Council of Medical Schemes on its 2012 Strategic Plan

Meeting report

Mr Kariem Hoosain, Council for Medical Schemes Board Member, offered an apology from the Chairperson of the Council who could not be there due to the change of date.

The presentation begun with an introduction in which Mr Hoosain sought to set context by saying in the first number of years the Council spent some time finding its feet and getting to grips with the complex industry the Council worked in – which had been unregulated. The industry had grown over the last 12 years to be over R100 billion. It had been a challenge for the Council to stay ahead of all the developments and the schemes. There had also been challenges to the way regulation had been conducted as well as monitoring. What had been found over the last few years was the Council’s ability to do this had been lagging. Last year the Council presented the budget with the focus on increasing and building capacity to catch up with some of the backlog that the Council had been experiencing for a number of years. With the concurrence of the Ministers of Finance and of Health it was agreed that this capacity would be phased in over a period of two years.

Dr Monwabisi Gantsho, Registrar for the Council of Medical Schemes, took over for the first part of the presentation. He clarified that this was the 2012/13 budget and not the 2010/11 as was written. Despite the challenges, the Council had been coping and would continue to do so with the help of the Committee, the Department and the Ministry. The Council had the capacity and skill within the office to enforce the provisions found in the Medical Schemes Act. The Council continued to ‘walk the talk’ when it came to prospective regulation that might arise as the Council continued to navigate through this big industry which it had been mandated to regulate. The Council would soon be presenting the amendments to the Act to make its work easier.

Dr Gantsho stated that the Council had been achieving their objectives and had met their goals however more could be done. It was through processes such as these where support could be solicited.

Dr Gantsho said that discussions with the Department of Health were ongoing in terms of amendments to the current Medical Schemes Act which had been in existence for 12 years. Numerous small changes has been made to the legislation to improve regulatory effectiveness. The process had been put on hold for longer than necessary as it had not been a priority at the time. However the Council now felt that any more delays in amending the Act would diminish their ability to regulate. The Council wanted to ensure that the protection of members continued and this could only be done by amending the Act. The Council had now concluded the drafting proposals to those areas that needed to be amended. He asked that the Committee support the amendments when they were placed before them by the Department.

Dr Gantsho clarified that PMBs on slide 5 meant ‘prescribed minimum benefits’.

Dr Boshoff Steenkamp, strategist for the Council for Medical Schemes, continued the presentation by presenting what were termed the ‘hard facts’. It was good to note that the majority of the people belonging to medical schemes were Africans at more than half, followed by white people and then coloured people and then Indian people. There was however a need to be aware of inequity within medical schemes which happened even on a geographic basis. In Gauteng and Western Cape there were higher numbers belonging to medical schemes but the numbers were lower in poor provinces such as Limpopo.

Dr SteenKamp said it was important that sick and old people had access to medical schemes and medical benefits. With available resources there needed to be no unfair discrimination within membership – this had been enshrined in the Act. There was a push to prevent schemes from not offering those benefits and attracting only fit and healthy young people. It sought to cover those that schemes could possibly turn away.

Mr Dan Rehutso, Chief Financial Officer of the Council for Medical Schemes presented the budget showing the key elements impacting the budget (see document).

Discussion
Clarification on signature of Chairperson and Copy and Paste of Document
Ms M J Segale-Diswai (ANC) said the document stated the former chairperson had retired on 15 November 2011 and had been replaced. However the former Chairperson’s signature still appeared on later documents. She was concerned that this document was a copy and paste from previous documents. Had the document really been updated as there seemed to be similarities?

Mr Hoosain replied there had been no ‘cut and paste exercise’ and the date was a typing error. With regards to the signature, CMS was required to submit the strategy and annual performance plan at a time when the old Chairperson was still in position. The new chairperson was appointed after the document had been submitted.

Maintenance Increase
Ms Segale-Diswai queried the increase in maintenance costs.

Mr Rehutso replied this related to the acquiring of the new office. Last year little had been done in terms of maintenance however to acquire additional office space there needed to be some revamping done. Although some maintenance would be done by the owners of the building, some cost needed to be incurred in terms of office partitions and the like which needed to come from the Council’s budget.

