Government Pension Administration Agency; Government Employee Medical Scheme: progress reports

Committee: Public Service and Administration, as well as Performance Monitoring and Evaluation

Chairperson: Ms J Moloi-Moropa (ANC)

Date of Meeting: 16 May 2012

Summary

The Government of Pension Administration Agency was established on 1 April 2010 to serve as the administration agency of the Government Employee Pension Fund (GEPF). Its presentation covered its legislative mandate, funds and schemes currently administered and supported and the GPAA Programme Overview; the footprint, the performance and the backlogs within the organisation; unclaimed benefits; its modernisation and partnership with SARS; cooperation with employers; achievements and challenges and its strategic direction.

Members asked about calls that had not been attended to; backlogs that spanned over 366 days; unclaimed benefits and the interest procured from it; and the problems it faced. Members complained that the issue of unclaimed benefits had not been properly tackled and there needed to be further interaction about this.

The Government Employees Medical Scheme presentation covered its 2011 successes and challenges; and gave an overview of the 2012 Strategic Plan and the Scheme’s performance in 2012.

Members asked how complaints were dealt with; about the escalation of the lease agreement; net cash inflow; interaction with Vietnamese and Zimbabwean officials; how long it took Government Employees Medical Scheme to change assistive devices and whether there were walk-in centres in rural provinces. Members also praised Government Employees Medical Scheme for their functionality and told them to keep up the good work.


Minutes

The Chairperson noted that the Committee had interacted with Government Employee Medical Scheme (GEMS) more than they had interacted with the GEPF. She referred to the long outstanding meeting that had been deferred consistently with the Public Protractor, the Committee and the GEPF about the Venda pension fund. Today’s meeting would not be covering this. That meeting would still be held at a later date.

Government Pension Administrative Agency (GPAA) presentation
Mr Joel Ramatlhape, Chief Information Officer of the Government Pensions Administrative Agency, was representing the CEO, Mr Phenias Tjie, who was currently meeting with the Portfolio Committee on Finance. They sought to present the progress so far with regards to work that had been covered.

The Government of Pension Administration Agency presentation covered its legislative mandate, funds and schemes currently administered and supported and the GPAA Programme Overview; the footprint, the performance and backlogs within the organisation; unclaimed benefits; its modernisation and partnership with SARS; cooperation with employers; achievements and challenges and its strategic direction.  Challenges faced by the Agency included procuring accurate and complete member data, member and pensioner education. Family disputes and death cases delayed the finalisation process and employer departments did not make sure that the documents were correctly completed prior to sending them to the GPAA. Timeous submissions of exit documents by employers was also an issue. Operating platforms were archaic and these limited access channels by clients.  There was also the hindrance of limited human capacity.

Discussion
Calls
Mr N du Toit (DA) said the report was not very revealing as it had not given anything to consider. On Page 7 one should be able to be told why there was a decrease in call volume. This had not been explained. Did it mean that there was another avenue that people were following or could they merely not get through? It also said that a target of 90% had been achieved for its call centre service level target. This meant that 84 000 calls had not been taken. One needed to state what type of calls these lost calls were and what had been the subject of the calls not taken. In terms of the two-minute target time not being attained the question that followed was what target time had been attained? More information was needed on quite a number of items.

Mr Morar, General Manager of Operations of the Government Pensions Administrative Agency, replied that total calls taken was 848 000 calls and of that 90 per cent were taken. Thus 84 000 calls were lost in totality.

Mr Murray asked a question around the client interface where the presentation has stated that 84 000 calls had been dropped because the capacity had not been there to deal with that. Ten per cent was a huge problem. How had this 84 000 been measured or was this a guestimate? If it was a guestimate then the problem was even bigger than had been originally reported.

Mr du Toit said these calls were probably confusing to the GPAA as well as they were not sure whether the person had phoned for the first second or even fourth time. These calls had been lost permanently. There was no way of knowing if perhaps they had gotten through the next time and had been helped. There needed to be a system to electronically track from where every call was coming. There needed to be a way to decipher who had phoned. It was distressing that 84 000 calls had not been picked up. He said in terms of backlog, there was a problem. He did not see people waiting a year or that there was total of R128 million that could not be paid into bank accounts. The unclaimed exit was at R490 million. He did not understand why someone could not be paid out in 60 days if the administration was running. It was a big problem and they were going to go into this problem, if they did not satisfy the Committee’s questions.

The Chairperson asked what was meant by ‘calls were lost’.

