Council for Medical Schemes: Budget & Strategic Plan 2009/10 & Committee Strategic Plan

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25 August 2009
Chairperson: Mr B Goqwana (ANC)
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Meeting Summary

The Council for Medical Schemes briefed the Committee, noting that it was formed in 2000, primarily to protect the interests of the beneficiaries of healthcare schemes, with special emphasis on the promotion of non-discriminatory access to healthcare schemes through open enrolment, community ratings and guaranteed benefits. It also aimed to promote financial stability and sustainability of the healthcare scheme operators, encourage their participation, investigate complaints against them and control and coordinate the way in which these schemes functioned in accordance with the national policy. It also advised the Minister and made recommendations on the criteria for the measurement of quality and outcomes. It had to comply with the Public Finance Management Act and had never received a qualified Audit Report from the Auditor-General. The accountability chain and composition of the Council was outlined. The industry contained 119 not-for-profit medical schemes and numerous profit intermediaries. The schemes covered 7.8 million lives. The annual gross income was R74 billion and the annual gross claims incurred amounted to R64.7 billion. Whilst the solvency levels of most companies were in excess of their prescribed 25%, many were struggling to maintain this. The planned operations of the Council and its budget were outlined.

Members asked about the solvency figures, how the Council undertook its consumer education, and whether it regarded 6% budget allocation to investigation of complaints as sufficient. They queried recent press reports about the fact that some members ran out of benefits part-way in the year, asked what kind of interaction the Council would have with the operators of the schemes, and asked what the situation was with the bargaining councils, and how the introduction of the National Health Insurance would affect the Council. The Council was asked to explain what matters it outsourced, and why, and whether it used labour brokers. Members were interested how the list of chronic conditions was compiled and how frequently it was updated, and queried how HIV was regarded, and also examined the problem of specified doctors often being situated far away from a scheme’s beneficiaries. Members questioned the length of time to finalise complaints, the amount spent on rental, the problems that arose if medical aid schemes did not pay on time. They sought clarity on whether the Council focused on the private or public healthcare sectors, how much attention was being given to the public healthcare sector, whether the Council had control over prices, the investigations it was currently undertaking, and what policy changes might be affected by the introduction of the National Health Insurance.

The Committee adopted its Strategic Plan.

Meeting report

Council for Medical Schemes (CMS or the Council) Budget and overview
Mr Patrick Matshidze, Acting Chief Executive Officer and Registrar, Council for Medical Schemes, presented an overview of the industry, and of Council’s activities, to place the budget within a broader context.

The Council for Medical Schemes (CMS or the Council) was formed in 2000, and its primary objective was the protection of the interests of health care schemes beneficiaries, with special emphasis on the promotion of non-discriminatory access to healthcare schemes through open enrolment, community ratings and guaranteed benefits. It also aimed to promote financial stability and sustainability, to encourage member participation and to investigate complaints, and it required medical schemes to give feedback to their members. It controlled and co-ordinated the functioning of medical schemes in accordance with the national health policy. It advised the Minister on any matter concerning medical schemes, most importantly by making recommendations on the criteria for the measurement of quality and outcomes.

The aims of the CMS, linked closely to its objectives, were to secure protection for beneficiaries of schemes, to provide guidance and support to trustees, to foster compliance with the Health Act (the Act), to investigate and resolve complaints, monitor the impact of the Act and develop strategic alliances nationally, regionally and internationally.

Mr Matshidze noted that the Chief Executive Officer was accountable to a health Council, which in turn was directly accountable to the Minister. He outlined the composition of the CMS (see attached document).

An overview of the industry showed that there were 119 not-for-profit medical schemes and numerous profit intermediaries. The schemes covered 7.8 million lives. The annual gross income was R74 billion and the annual gross claims incurred amounted to R64.7 billion. Mr Matshidze tabled a slide of the benefits paid. He indicated that although the solvency levels were mostly far above the prescribed rate of 25%, many schemes were nonetheless facing challenges with maintaining their solvency and that there had been increasing levels of liquidation and amalgamation of schemes. He also noted the emergence of gap cover products operating under the insurance environment. He said that CMS was checking credibility of these structures.

He then outlined the operational activities of 2009/10, as contained in the attached document.

Mr Dan Lehutjo, Chief Financial Officer, CMS, then tabled the overview of the budget allocation for CMS. He explained that the CMS was guided by the Public Finance Management Act (PFMA) and was accountable to the Minister of Health. It was audited by the Auditor-General, and had been given clean audit certificates for every year since its formation.