Clarification on items termed ‘other’ within finance section
Ms Segale-Diswai asked what the item ‘Other’ within the finance section entailed.

Education of people
Ms Segale-Diswai said at the previous meeting with CMS they had talked about the education of people. How was this done? How did the ordinary person know of CMS’s existence? There were a great number of people with complaints.

Ms D Robinson (DA) asked what was the plan to educate public on how medical aid schemes worked? She also asked how medical schemes could be protected as legislation changed. She asked if there was a budget for this. She was concerned about young people who could not afford to pay medical aid fees. How were people meant to cope when its cost was going up so much?

Dr Gantsho replied that education and training had been done by a dedicated unit within CMS called ‘Education and Training’. This was one of the units that was hardly found in the office as they were out with well planned programmes and presentations to unions, professional groupings and consumer groups. The unit sought to meet with groups to ensure that they knew what their medical aid entitled them. It judged these against regulations to make sure these medical aids schemes did what they were supposed to do. There was a Benefits Management Unit which received submissions on an annual basis from all medical aid schemes. The submissions laid out the rules and the benefits that were offered. Before the end of each year these companies needed to submit and the Council had rejected proposals that submissions be done every three or five years. There was a customer care unit that received many of the complaints. The requirement from the Council in terms of the Medical Schemes Act was to note the date of the complaint and it had to be responded to and resolved within a specific period of time.

Dr Steenkamp replied that if the Council was to educate eight million beneficiaries, this would not be cost effective. Thus the Council had insisted that the schemes communicated certain matters with members. All of this information was being put in the communication guidelines as this was an endless task.

Rent
Ms P Kopane (DA) asked why had the CMS rent increased so much? Was it not more effective for CMS to own the building instead of renting it?

Mr Rehutso replied that the Council was seeking to acquire more space as the space they had at the moment was not enough to accommodate the increase in staff. There was simply not enough office space for new employees.

The Chairperson interrupted saying the question was why did the Council continue to rent and not buy?

Mr Hoosain replied that the issue of buying or renting would need proper analysis within the Council. There were arguments for and against owning your own building. Owing to the size of the Council, it may not be feasible to own a building as the requirements may be too big. The question was what happened if the needs of the Council changed? It was something that would be taken to the Council and there would be a discussion and a formal recommendation made on it.

Security Costs
Ms Kopane stated that there had been a sharp increase of more than 100% in security costs? Why had there been such a sharp increase?

Mr Rehutso replied that there was a need to beef up security within existing structures as there had been some security risks in the past.

Litigation
Ms Kopane noted that legal fees had gone down however there had been an upward trend in litigation. Why had there been an increase in litigation?

Dr Gantsho replied that litigation and court cases were not considered and finalised within one financial year. Finalisation of court cases did not coincide with the end of a financial year. There had been cases that had been going on for years which caused a distortion in the financial statements. This was when the Council had been involved in a case and although had spent money going through the process, it had recovered the money when the Council had won their case as they always did. Such cases went through an adjudication process and some had been very costly. The decrease in the budget was based on winning this case.

Ms Robinson asked why legal costs were so high. Was there another way with dealing with this problem other than litigation? It was costly and extended over such a long period of time.

The Chairperson asked why there were such high legal costs. Was there no way to make the medical aid industry understand that it was there for its members and not there to do all these things that landed them in court? By the time entities landed in court, the relationship with members had already damaged. The industry needed to understand that they were not looking after their members well and seemed to be concerned only with profits.

Mr Hoosain replied that it was important to understand the processes that there were within the Council before it got to the point of a legal dispute with anybody. When somebody had a concern, they had to go through adjudication processes. He liked to think that around 90% of concerns involving medical schemes in one way or the other were solved this way. This was a first/second stage resolution. Some did go to the appeals board. If someone did not like the decision it went to another body in which the decision was chaired by a judge. When people were again not happy, this was when the most extreme legal processes started kicking in. Although these were just a handful of cases, they took up a good chunk of the resources. Most times when CMS took cases to court, there would be some sort of underlying irregularity that needed to be exposed. By the time it had reached this point, various forums would have been tried but there had been resistance by individuals and instead they chose to use all the resources they could to cover up whatever the problem was. However a large number of the complaints were solved before this stage. There was a move previously to see how much legal work was outsourced and how much was done internally – as outsourced work was always more expensive. CMS decided on rather having its own internal legal counsel. CMS went out of its way to try and accommodate individuals but when they were trying to cover up irregularities then often those companies fought tooth and nail to cover them up.

