Consultants in Department of Health: Auditor-General briefing; Council for Medical Schemes Annual Performance Plan

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20 March 2013
Chairperson: Mr B Goqwana (ANC)
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Meeting Summary

The Auditor General South Africa (AGSA) reported on the results of a performance audit conducted into the use of consultants by eight government departments, including the Department of Health (DOH) over the period 2008 to 2011. The difference between a regulatory annual audit into the financial statements, and a performance audit into whether spending was efficient, effective and economical, was explained. The general findings in relation to most departments were set out, ranging through planning and appointment processes, internal capacity at departments, training and transfer of skills from consultants to employees, performance management and monitoring of consultants, extension of contracts and the closing and finalising projects. DOH spent R416 million on consultants over the three-year period, and seven projects were audited, worth R301.6 million. The average vacancy rate at DOH in that period was around 28.8%, and this impacted heavily on lack of capacity. The contract on the public sector nursing colleges had resulted in a plan to address capacity and quality of training, yet DOH’s own internal vacancies meant the plan could not be implemented. Another project to set up containment measures for polio viruses at laboratories was incorrectly planned and was not reviewed on time, with the result that too few laboratories were initially covered, that it had to be extended, and once it was completed there were no dedicated posts to take it further. Similar problems arose with a manual that was developed and handed to the DOH in March 2009, but only implemented from April 2010, on another contract. The Hotline project suffered from poor planning and was delayed by ten months. There were insufficient formal processes in place to verify the work of three NGOs and to verify their data. AGSA recommended that the Committee must now follow up on the commitments by the DOH to address the deficiencies, and noted that other departments had made commitments also to improve the policies and guidelines around hiring of consultants and performance management processes. The three levels of management, oversight and independent assurance were described. Members were concerned about the level of spending on consultants and bemoaned the lack of monitoring and evaluation systems. They queried whether there had been skills transfer, and whether it was cost-effective to use the consultants. It was apparent that many questions needed to be answered by the DOH as they were outside the scope of AGSA’s performance audit.

The Council for Medical Schemes (CMS) then presented its Annual Performance Plan, highlighting its  role as a regulatory body that sought to ensure that all medical aid scheme members or beneficiaries were properly protected. The CMS aimed to prevent discrimination against some members over others, which had been of concern, and to ensure that the medical aid schemes were properly regulated and maintained good governance. CMS itself had to ensure that it had efficient and effective operations, and continue to advise the Minister and role players. Each of these points was explained with illustrative examples. The market inquiry of the Competition Commission into the healthcare sector was explained, as well as the debates about pricing. CMS set out some of its proposals for revisions to the Medical Schemes Act, which were awaiting approval from the Minister and DOH prior to being tabled in Parliament. CMS expected to receive R110 million as income in the next financial year, from regulated levies on scheme principal members, approved by the Ministers of Health and Finance. Most of its expenditure, as a service organisation, went to staff costs, with a substantial amount also going to legal fees. Members were particularly concerned about how members of schemes could be protected, particularly those who were most vulnerable, against fraud and incorrect practices. They enquired how CMS promoted its services, how it built public awareness, what it had done in cases of fraud, and what could be done about some unethical or questionable hospital practices. CMS explained that although it had no direct mandate on costs, it was nonetheless working closely with he Competition Commission n the market inquiry into the healthcare sector, and had no doubt that this would raise comments on this point. the protection of members and beneficiaries in light of unethical hospital practices with monetary implications, fraudulent claims by health professionals and discrimination by medical schemes.

Meeting report

Consultants in Department of Health: Auditor-General South Africa briefing
Ms Marieke Segan, Performance Auditor, Auditor General South Africa, noted that the Auditor-General South Africa (AGSA), as the supreme audit institution in South Africa, strengthened democracy through enabling oversight, accountability and governance in the public sector. This presentation was intended to assist the Committee to fulfil its oversight function.

She explained the difference between the annual audit, which looked at the financial statements, and this performance audit, which focused on the “three Es” of economy, efficiency and effectiveness, evaluating the measures put in place by management to ensure that resources were properly used.