Mr Morar replied this meant that this was the number of calls that had not been taken. The reason was there had been no capacity to take these calls. They had lost the calls as the calls had been dropped before they could answer them.

Mr Morar replied that a target of two minutes had been set to receive all calls. This target had been exceeded. Instead of making sure that all calls had been taken within two minutes, the target had been exceeded. They were stating that the target had not been met. His estimate was what had been achieved was two and a half minutes.

Exit Documents
Mr du Toit asked about the exit documents and said he presumed that this was people leaving jobs. He asked for clarity. He asked what was meant by the ‘employer exit documents error rate which was 16, 000’.

Mr Morar replied that exit documents were when a person left the employment of the government there was a process within which they exited the system. GPAA received documents around that and that is what they as administrators processed. For the previous year 2009/10 they had received just under 40 000 documents. For the year 2010/11 they had received 53 000 pieces of documentation. This came back to the improved footprint the GPAA had in the regional offices. In the previous report-back, they had stated they were not fully capacitated within regional offices. Now that they had regional offices in all nine provinces, as presence in terms of staffing, they had been able to react better in obtaining documentation from employee departments. Therefore this documentation got to the administrator faster.

Backlogs
Mr du Toit said it was distressing to see that the backlogs spanned back more than 366 days and there were close to 3 500 cases. He did not see why something needed to be outstanding for a year. What also was not clear was if the benefits backlog reduction tied in with the Annual Report’s page 17 on current payment backlog reduction. In the Annual Report, for over 365 days there was a total of 1000. What did this mean and why were there so many outstanding cases over so many days? There needed to be an analysis of this and an identification of what the problem was. They could not just be given bare facts.

Mr A Williams (ANC) also asked what percentage of unclaimed benefits were part of the backlog? Or did they have nothing to do with the backlog and were they not related to each other?

Mr du Toit said his feeling was that, in terms of backlog, there was a problem. He could not understand people having to wait a year or that there was a total of R128 million that could not be paid into bank accounts. The unclaimed exit was at R490 million. He did not understand why someone could not be paid out in 60 days if administration was running. It was a big problem and the Committee was going to go into this problem if GPAA presenters could not satisfy their questions.

Unclaimed Benefits
Mr du Toit asked why there had been an increase in magnetic tape rejections. Why were these magnetic tape rejections there in the first place? He asked if the rise meant that it was getting better or getting worse. He also asked what was going on with all the unclaimed funeral benefits. It was not clear what all this meant. The figures were difficult to understand

Mr Morar replied that when GPAA had reported previously, the outstanding documentation not processed in 2007/8 was 21 000 claims and for 2010/11 it was at 4 741 claims. Based on that information the outstanding balance was 3 482 in terms of claims that were greater than one year old. As of March 2012 there had been 5 817 documents and in terms of the law, all that was sitting within 60 days was current work. There were 3 556 claims that GEPF was currently processing as of the end of March 2012. The outstanding balance, which had been sitting in excess of 365 days, was 1 006 as compared to the previous figure of 3 482. There had thus been a reduction of close to 2 500 claims. In terms of actual backlogs (in excess of less than 60 days) there were only 128. This was because all claims less than 60 days, were ones they were currently working on. The difference was 2 225 and the figure of 2 353 was the current claims sitting with GPAA.

Mr Morar replied that unclaimed benefits were when members or beneficiaries did not claim their benefits. In terms of the rejections, the GPAA found that members had not properly updated their banking details when they sent in that information or an employment of the government and changed from one bank account to another. This resulted in a rejection when they tried to pay the claim into a bank account. This was called a magnetic tape rejection. There had been an increase in that as GPAA were unable to pay the money into the bank accounts. Unclaimed benefits in terms of exits was when a members had exited and the GPAA tried to pay the amount but could not. Thus the money was put into an unpaid benefit account. In terms of the tax decline directives these were actual directives and the GPAA had to apply for actual tax directives when they paid out benefits. Thus when a member’s tax directive was declined by SARS, they were unable to pay it and this was also termed as an unclaimed benefit. This was the basis on which they based the unclaimed.

Mr A Williams (ANC) said R65 million was a lot of money for former employees of the state not to have. He asked what mechanisms had been put in place to find these people and give them their money. One of the problems was possibly people did not know how to get their money and it was then left for years and years. The other thing was the figure for unclaimed benefits was not decreasing or staying the same, thus there were not mechanisms in place to stop this as well as helping to find people to give them their money.

The Chairperson agreed and also asked why this figure was increasing over a period of time. The Committee had wanted to interrogate that aspect to see what mechanisms were in place.