Dr Gantsho added that what CMS was dealing with in the courts were the exceptional cases. The more the Council succeeded in prospective regulation, the less the need to go to court. A task force had been mandated with the task of finding alternative dispute resolution.

International Partnership Programme
Ms Kopane wanted clarification on what the international partnership programme entailed and what was the budget for it.

Dr Gantsho said the increase was because in the past Council had not concentrated on collaborating with international partners. The exercise that had involved National Health Insurance (NHI) had shown that initiatives that the Council wanted to embark on could not be accomplished purely by looking inward. There was a need to learn how international partners had dealt with various challenges. Where countries had had study groups on this, there was a responsibility to find out what was going on out there and advice the Department and the Minister of Health. The goal of Council, within budget, was to meet with people either by inviting them here or by going to certain locations. The Council had thus far met with people in Ghana and Namibia. The Council considered international partnerships as critical in any stage in the changing of policy.

Indicator of office CEO and Registrar
Ms Kopane referred to Programme One (Office of the CEO and Registrar) and asked why there was only one indicator and why was it chosen. Did it speak to the core function of the Council?

Restructuring
Ms Kopane asked why was the structure of the health administration programme was broken into two. What was the impact in terms of the restructuring?

Visibility of the CMS
Ms B Ngcobo (ANC) asked how much users knew about the CMS? She asked what methods the Council used to popularise itself. How did the Council popularise itself, outside of cases of complaints?

Cancer drugs
Ms Ngcobo asked about cancer drugs particularly those that were not covered by medical aid schemes. What were people to do if they had cancer and these were the only drugs that could help them?

Dr Gantsho replied no one knew when one was going to be struck by cancer. The treatment of various types of cancer was expensive and the level of care differed from being screened to that of treatment. These new biological drugs were extremely expensive. If a member contributed significantly less than the cost of the drugs, the member was unable to withdraw the amount needed for the drugs and the question of sustainability came in. This was where the Prescribed Minimum Benefits (PMB) came in. When a condition fell under the PMBs, then it must be paid for in full by the medical scheme. However the scheme would have to close down if vast numbers of members did this. There was thus a need to balance affordability of a medical scheme and the sustainability of the scheme. They were in a process of developing within the office an alternative way of treating these conditions. Biologically was not the only way of treating these conditions. The issue of cancer and affordability was an unfinished story. The Council was putting this to the relevant subcommittees within the NHI.

Spouses on Schemes
Ms Ngcobo asked if the husband is in one scheme and the wife in another but one of them wanted to add the spouse as member, how did they go about this?

Membership
The Chairperson asked if the figure of eight million members covered only primary members or secondary members as well.

Investigation of other National Health Insurance
Ms D Robinson said she understood that the CMS had agreed to assist the Committee in investigating the National Health Insurance (NHI) in other countries to improve this country’s NHI. She asked if plans to do this had been set in place and if it had been done.

Dr Steenkamp replied that in terms of learning from other countries, the Council had already published comments on the National Health Insurance (NHI) pre-paper on the CMS website. In this the Council had evaluated the entire health insurance system in terms of its finance system and included alternatives. There was the analysis of other health insurance systems in the world. So the work had been done.

Medical Insurances
The Chairperson asked what were ‘medical insurances’ and who regulated them?

Dr Steenkamp replied there were short term insurance products that were regulated by the Financial Services Board. The problem with these products was they did not operate within a legal framework. This had the negative effect of taking particularly young and healthy people out of the medical schemes environment because they saw medical insurance as a viable option. The problem was there was no long-term protection there. This was the motivation behind the demarcation regulations published recently by Treasury. The option was either these entities complied with the Medical Schemes Act and offered all those benefits and allow themselves to be regulated by the CMS or they could no longer provide this service.