The reasons why government had elected to do this performance audit on eight Departments were outlined. There had been significant Departmental expenditure on consultants, totalling R102 billion over the three financial years 2008 to 2011, at national and provincial Departments. Owing to South Africa’s persistent skills crisis, it was recommended that Departments should use consultants to gain specialist knowledge in achieving their targets. However, they should build a relationship of national importance, where Departments used consultants to achieve their goals in furtherance of the national development plan. AGSA recognised that the public sector would benefit from the use of consultants where there was a good partnership between consultants and Departments, when Departments put evaluation systems in place to ensure that value for money was obtained from the consultants. Previous audits had been done on use of consultants, in 1996 and 2001, and there was a need for AGSA to follow-up on whether the recommendations from those were being implemented.

The scope of the audit encompassed eight national Departments, who accounted for 33%, or R24.6 billion, from the total of R102 billion spent on consultants. The Departments were selected on the basis of their expenditure, the outcomes of the financial audits (also referred to as regularity audits), as well as the assessments done by performance auditors.

The key focus areas that were crucial were the planning and appointment processes, internal capacity at Departments, training and transfer of skills from consultants to employees, performance management and monitoring of consultants, extension of contracts and the closing and finalising projects. Key challenges were identified in these areas across all the Departments, and Ms Segan gave some examples. In the field of planning and appointment processes, comprehensive needs assessments were not completed. Competitive procurement processes were not followed and expectations on milestones, timelines and costs were not clearly specified by Departments. With regard to internal capacity, consultants would be appointed where permanent capacity should have been created. Consultants would also be appointed due to a lack of internal staff capacity. The skills transfer and training by consultants was ineffectual. In the key area of performance management and monitoring the challenges identified were the lack of oversight and internal controls prior to the payment of the consultant. Deficient project management and monitoring meant that cost overruns occurred, and these were neither motivated nor approved. Contracts would often be extended due to the lack of project management and monitoring. Finally, there was failure to retrospectively analyse projects when closing them off.

The National Department of Health (DOH or the Department) had spent a total of R416 million on consultants over the three-year period. Seven projects were audited, with a combined value of R301.6 million. The average vacancy rate at the Department over the three year period was 28,8%. For the purposes of the audit, agency, support or outsourced services referred to the situation where the Department did not have the capacity to execute the task yet, for whatever reason. Contractors were described as necessary where there was no internal capacity and where appointment of a contractor would be the most economical option for the Department. The use of consultants denoted the acquisition of expert skills, with assistance provided on a material and time basis. Typically, these services would last for only a short period, and the Department would be expected to use consultants for design and implementation processes of projects.

The audit findings for the DOH were set out. The seven projects were listed, of which four used consultants, and three used agency or outsourced services. Contract-specific challenges arose in the form of the public sector nursing colleges, where Genius Management Solutions was contracted, at a cost of R7 862 763, from October 2009 –March 2010. The programmes offered and the capacity of the colleges was scrutinised and it transpired that the intended deliverables – an implementation plan to address capacity and quality of training – could not be effectively implemented. At that time, DOH had a 60% vacancy rate in the HR planning policy and research directorate, and the programmes were not concluded.

Another project, concerning the containment of wild poliovirus infectious material, employed Health Development Africa and cost R896 810, from June 2009-June 2010. This stemmed from the World Health Organisation’s (WHO) commitment to polio eradication, which would be qualified by regions being documented as polio-free for three consecutive years, and all the laboratories having containment measures. Various challenges were shown with this project. The work done by the consultant was not reviewed on time, so deficiencies were not identified, and subsequently were not addressed in a timely fashion. It was also found that the consultant had not fulfilled its mandate. The WHO had required 10% of all labs in South Africa to be within the consultant’s scope of work, but the consultant worked on too few, which then meant that the project had to be extended in order to bring the numbers up to the requirements. There was inadequate human resource planning, and the moratorium on the filling of vacancies within DOH resulted in no dedicated posts being created for the periodic monitoring and evaluation of the laboratories after the completion of the project.

The next project outlined was the development of the National Infection Prevention and Control Manual, under the University of KwaZulu Natal, at a cost of R873 411, between August 2008 and March 2009. Once again, there were various challenges. The specialised internal capacity was not created to coordinate and evaluate the results of the draft National Infection Prevention and Control Manual, for vetting and input purposes. The Manual had been handed to the DOH in March 2009, yet only in April 2010 did the Department hire a specialist to implement the Manual, and once again, this was done on a contract, and not a permanent basis. There was also lack of specialised internal capacity to facilitate the future implementation of the content of the Manual, which would hinder the attainment of the project’s objective.