Mr Ramatlhape replied that if one looked at unclaimed exits the nature of the problem could be myriad. One problem could have been that a person absconded and the organisation was unable to find the individual. The Department recognised they needed to exit the individual. In that process the Department was unable to collect the information about the person. This was one of the problems that led to unclaimed benefits. The bulk of the cases were due to the department being unable to locate the individual. They now had a policy in place that allowed them to track the individual under certain conditions to see if they would be able to reduce the number. The tracing policy had been approved in December and it was in the process of implementing the policy. He agreed the figure of R658 million was a huge amount and was worrying. It was money that could have been used efficiently in the economy and they were working to reduce the amount.

Mr Morar replied that the board of trustees approved the unclaimed benefit policy and the tracing policy in December 2011. The implementation of that policy was to be from 1 April 2012. The GPAA hoped that the mechanisms they planned to implement would reduce the large amount of unclaimed benefits and trace members as quickly as possible.

The Chairperson suggested the Committee move on. If members did not want to, they could raise their hands. The information the Committee wanted on unclaimed benefits was information the GPAA did not have at the moment. They had wanted to find out what was being done. From the presentation, she understood that GEPF had analysed where the problems were and were suggesting how they wanted to move forward and improve. This was what the Committee wanted to emphasise as the role of government was to improve the lives of people. This was a huge sum of money and to hear the people could not be traced to be given this money was painful thing. The Members were public representatives and they were there to make sure the people were being served. However the meeting was not assisting the situation. She suggested having a proper meeting on this matter. There was also a need to know how the money of workers was being invested. The Committee had done oversight on all the other institutions. However only GEMS and GEPF had not been visited and there was a need for site visits to both institutions.

Mr E Nyekemba (ANC) said he heard the way forward suggested by the Chairperson as informed by the challenges of the Agency. It had been correctly stated that this was workers’ money and once it was not handled properly that raised a flag. He said he did not understand what was meant by ‘unclaimed benefits’ and the fact that the Agency could not pay out because the banking details were old. A claim form asked for bank details and one would not cite old bank details. He did not understand. When these workers became angry they would be angry at government and government would be blamed for the mistakes of the agency. If this was the case perhaps government should look at other agencies if GPAA did not have the capacity.

Interest on the unclaimed benefits
Mr du Toit said somewhere in the bank there was R65 million. Banks could lend out that money but interest was paid for the money. The difference between that was profit for the bank. He did not want to hear that the bank made a profit from benefits not being paid out. He also wanted to know what bank had this money and how much interest was being earned?

Unmodified audit opinion
Mr Williams asked what an ‘unmodified audit opinion’ was.

Mr Ramatlhape replied his layman understanding was that ‘unmodified’ was the same as ‘unqualified’.

Client Interface
Mr du Toit said he did not understand what the ‘error rate for exit documents’ meant.

Centre Problems
Mr du Toit said the Committee also needed have a breakdown of the problems in the different centres. How could the Department manage the problem if they could not come before the Committee and state what the problem was and also state what they could not solve? It seemed the Department did not have a perception of their problems.

Corruption in the Agency
Mr Manana said he understood her position as Chair of the meeting that she needed to be lenient but this was a waste of time. This had been an insult to the people as who would abscond from claiming money? If one looked to the problem in the agency, corruption was at the centre. It needed to be put on record that time had been wasted and this was an insult to the people. The presenters were not giving answers that could be understood, they did not seem to have answers and no one seemed to understand. It was no use to engage on this today.

The Chairperson said this was not a hit and run matter as it was very serious. It was painful to hear that there was money for the workers that had not been given to them. There was a lot of poverty out there. The GEPF needed to come forward with all the facts. There was a need to be a caring government. The GEPF needed to return to interrogate thoroughly where that money had been invested, where it went and what it did. Had this money helped workers? There was a need to do follow up as there was also the issue of agencification – which was another matter. She wanted to urge members that this meeting was not the time to engage with this as there was a need for thorough oversight. There was a need to sit down and plan properly in order to bring the matter to a conclusion. There had been the issue of state owned enterprises before Parliament. The Committee had discovered they really needed this meeting and also to give the beneficiaries a voice. She asked the members if they agreed to leave this matter for the time being.

Mr du Toit attempted to re-open the matter but this was not allowed as it would be tackled at a later date.

Government Employees Medical Scheme (GEMS) presentation
Mr Colbert Rikotso, GEMS Board Chairperson, started with a brief appraisal of the Scheme’s background.