Future of the Council
Ms Kopane asked if the Council had done some sort of analysis about its future and that of medical aid schemes.

Dr Gantsho replied that even in advanced countries the question of the future of medical aid schemes was posted in terms of the NHI. Within this country there was for the foreseeable future still going to be medical aid schemes. As long as these schemes existed, they needed to be regulated. There was no way the country could return to the period in which medical aid schemes were not regulated. This was the first premise the Council moved from. The second premise was the present medical aid schemes needed to change and do things differently. And as the regulator, the Council needed to change and evolve. As long as there were medical scheme structures in place, there was a need to regulate them.

Mr Hoosain added that the Council recognised that the NHI was still evolving and that a broad framework had been put in place to reach specific targets over the next 14 years.

Dr Gantsho commented that the Council would still have a role to play in the regulation of medical schemes. Although there was no specific framework or plan of what the Council would look like in 14 years’ time, they certainly had put measures in place to deal with things as they arose.

Medical Aid prices
Ms R Motsepe (ANC) asked how often the Council went to medical aid schemes and checked the prices? She felt this was an important role of the Council.

Dr Gantsho replied that S43 of the Act allowed the Council to do an inspection of any scheme at any given time. The Council’s Compliance and Investigation Unit had a programme of the number of schemes that it needed to visit each year. The Council through this unit checked and monitored the medical schemes including such aspects as structure and election of board of trustees.

Private Hospitals
The Chairperson said that the CMS was regulating the medical aid industry. However these medical aids paid the hospitals, which seemed to be taking most of the money. Were these hospitals indirectly regulated?


Ms Motsepe asked how did one stop private hospitals taking advantage of people as they sometimes engaged in malpractices. There had been numerous complaints about private hospitals.

The Chairperson stated that sometimes when laws were made those making them did not look ahead and foresee other possible problems. It was the case here that when medical schemes were being regulated an important strand had been forgotten, namely private hospitals. Fortunately the hospitals had been summoned by the Committee who had asked if they were prepared to be regulated and they had said they were. The question was how did you regulate them? These hospitals seemed to be doing as they pleased. He was not sure that allowing the big hospitals to sit down and decide what they were going to do was the right way to do things. Were these hospitals inside or outside the ambit of CMS as it was clear that most of the money went to them.

Mr Hoosain replied the Council did not have any regulatory oversight over health professionals as they were dealt with by the Health Professions Council of South Africa (HPCSA). People having to pay for treatment upfront had nothing to do with the medical scheme system. This was a matter dealt with by the Health Professions Council. The Health Act only dealt with the minimum standards that the private hospitals had to comply with. It did not deal with anything else in terms of hospital plans or day to day running. The uncontrolled costs of specialists and the private facilities themselves remained outside the mandate and regulation of the Council.

Dr Gantsho said there was no regulator for the private hospitals. When the question had arisen last time the Council had been given the ‘homework’ of advising on the matter. What the Council had said was there was a need to regulate them. CMS had gone further and spoken to the legal advice CMS had been given on how to regulate an industry. The Council sought to be advised about whom should be given this information within the Health Professionals Council of South Africa. Would the advice be taken to the HPCSA through the Chair or some other channel? There was a need to develop a legislative framework to regulate private hospitals. The legal company that had advised the Council could be used to develop such a framework. The Council was willing to supply the advice it had been given on the matter. The Council would communicate with the Chairperson’s office to work on that. The more the private hospitals were not regulated, the more the problems experienced occurred. What the Council had done was to engage the private hospitals and ask if they were prepared to be regulated as well as if they would supply the data that pertained to the rise of private hospital costs. The hospitals had been reluctant initially as they felt they did not have to report to the Council which did not regulate them. However Council had managed to work out a system whereby Council said it would report on an annual basis in the CMS Annual Report information found out about the private hospitals from the medical schemes. The Council informed the hospitals that the hospitals were not able to complain about what had been reported as this was what had been observed. Thus the hospitals needed to cooperate with the Council and supply the information needed. Despite their reluctance, the hospitals also saw that there seemed to be no other way but doing so. What would have helped in doing this would be pressure placed on having a legislative framework that would serve to regulate them. He urged the Committee to look into this.