The next project used a consultant to develop a situational and needs analysis towards the development of a national call centre. Diphale Connexions (Pty) Ltd was hired at a cost of R476 320. The original time frame for the completion of the project was set as 90 days, yet various factors, including communication with all the role players, were underestimated during the planning process. Consequently, the project was completed 10 months late, and during that time the Presidential Hotline was established.

The final project under scrutiny involved the non-governmental organisations of Life Line, Soul City and loveLife, which provided community health services. The combined expenditure was R291.5 million, in the 2007/08 and 2009/10 financial years. AGSA found a lack of formal and structured processes to verify performance-related statistics and data provided by these NGOs. The DOH also had no formal guidelines in place to assess the feasibility of the objectives or targets set out in the NGOs’ business plans. In 2005, the Global Fund had withdrawn funding of US$43 million from one of these projects, due to the lack of governance structures and lack of proper financial and accounting procedures.

AGSA made some recommendations to the Committee, which included following up on what corrective action DOH had taken in line with the action plans that it had drawn setting out commitments to AGSA. There should be quarterly monitoring of those activities, and AGSA recommended that the Committee do an intense scrutiny of strategic plans and accountability reports, particularly in regard to matters such as the moratorium on the filling of vacancies.

Key recommendations were also given on how government could remedy the situation across departments. These included formulation of policy, strategy and guidelines that governed the use of consultants. There must be improved planning for the use of consultants. Performance management and monitoring processes had to be put in place, and then proper financial management and control was to be established. Sufficient internal capacity to enable training and skills transfer was to be created.

AGSA noted that the assurance model involved three levels of management assurance, oversight assurance and independent assurance. Independent assurance comprised oversight performed by portfolio committees or councils, and included in particular the review of strategic business plans as well as the Accounting Officer’s reports on the use of consultants. Management assurance required senior management to take immediate action to address specific recommendations and adhere to financial management and control systems. The Accounting officer must hold officials accountable for the use of resources, and report annually on the use of consultants. Executive authority was to monitor the use of consultants and enforce accountability and consequences. Oversight assurance required that the National Treasury or Department of Public Service and Administration (DPSA) monitored compliance with laws and regulations, and subsequently took appropriate action. Internal auditors were to follow up on management’s actions to address specific recommendations as well as conducting performance audits on the use of consultants. The Audit Committee should monitor the implementation of commitments on corrective action made by management, as well as significant expenditure on consultants.

AGSA noted that because the reports were intended to spark action, this report had been sent to the National Treasury, Department of Health, the Minister of Health, this Portfolio Committee and the Department of Public Service and Administration, with a view to eliciting commitments from all parties. National Treasury had given a commitment to reviewing the guidelines for the appointment of consultants, as well as placing emphasis on monitoring compliance with legal frameworks related to the appointment, management and use of consultants. The Department of Health and the Minister had stated that, since the performance audit, organisational structures had been revised and a newer Cluster was created to manage and monitor human resource gaps at nursing colleges. Internal capacity was created for the containment of the wild poliovirus infectious material and the further implementation of the content of the National Infection Prevention and Control Manual. The National Healthcare Worker Hotline had now been established to render support to healthcare workers, countrywide, on clinical HIV and AIDS issues. Monitoring and support visits to the NGOs were conducted to monitor progress against the agreed deliverables. The NGOs’ framework and guidelines were being reviewed, as were their business plans. The Department of Public Service and Administration had committed itself to providing information on skills in the public sector. Research would be conducted and interventions developed by March 2014, to reduce the vacancy rate. The annual Departmental submission of HR plans would be increased to 100% compliance.

AGSA expressed the view, in conclusion, that citizen value was enhanced through a balanced partnership equation of public and private sectors working together. The use of consultants could be beneficial if they did not attempt to take advantage of weaknesses in government systems, where a good corporate conscience was developed, where steps to prevent malpractices were taken and strong governance support by the private sector was provided.

The Chairperson prefaced the discussion with reference to the National Health Amendment Bill, and clarified that the whole Bill had not been rejected, but a statement had been made by the NCP that served as a means to prompt mediation.