Dr Eugene Watson, GEMS Principal Officer, continued with an overview of the performance of 2011 which covered successes and challenges. It outlined the legal form, registration and the corporate structure. Business indicators and financials were provided for 2011. The 2012 Strategic Plan was explained with an update on the Scheme’s performance in 2012.

Discussion
Complaints
Mr du Toit said he agreed that GEMS was on a good footing. He was satisfied with what he had seen. It was significant when GEMS reached a certain level of viability the complaints dropped. He asked if the 16% of members who were not satisfied had been asked why this was the case.

Dr Watson replied that of the 16% of complaints, most were people who felt relatively good. The remaining percentage whose complaints were negative in nature were captured. Quite a few of the responses had been contradictory in nature. However a survey needed to be done over time as one could not base the data on one survey, even though the one survey was useful.

Mr Colbert Rikotso replied that the board took very seriously the satisfaction of the members so there were other reports that related to this. There was the quarterly complaints report that allowed the board to know what members were not satisfied about and how complaints were being addressed. It also stated whether complaints were addressed to their conclusion. There were thus other mechanisms to find out what had made the other percentage of members dissatisfied.

Financials
Mr du Toit said he was happy with a lot of the financials. The savings plan liability had increased which was a good thing as had trade and other variables. He wondered if the lease escalation was down because they had negotiated better leases. He needed a clear indication of what had happened there.

Dr Watson replied he would try and answer the question on financials despite being a medical doctor. He said the savings plan liability related not to the members saving but one of the benefit plans had had a savings option to which 25% of the contribution had been allocated to savings. It was not the organisation’s money but was always the member’s money. The liability option was based on how that option had grown or shrunk or how the member had claimed. On the lease agreement, he said there was a lease agreement in place for the head office (which was less than 1000 square meters) and now there was a pre-paid lease arrangement for the office which was in Pretoria. They basically paid for 12 months. He figured that the escalation was related to the terms of that contract as well as the lease period. On the outstanding claims that had increased, it was a provision made with actuarial projections based on the numbers of members, the size of the scheme, the extent to which they claimed and what was the equivalent for that point in time. The provision was going to increase as claim values and volumes increased. He thought this was good. GEMS had a conservative view and did not want to under provide. It was not good to have to re-state one’s numbers and apologise for being too aggressive with profits. Thus it was best to add it to the balance sheet and in the subsequent year, one could say they found their provision to be excessive

Mr du Toit asked if one could explain a net cash inflow decrease. It was not a big concern but he just wanted to know how this was reasoned

Dr Watson replied that they kept most of their money in cash, in call accounts and fixed deposits. In 2011 GEMS longest investment had been six months for a fraction of their money. This was because in a month R 1.7 billion would come in and you would pay almost R1.5 billion rand out. Money essentially kept moving in and out and this meant the most attractive yields were not seen. It was member money and thus one did not want to be aggressive with what was done with it. GEMS ran it at call account level in terms of the yield and this was affected by the interest rate.

Vietnamese and Zimbabwean Officials
Mr du Toit stated there had been an engagement with Vietnamese and Zimbabwean officials. He asked what the engagement had been about as it seemed somewhat strange.

Dr Watson said the Vietnamese were part of a delegation organised by the Department of International Relations and Cooperation. The Department for Public Service and Administration then had the delegation talk about its public service, conditions of service and employee benefits. On the day when employee benefits were discussed GEMS hosted the delegation and gave them a walk through and showed them the call centre and the claims system to give them a sense of how the arrangement was administered. In terms of the Zimbabweans, it was a sit-down session where ideas were shared. Zimbabwe had a benefits scheme although it was not as sophisticated as South Africa’s. They had wanted to see how economies of scale could be leveraged in the public service and have something put in place that worked.

Rival Schemes
Mr Marais asked what had been the outcome of the other medical scheme which had been in rivalry with GEMS. Did that medical scheme still operate and what were the rates of that medical scheme?

Dr Watson wanted to clarify which rival scheme was being referred to. The historical schemes had been the ones that were racially based. There had been Medihealth for white public servants, Bonitas for black public servants, Sanitas for Indian public servants and Prosana for coloured public servants. This had been the historical equivalent of GEMS. GEMS had not targeted any medical schemes. They had stated that it was not obligatory to join GEMS. What they had done was to offer benefits in a manner that was attractive to members and fulfilled a need and was affordable. This was what GEMS had done consistently. He stated that targeting a medical scheme would not help if half of the government servants were not using a subsidy anyway. GEMS had had to implement a holistic strategy and had had to say what they offered was value for money. In time public service employees had bought into it. In the Western Cape almost 80% of public service employees were with GEMS.

