation from here?
Well, if you gave me a magic wand I would want the current trend to continue. I would want a phased and responsible release from lockdown that allows us to kick start the economy, to get productive parts of the economy back – manufacturing and mining – where young healthy people can go back to work with social distancing and with improved hygiene. I think the world will never look the same, but with all of those precautions and measures and proper screening and testing happening. Alongside that to kickstart that productive part of the economy and on a phased basis, release society back to normal life. I say that in inverted commas because I don’t think it will look the same as it used to. I think social distancing and these sanitation precautions are the way we’re going to live for a long time, certainly until we’ve got a vaccine and probably thereafter. So the best case scenario for me would be a steady flat curve and the economy starting again. Lots of testing happening – ubiquitously – freely accessible reactive responses to where there’s nodes of infectivity associated with quarantine and a healthcare system that’s geared up and ready to deal with the infections as and when they come along from.
If we have social distancing and if we do wash our hands more often, we would then abandon many of these South African traits of kissing and hugging and shaking hands, surely that would have an impact on things like flu and the number of people who would be infected in a normal season?
Absolutely and a favourable impact on flu. I must say I personally regret the thought of not being able to slap hands in a typical Ubuntu African handshake or give a brother a squeeze in a moment of affection, but I do think that is the new normal. I think we’ve got to absolutely come to terms with, we can be nostalgic about it but we shouldn’t break the rules around that. We need to be disciplined and that will change the pattern of not only this disease but as you correctly point out quite favourably, it will change the pattern of all diseases that are spread by saliva droplets which includes the viral influenza and others.