Mr D Kganare (COPE) questioned the perceived skills shortage in South Africa, in light of the skills set that was available but unused. He said there was also a question of whether incompetent people were being employed and consultants thereafter brought in to complete the same task. He asked, where there were unfilled vacancies, who should be monitoring the consultants operating in those areas. He also questioned what threat the consultant’s vested interest in their perennial use posed to permanent posts. Consultants were not held accountable by departments and could charge higher rates. Moreover, he questioned the validity of terming consultants as “partners” and proposed that the term “service providers” would be more appropriate, given the fact that consultants had a profit making incentive. With regard to agency and support systems, he enquired whether there were monitoring and evaluations systems in place for non-core services. He made the point that it was also not within the scope of AGSA to list core and non-core functions, as this must be done by the DOH. He noted that the vacancy rate at DOH had decreased greatly from the date of this audit.

The Chairperson acknowledged that some of the questions were not within the scope of AGSA, but rather of the DOH. He noted that Members were engaging with this presentation by AGSA in preparation also for the DOH’s presentation of the strategic plan.

The Chairperson questioned the disparities between the remuneration given to consultants and the low salaries complained of by staff. He also wanted to know if the figures quoted were inclusive of the costs incurred during the extended project periods.

Ms Segan said that the AGSA was not so much concerned at extension of contracts, save in one instance, for this was not the main issue. Instead, the contracts were ineffectual because the DOH itself lacked capacity to implement the systems created.

Ms M Segale-Diswai (ANC) enquired about the role of the AGSA in remedying the skills shortage crisis. If DOH had put the funding to the filling of vacancies, instead of spending it on consultants, she wondered if there would have been a different outcome, and how that would affect the finding of AGSA. She wondered if the use of consultants to conduct a situational needs analysis for a call centre was really necessary.

Ms Segan responded that the AGSA had the role of raising awareness on the deficiencies in government, including the skills shortage. It provided recommendations on how capacity could effectively be filled. It was integral to this Committee’s oversight role to make enquiries as to what the DOH would have spent if it had filled vacancies, and what it had spent on hiring consultants, and to enquire what was the most effective and cost-effective way to get the job done and fulfil the Department’s mandate. The DOH would not establish a hotline every day, so it was quite possible that it might not have had internal skills for this. However, it was still up to the DOH to show whether or not there was internal capacity.

Ms R Motsepe (ANC) required clarification on how many consultants the Department had and whether these consultancies were instrumental in job creation for communities. Further, she requested how many of the consultants were blacklisted if they produced incomplete or unsatisfactory outcomes.

Ms Segan said that there was no information on the number of consultants readily available, but only on the amount paid to the consultants. The Auditor General did not find it necessary to enquire about any blacklisting as all consultants had completed their project objectives at the National Department of Health.

Ms T Kenye (ANC) was concerned with the expenditure on Soul City, loveLife and Life Line, given that their public visibility was minimal. She asked if AGSA considered these projects to be worth the money spent on them. She asked what the solution would be to the lack of monitoring that was due to deficiencies in project management.

Ms Segan responded that on the point of monitoring and evaluation, the Director General at the National Department of Health had given her commitment to address this, and specific policies and procedures had been put in place now to monitor the NGOs. Where these projects had declined in visibility, processes were in place for DOH to use internal staff, in order to reduce reliance on consultants.

Ms B Ngcobo (ANC) enquired as to the reasons for the repeated use of the same consultants. Noting that the Department, because of lack of monitoring, could not say that the work was satisfactory, she asked if AGSA was of the opinion that the value received was worth the money paid.

Ms Segan said that repeated use of the same consultants was not an issue specifically identified for the National Department of Health, yet generally, this would be a case in a department that continuously lacked permanent personnel to whom skills should be transferred. Continuing lack of capacity led to the situation where departments became reliant on the consultants.

Mr G Lekgetho (ANC) was of the view that the matter was a highly political legacy issue, which led to the question of the rate of consulting in government pre-1994. He touched on the phenomenon of government grooming internal capacity, only to have those people leave, join the private sector as consultants and sometimes return to consult in the very same department. He asked if the public service had engaged the private sector with a view to forming partnerships, and also asked what was being done to try to attract back skills to the public service. He also asked if the Department of Health, in particular, had the project management capacity required.

Ms Segan said that many of these issues must be answered by the DOH. The issue of the skills crisis was linked to the vacancy rate, and this in turn was tied to how the Department attracted and retained skills when it had vacancies.