Mr D Kganare (COPE) asked whether the solvency figures included the claims in respect of medical aid, and whether anything was excluded from those figures. He also referred to the graphs, asking for clarity that the industry’s gross profit was around R9.4 billion.

Mr Kganare asked for further information about the consumer education project, and what mechanisms were used to reach the different consumers of the health schemes.

Mr Matshidze explained that the solvency rate meant that if something were to go wrong with the medical schemes, they would still be able to honour all the claims for their members. Not every medical aid scheme was currently meeting this requirement. He explained that there was a 30 day period for complaints.

Mr M Waters (DA) asked whether the 6% of the budget spent on investigation costs and legal fees was sufficient, given that one of the main roles of the CMS was to protect consumers and accept and investigate complaints.

Mr Matshidze explained that although the CMS prioritised legal investigations, its limited budget was a constant challenge and that the budget was constantly being reviewed.

Mr Waters asked for a response to the recent press reports in the Cape Times alleging that members of some health schemes were running out of benefits before the year end. He asked what kind of interaction the CMS had had with the medical aids schemes

Mr Matshidze said that by law the legislative benefits should not run out before year end, and that technology had improved to avert some of those challenges. He explained that the scheme of enhanced benefits was an area of major challenge, and that high costs were also contributing to the problem.
Mr M Waters asked for some clarification about the bargaining council for CMS. As far as he understood the situation, it had to do with how working families could access healthcare schemes. If this was indeed the case, he asked whether an expansion of healthcare membership was possible. He asked what the CMS’s relationship was with the recent National Health Insurance (NHI) proposals and its vision for future involvement.

Mr Matshidze said that the bargaining council was currently not regulated at tightly as CMS would like, and CMS had left it to the Department of Labour to monitor how processes would unfold. Research had shown that the bargaining councils had not advanced in the last three years. There was an attempt by the Department of Health to look at low-end medical schemes, and this project was still in progress.

Mr Matshidze said that the CMS was working very closely with the NHI proposals. He suggested a need for intensive technical assessment of the scheme. He stressed that CMS had always been participating in the National Health Reform.

Ms L Makhubela- Mashele (ANC) asked about the accountability structures and their relationship to the Minister of Health. She also asked how Members of the Portfolio Committee could gain access to further information about the CMS. She asked about the rationale behind outsourcing auditing consulting agents, and asked what additional costs were involved in this. She also asked for information around the CMS’s hiring of scarce skills, particularly whether this was done by a recruitment agency, and whether this was not regarded as labour-broking.

Mr Matshidze explained that the CMS was an independent structure, which reported to the Department of Health, as did many of the other health councils. He explained that CMS’s legal unit was too small to appoint internal legal staff. CMS also preferred to outsource auditing to auditing companies as they added a measure of independence and objectivity to the proceedings. He also confirmed that the CMS did not use labour brokers, but would instead use its own head-hunting techniques where possible. He noted that the Council had, however, recently experienced some difficulty in hiring an actuary.

Ms M Segale-Diswai (ANC) asked about the list of chronic conditions, and how the choice was made of which to include and exclude. She asked about the status of HIV in the medical aid schemes.

Mr Matshidze explained that the list of 26 chronic conditions was reviewed every two years and that there were protocols to take note of technological developments in health. HIV was included as part of the list because it involved other conditions.

Ms M Segale-Diswai asked how a member of the public could deal with the problem that often the patient was not within close physical proximity of those doctors approved by his or her particular medical aid scheme, and therefore was forced to pay very much more to visit another doctor whose surgery was closer.

Mr Matshidze explained that ordinarily, inaccessibility of doctors would mean that the scheme would not be approved. However, in such a situation, a member of a health scheme, in terms of the law, should be able to have access to doctors who were closer on a voluntary basis.

Ms P Tshwete (ANC) asked how long it would take for complaints to be investigated.

Mr Matshidze said that complaints in the public domain would take about three months, but other complaints could ordinarily be resolved in a shorter time.

Ms Tshwete also queried the large percentage of the budget that was spent on rental, asking whether this was not considered to be too high.

Mr Matshidze noted that the unsure future of the CMS required that it should rent, rather than own property.

Mr S Pillay (ANC) asked whether the complaints procedure of the CMS could be made available to the Committee, noting that Members were representing different communities.