Dr Watson said that GEMS did offer comprehensive benefits. They tested this annually to make sure they were not short changing members. They wanted to ensure they were not offering too much as there were financial implications when schemes were too generous with benefits. Their contributions were still around 15% cheaper than a comparable scheme in the market place. GEMS was not the most lavish but it was not the most basic medical scheme. The contributions were comparable.

National Health Insurance
Mr Marais asked how would the National Health Insurance scheme would impact GEMS going forward?

Dr Watson replied that the Green Paper did not present much in terms of the role for medical schemes in general. GEMS however appreciated that they were a scheme created by government for its employees and so they had engaged the Department of Health and offered some services which were similar. In their environment one would use data capturing, case management, clinical risk assessments, the fraud lessons and fraud investigation sanctions as well as actually delivering health care services. In the National Health Insurance (NHI) context, it would be community health care workers. They had set out these options and GEMS felt there was a role to play. What had been important to see in the Green Paper, was the NHI was considerably larger and wider in scope than what a medical scheme did. They wanted to participate. GEMS planned to follow the lead of what the Department of Health wanted them to do.

Centres
An ANC member asked where the walk-in centres were based. What about in the rural areas?

Dr Watson replied that there were two walk-in centres in each province. However there was no way one could be everywhere a public employee was. Employees were scattered throughout the country. There were over 29 000 schools in the country, there were border posts on the circumference of the country. Big centres were in cities such as Johannesburg, Cape Town and Pretoria where there were many government employees. Access would be a problem if it had been based on physical access. Thus the biggest access point was the call centre that operated with phones and emails. The walk-in centres had been placed in the two towns where the largest number of public service employees were in that province. Initially there had been one and now there were two. It was on an annual basis, if not bi-annually, that there was an assessment as to whether there was a need to expand or not. In order to help with calls (appreciating that they did cost money) there was a ‘please call me’ facility where members were able to sms their number and they would be called back.

Assistive devices
An ANC member asked how long it took GEMS to change people’s assistive devices?

Dr Watson replied there was a monetary limit not a time-spaced limit. If a member had a benefit and wanted to keep replacing their assistive devices they could as long as the money was there. The wear and tear on these devices was not the same. There were some who would keep a device for long periods whilst others wanted to change them annually. What had been allocated was a financial limitation. There had been some improvements and if one looked at wheel chairs, one could now see members getting an inexpensive wheel chair if the need was there.

Praise for GEMS
Mr Nyekemba said he had once heard the Minister of Health praising GEMS as a medical scheme that was affordable and well managed. At the time, he had wondered why the Minister had said this, but this presentation had confirmed this. The board needed to continue the good work and he hoped other medical schemes followed their good example.

The Chairperson said there were other areas that still needed to be engaged on concerning other developments within the health sector at large. The Committee appreciated the information given today. Within the five government priorities, there was health. To be functioning well within that sector was a good thing. At this point, the Committee was satisfied about what they had wanted to find out. She said it was important to do a sum up of the issues that had been discussed.

Mr Mashwahle Diphofa, Director General of the Department of Public Services and Administration (DPSA), said there was not much to add. In terms of the GEPF presentation the separation that had happened between the fund and its administration by GPAA was exactly to ensure that Fund decisions, in terms of investment, had a separate focus whilst the operation activities of timely payments and efficient payment processes was the focus of the Agency. This was a government component residing under National Treasury. It was of interest to the Department that the concerns that Members had raised should be addressed. This was why the separation had taken place to ensure efficient processing of applications. There were instances that required intervention such as the statement that departments had not cooperated to provide exit documents on time. This was a matter that DPSA needed to take up with the Agency. DPSA was aware that in the past there had been a campaign to ensure the speedy processing of exit documents. This was however an area that DPSA had to work with the Agency to ensure the employer did not become the reason that the submission of documents was late.

In terms of GEMS, Mr Diphofa mentioned equity and representation on the GEMS board. The Minister had made increasing participation in GEMS one of the five priorities. There was very strong interest that as many public servants as possible take advantage of medical coverage. The NHI was a critical programme of government. The Department was quite pleased with the way the scheme had been run. As the acting Minister had indicated in the budget vote speech, GEMS’s achievements as a medical scheme was a feather in its cap.

The Chairperson thanked Mr Diphofa for summing up the presentations and adjourned the meetings.