Ms P Kopane (DA) noted that AGSA had mentioned that transfer of skills from the consultant to the employees was often a stipulated expectation in the contracts. However, she asked if there were plans that identified the personnel who needed to be trained within a certain timeframe, and if specific skills were identified. Finally, when closing off the projects, she asked if the DOH had sat down with the consultants to conduct an assessment of whether the skills transfer had been completed. She also asked why there were disparities between the key challenges as outlined in the presentation and the audit findings.

Ms Segan explained that the key challenges were generally stated for all eight departments that were audited. The specific findings presented later pertained to the Department of Health. She noted that at the time of closing off projects, the DOH tended not to have capacity to implement whatever the consultants had designed. The transfer of skills to employees, in line with contracts, had been completed successfully in the case of DOH. However, the DOH had not identified the skills to be targeted in the planning phases.

Council for Medical Schemes Annual Performance Plan
Dr Monwabisi Gantsho, Chief Executive Officer and Registrar, Council for Medical Schemes, introduced Prof Yosuf Veriava, who had been appointed in November 2012, by the Minister, as Chairperson of the Council for Medical Schemes (CMS or the Council).

Dr Boshoff Steenekamp, Strategist: Office of the Registrar, CMS, highlighted four items that were set to change the operational environment significantly for the Council. The first was the National Health Insurance (NHI). The CMS would continue with the regulation of medical schemes until the NHI development process was completed. Secondly, the Medical Schemes Amendment Bill had been approved by Council and was to be submitted to the Department for further processing. He explained that this Bill was the result of twelve years experience with working with the Act and envisaged much restructuring, with the key objective of improving regulation within the industry. Thirdly, he noted that “gap cover” in terms of short term insurance products allowed for the discrimination against the old and sick, a significant risk pool. These short term products were not regulated under the present Medical Schemes Act (the Act) and this allowed for large sums of money in the healthcare market that were for profit yet unregulated. If this were allowed to continue, this would make unborn children, the old, poor and sickly especially vulnerable. Fourthly, he said that the Competition Act had been amended to allow the Competition Commission (CC) the power to conduct market inquiries, and it was presently conducting one into the healthcare environment. CMS undertook to work closely with the CC to investigate the perceived healthcare market failures and provide rational responses towards regulatory changes.

Dr Steenekamp noted that the strategic goals of the Council. It must protect members of medical schemes by preventing discrimination against beneficiaries, as stipulated in the Act. CMS must properly regulate medical schemes and ensure that they were responsive to their environment, with clean governance systems. CMS, as a regulator resourced by taxes and levies, had to ensure that it maintained its own efficient and effective operations. Finally, it must continually reflect on its role and effectiveness in the medical schemes regulatory environment, and advise the Minister and role players accordingly.

In regard to protection of scheme members, he noted that the numbers of medical aid members had increased, particularly with the introduction of Government Employee Medical Scheme (GEMS), yet the membership was closely linked to employment. Expenditure on private hospitals per member had increased, and there was also a correlation in the increase of specialist costs and hospital costs. Conversely, medicine prices, which had been regulated, remained largely unchanged. In order to ensure fair and non discriminatory access to medical scheme benefits, CMS had to give prime consideration to risk pool management. The Act contained three important provisions on risk pools. Community rating provided that regardless of a person’s state of health, s/he would pay the same rates. This went towards eliminating discrimination and risk rating. Open enrolment provided for the compulsory acceptance of members by schemes, regardless of their medical history. Minimum Benefit cover provided that there were certain minimum charges that the scheme must cover. However, these risk pooling arrangements were threatened by affordability. Unemployment and costs were potential barriers to the outlined framework.

Dr Steenekamp expanded further on the inherently discriminatory nature of gap cover products. They were weighted in favour of the young and healthy, who could afford to face their low risk, yet the old and sick had to pay in the difference that was not covered by the scheme. Enrolment provisions were also being challenged, as with Discovery, who had refused to accept Transmed members in spite of a ruling by the Registrar and Council and had taken the issue to the Appeal Board. GEMS had also appealed the decision by the Registrar, Council and Appeal Board, and had taken the matter on appeal to the High Court.

The lack of a price determination framework threatened access to benefits because of affordability.