Ms A Luthuli (ANC) asked about the CMS’s use of an external agency for job searching and hiring. She also raised the issue of medical aids running out, saying that this was a serious issue.

Ms Luthuli also noted that there was often a problem that medical aid schemes would not pay on time, and that this caused serious cash-flow problems for the running of practices. She explained that the administrators of the medical aid schemes did not deal directly with doctors, which also often caused managerial issues and severely discouraged doctors from continuing to practise. She found this system highly problematic and asked whether CMS was addressing this in any way.

Mr Pillay asked whether the CMS was acting in a way that was complementary to the National Health Policy. He noted that the sphere of private health care was seen as detrimental to the public sphere, in terms of human resources, capital resources and escalation and increased tax expenditure costs.

Mr Matshidze said that he had covered the issues of job agencies and medical aids running out earlier during the question time. In regard to the CMS’s relationship with the public sector, he noted that R125 million was spent on public health, which represented a very small percentage and that it had in fact reduced from previous years. He said that most benefits paid were falling into the private sector. There was a project that started in the Eastern Cape, to build on the infrastructure to improve public healthcare involvement. He stated that he was not in a position to report on its progress. He added that the CMS did not have any control over prices within the private sector, which presented a serious challenge. Some doctors in certain areas, such as Soweto, simply could not charge more than a very minimal rate because their patients would be unable to afford this. He noted that the CMS was looking into the possibility of starting bargaining councils, which could assist in this matter.

Mr Pillay asked about the “complaints versus compliance” campaign, which urged health schemes to comply rather than be the focus of complaints. He also queried the fact that, despite the mandate for medical aid schemes to pay within 30 days, there were still numerous cases where this was not happening. Finally he asked about the magnitude of the investigations into mismanagement, citing Discovery Health as an example. He said that this involved the sum of R980 million. He asked how much the CMS was likely to have to spend on recovering the money. The scale of this mismanagement was massive.

Mr Matshidze said that the CMS monitored complaints by type and scheme. He explained that it was important to check the medical aid schemes’ compliance with the entire legislation, which presented a real challenge. If schemes had certain accounts that needed investigation, then CMS felt that it was in fact necessary to look into the whole scheme, and approach the courts, if necessary. Even though this was costly, it was often worthwhile. Even the smallest schemes involved amounts of at least R1 million, and some had assets of up to R47 million. The schemes were often able to mitigate their risks and sometimes could grant exceptions to their members, which made it difficult to hold them accountable.

The Chairperson noted that there was still a highly disparate ratio between very wealthy and very poor people in South Africa, and therefore asked how much attention was being given to public institutions. He referred to a graph in the document revealing a large increase in payments to private hospitals, and asked how much money was being given to public hospitals. He also asked whether they claimed from the CMS.

Mr Matshidze said that the CMS was using standard review processes to identify gaps between the consumers and the level of care given. He explained that currently all development was dependent on the NHI process. He mentioned that there was discussion about inclusion of diseases of lifestyle and infectious diseases.

Ms T Kenye (ANC) asked about the CMS’s vision and asked also what mechanisms were in place to bridge the gap between the health care for rich and poor.

Mr Matshidze said that it was not the intention of the CMS only to provide for the private sphere, but that it was hoping to fall in line with the supposed re-invigoration of the public sector, which had not then happened. He emphasised that the CMS was not in control of the delivery function of any of the schemes, or the ways in which any health products were priced. He said that the Council would have liked to implement a bargaining committee to ensure some level of intervention to judge whether or not the prices were fair.

The Chairperson commented on the trajectory change from social to national health care, and asked what possibilities CMS foresaw to move along with this change, from a policy point of view.

Mr Matshidze said that the CMS had not been able to formally engage in policy development and were waiting for the NHI introduction, before it could produce a formal pronouncement of its involvement.

Adoption of Committees Strategic Plan

Dr J Tsoka- Gwegweni, Content Advisor to the Committee, tabled the Strategic Plan of the Committee. It was pointed out that at this stage the budget figures were expressed as ideal rather than actual.

Ms P Tshwete (ANC) pointed out that the provinces and areas designated for oversight visits were set out in alphabetical order, and felt that some other system of prioritisation would be better. Members also discussed what international visits might be undertaken.

The Strategic Plan was adopted, with amendments.

The meeting was adjourned.


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