The CMS had responded to the challenges of access in a number of ways. Firstly, it had initiated a research project to advise the Department of Health on possible interventions to contain the increasing disparate risk distribution between schemes. It continued to interact with the Department of Health and National Treasury to get consensus on the demarcation of regulations. Draft amendments to the Prescribed Minimum Benefit (PMB) regulations were submitted to the Minister of Health in March 2010. The Competition Commission’s market inquiry had potential to address the issues. The CMS had met with the Minister and GEMS to try to settle matters rather than pursue the court action.

Dr Steenekamp then spoke to the governance of schemes to ensure that they were responsive to their environment. He pointed out that the non-healthcare administration costs had decreased whereas the healthcare costs had increased at a greater rate. The Council recognised that although it was already empowered in terms of the Act to regulate administration costs, there was lack of understanding on the level of out-of-pocket expenditure. It intended to do research on this, in collaboration with Statistics South Africa.

The regulatory functions of the Council interacted, because prospective regulation influenced the industry, which then impacted on the concurrent regulatory processes of the Council. Increasingly, the Council had found that its retrospective regulation workload was increasing, with many more complaints being lodged that required a clinical opinion. He cited the figure that these amounted to 0.18 per 1000 beneficiaries in 2012, as opposed to 0.10 in 2011. Regulation was not as effective as it could be, which was evidenced by the increasing industry pushback in terms of retrospective regulation.

Governance failures, although not pervasive, still persisted in some schemes. These were in the forms of strong administrator influence on the affairs of some schemes, and the lack of an arm’s length relationship between trustees and third party contractors. Certain boards lacked the expertise and skills mix required. Sometimes, clear ‘fit and proper’ standards were not established. He again noted that the Act needed amendment, particularly in regard to putting poorly-governed schemes under curatorship.

The role of managed care organisations was questioned by the Council, to find out if and how they contributed to the healthcare environment, by reducing costs and improving quality. This spoke to the concern repeatedly raised by Prof Veriava around the quality and appropriateness of the care.

The issue of alternative dispute resolution, in order to resolve complaints expediently, had been raised, and CMS decided to propose amendments to the Act that would specifically require alternative dispute resolution (ADR) processes to be instigated, prior to referring the matter to the Tribunal. The Council also recommended that dispute resolution should be exhausted at scheme level, and therefore proposed the piloting of an internal dispute resolution process, on a voluntary basis, with the objective of reducing the backlog of appeals to the Council.

Dr Steenekamp then spoke to internal matters of the CMS. The Council presently occupied two separate buildings, which were already filled to capacity. A tender had been issued for new office accommodation in Centurion, and it was due to move was due in May 2013.

Dr Steenekamp then spoke to the legislative changes under way. The publication process of the proposed PMB regulations was slow, since the CMS was still awaiting feedback from the Minister. The Minister supported the non discriminatory demarcation regulations, yet the financing remained an obstacle. Statutory fees were last adjusted in 2000. The Competition Commission’s market inquiry may come up with some recommendations for price determination.

He then noted that the Medical Schemes Amendment Bill that Council wished to propose comprised a whole rearrangement of the current Act. The changes were aimed at ensuring that potential perverse dealings, such as directors or trustees benefiting from their position, were halted, and that the members’ money paid to the scheme would go to healthcare and not to an individual’s pocket.

Mr Daniel Lehutjo, Chief Financial Officer, Council for Medical Schemes, tabled the budget to support the new Annual Plan. The budget was around R110 million. Although ideally this should be higher, it must be remembered that the Council was funded by medical scheme members, through levies imposed on the schemes. The levy had increased by 9.85%, or by about R2.40 per year per member. The charges were only levied on the principal members, not on total beneficiaries. The levy for 2013 was set at R26.79, for which the Minister had already given approval. The Minister of Finance, however, still had to give his concurrence before the CMS could collect from the medical aid schemes.

CMS had large expenditure on legal fees, which amounted, in the year to March 2013, to around R8 million. This was because of the nature of the Council’s work as a regulator, which meant that its decisions were often challenged. CMS was trying to drop its expenditure, given the call on all departments ad entities to be frugal. He also noted that salary expenditure took up the largest slice of the expenditure budget, as would be expected, because the CMS was a service industry. The proposed positions were intended to promote the prospective, concurrent and retrospective regulatory functions of the Council, and were directly linked to achievement of the goals of the Council. He also highlighted internal management expenditure, due to the relocation in May. He also added that the Council had grown from 10 staff members in 2000, to 100 presently. Finally, he noted that for the past eleven years, despite the limited resources and the challenges faced, the Council managed to attain a clean audit.

Ms B Ngcobo (ANC) enquired whether the new office space was bought or rented, and whether it was sufficient to accommodate future staff growth.
Mr Lehutjo expounded on the new office arrangements. After the tender process and subsequent consultation with National Treasury, a lease contract was concluded that would give CMS the option to purchase the new premises at the end of the lease. The purchase price of the building at the moment was around the same as the total budget of CMS, so it would have been unaffordable to purchase outright now. However, CMS would get that option later. The premises would accommodate personnel for about the next 10 years on the current growth trajectory.

Ms Ngcobo asked for the CMS response to the incidence of biological medicine.

Dr Steenekamp confirmed that biological medicines represented difficulties, in that they were expensive and well marketed, yet over time proved to be no better than already-existing alternatives or cheaper counterparts. In general, those treatments were not at PMB level of care, which meant that most schemes were not required to pay for most biological medicines, except for the singular instances where such remedies were shown to be cost effective.

Ms Ngcobo asked about the future state of health standards and the medical aids, in relation to the National Health Development Plan.

Dr Steenekamp noted that both the NHI and National Health Development Plan were being dealt with by Parliament, and although there was a report on certain aspects of implementation, these were outside of the Council’s mandate. CMS was aware of the timeframes and objectives and provisions that pertained to it specifically.

He added that, although it could not be accurately forecasted, the future of the NHI could be estimated by referring to comparative studies. Countries with well developed national health insurance systems always had private insurance environments as well. Where there was a failure to regulate the balance between the publicly funded NHI and the private systems, a situation such as Chile could occur, where the old and sick were the responsibility of the state, whilst the young and healthy belonged to private schemes.

Ms T Kenye (ANC) referred to the Council’s objectives in relation to beneficiary access. She asked if beneficiaries were aware of the fact that they could complain to CMS, where they might have been discriminated against by the medical aid scheme, where their consumer rights had been infringed, or where they were charged surplus costs. She also asked how CMS would advise in these instances.

Ms Kenye also enquired about the Council’s outreach or marketing strategy to educate and spread awareness among beneficiaries, as this seemed to be in line with the Committee’s recommendation to reach a broader audience.

Dr Gantsho referred to what had been set out already in the presentation about discrimination against some members. When frameworks were established, these would go some way to addressing the issues. The CMS maintained its disapproval of discrimination, as illustrated in a recent ruling against a company that sought to discriminate against a member on the basis of obesity. The Council had strategies and operations to alert members and beneficiaries how they could lodge complaints at scheme level, prior to Council involvement. ADR was also tabled as a solution, and the development of internal dispute resolution rules was recommended. Furthermore, section 47 of the Act required that the Council attend to the complaints as soon as they were lodged. The complaints adjudication unit was inundated.

Mr Lehutjo added that the Stakeholder Relations Unit had introduced the concept of stakeholder indabas, which would enhance the consumer outreach programmes. The Consumer Education Unit also hired out a stand at the Rand Show as a platform for consumer interaction. This unit, however, had only three employees, whereas the Council dealt with 98 schemes. Due to budgetary constraints, a process would be introduced where medical schemes were obliged to issue membership cards that clearly showed the logo, contact details and explanatory notes from the CMS.

Ms Kenye asked for clarity on schemes being placed under curatorship.

Dr Gantsho explained that medical schemes were placed under curatorship where there had been governance failures. In terms of section 44 of the Act, in cases where the Council detected poor governance, it was mandated to take intervention measures, which might include putting the scheme under curatorship.

Ms Kenye asked what was done by CMS to address the employee turnover rate.

Mr Lekgetho was concerned about the reference to temporary positions and enquired as to the possibility of the positions being permanent.

Dr Gantsho reported that part of the challenges around staff turnover arose because the medical schemes would poach staff from the CMS because of their experience and skills. The Council fully supported the Office’s introduction of staff retention strategies.

Mr Lehutjo added that temporary staff members were interns and were paid at lower rates. The need for added capacity was identified, yet, as outlined, budgetary constraints did not render permanent employment feasible at this stage.

Dr Gantsho agreed that the reason for creating temporary posts were that the CMS could not afford the financial implications of hiring permanent staff. The levy had to be kept at a certain level, and that determined the income of the CMS. The Minister of Finance had to approve that levy.

Ms Kenye asked if proposed use of technology in the form of Google Cloud been implemented.

Ms Kenye questioned whether there was any regulation of the levy charged by pharmacies.

Dr Steenekamp asserted that all pharmacies had to charge the same, regulated levies. There could not be any deviations from the law in that regard. Members were often charged co-payment without their knowledge, and that was an issue that had to be addressed in the price determination project.  The National Health Act offered the public protection, because it provided that doctors bore the responsibility of fully disclosing information about costs to the patient.

Mr Lekgetho enquired as to the timeframe for the Amendment Bill. He added that the name of the Council seemed to cause some confusion and he recommended that it be changed.

Dr Gantsho said the name of the Council would be left to Parliament and could be addressed in the public comments. In regard to the progress, he noted that the Council had approved the Medical Schemes Amendment Bill, and it had been submitted to the DOH and Ministry of Health for their approval. Once that was done, it would be submitted to Parliament and tabled to this Committee.

Mr Kganare bemoaned the private hospital practice where caesarean sections were “rationed”, saying this had large implications on the cost of the medical aid.

Prof Veriava said that the performing of caesarean sections was governed by considerations of convenience to the doctor and hospital, as well as a possible perverse financial incentive. He recommended that this issue be taken up by the Health Professions Council.

The Chairperson conjectured that another reason may be that the hospitals remained unregulated although all the parties concerned were regulated. He agreed that further inquiry was needed on this point.

Mr Kganare asked how the Council dealt with unethical practices by doctors and hospitals.

Prof Veriava said that it was believed that the Competition Commission’s market inquiry could lead to strong recommendations on how market conduct should be regulated, and could also result in more controls of healthcare prices.

Dr Gantsho stressed that the questions on the price determination progress fell outside of CMS’s primary mandate. However, CMS was engaging with the Health Professions Council and the Competition Commission in this regard. The relationship with the Competition Commission as a co-regulator, and the Council’s role in the price determination inquiry rendered CMS an integral part of the determination inquiry.

Mr Kganare noted that the foreword to the Annual Performance Plan seemed to be an exact copy of the foreword presented in 2011.

Dr Steenekamp admitted that the foreword was a copy of previous report. He noted that a strategic plan was to be submitted once every five years, and because the essence of the strategic plan had not changed, as it covered the term of office of the Minister of Health, it was not considered necessary to change the foreword. The performance reporting was relatively new, and this was the third such plan submitted. The annexures had been updated.

Mr Kganare said that although there had been an increase in membership, the complaints adjudication costs had decreased and telephone and fax costs remained constant in comparison to the previous year.

Mr Lehutjo said that in relation to telephone expenses, CMS had put in new efficiency measures in the form of line routing, which had resulted in costs being minimised. Furthermore, private calls were charged to the employees. The complaints expenses remained largely static because the complaints were lodged either in person or in writing, at the CMS offices. Complaints were not proactively sought, nor were they resolved outside the office. The costs for the complaints unit largely comprised the salaries of the personnel in the Complaints Unit, which employed seven legal officers.

Ms P Kopane (DA) required clarification on what measures were in place to protect the beneficiaries when fraudulent claims were made by healthcare professionals. She was concerned at the lack of coordination across medical aid schemes to prevent fraudulent claims, and noted that one scheme had enlisted the services of a mobile validation system to prevent such fraud.

Dr Gantsho submitted that the issue of fraud was problematic, and that CMS regarded it as unacceptable that any monies paid by members might not go toward the provision of quality healthcare. The CMS tried to protect the vulnerable, but no protection could ever be absolutely foolproof. There was potential for legal follow up by the funders in the identified cases of fraud. The Council believed that all regulators needed to work together to come up with the best preventative strategy. He noted that, essentially, it was the beneficiaries who paid the levies to CMS, and not the medical aid schemes. He noted that money was spent on legal fees by CMS where necessary, and that the legal actions taken by the Council were yielding positive results.

He added that in regard to the PMB legal challenges and considerations, the Council had won its court cases against the BHF and was now in constant contact with the BHF regarding aspects of PMB that were felt to be barriers to achieving harmony. The Council followed the practice of payment in full on PMB, yet there was still a worrying perception that CMS offered a blank cheque to service providers.

The meeting was adjourned.


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