Medical Research Council & Council for Medical Schemes on their 2014 Strategic Plans

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30 July 2014
Chairperson: Ms M Dunjwa (ANC)
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Meeting Summary

The Medical Research Council (MRC) presented its 2014 Strategic and Annual Performance Plans. It was tasked with administering South African health research effectively and efficiently, leading the generation of new knowledge for policy and practice, innovation and technology development, which covered new diagnostics, drugs, devices and vaccines, and capacity building of scientists. There were several burdens of disease in South Africa, with HIV and TB still at the fore, but there were growing concerns about non-communicable and lifestyle diseases also. In the HIV and TB environment, the MRC was committed to working towards developing successful vaccines, now that the rollout of ARVs and prevention of mother-to-child transmission had led to increased life expectancy. Extreme and Multi-Drug Resistant TB were still of huge concern and MRC was funding research both into diagnostics and treatment. Non-human primate facilities were core to the health research for testing of vaccines. Training focused on the next generation of medical scientists, and the grants and funding for Masters and PhD researchers in medical and allied fields were described. MRC supported students to gain experience on bioinformatics that was currently lacking in South Africa, as well as investigating disease pathogenesis and vaccine discovery and, although this was not a major issue in South Africa, was contributing much to malaria research for the region and Africa. It also ran flagship projects in areas such as mental health, metabolic disease, stem-cell research, gender violence, and causes of death from road accidents, especially for children. It was leading generation of new knowledge as well as facilitating the translation of that knowledge into policies and practices. Prime examples were traditional medicines, raising awareness of lead poisoning, especially in fishing communities that used lead sinkers, campaigns on intimate partner violence, nutrition programmes, and prevention of brain injuries during sport. Some of its innovations included the SHIP programme for new diagnostics and medical devises and Doppler devices for averting still-births, triage prototypes for primary healthcare and funding of vaccine development. MRC received R540.17 million from a government grant and anticipated being able to leverage other funding of R64 million. In the 2017/18 year, the government grant would decrease by R50 million, which was of great concern. Intramural research took 38% of total budget, and extramural research 22%. MRC stressed that there was a critical need to devote more funding to science and technology research, to achieve the wealth and health of the nation, and to increase South Africa’s publication output.

Members expressed concern about research units that had been closed, and questioned the impact. They asked about the new Human Papilloma Vaccine, and whether there were any negative effects, as well as which of the vaccines were suggested for South African use. They suggested that the private sector should be encouraged to contribute to research costs. They asked for clarity on the proposed amendments to the MRC Act, how MRC translated research findings into policy and practice, the provincial indicators, and whether there were overlaps with the Departments of Science and Technology, Health, or other research institutions. Questions on the effect of genetically modified organisms led to an assurance that the MRC was not researching this, as it lay in the purview of the Agricultural Research Council. Members were worried whether there was not too much emphasis on the curative and diagnostic aspects, rather than prevention, but the bias was explained, and the MRC also clarified who was researching social determinants of disease. Members expressed their concern also about the vast amounts spent on external diagnostic laboratories by the public health system, asked for clarity on the economic support package, questioned whether research grants had to be based on high-impact journals, and what the scientific challenges were around vaccine development, particularly for HIV and TB. Members also enquired if the MRC was dealing with oral health, particularly in children, and nutrition, and asthma contributors. They asked about the gender and demographic breakdown for both scientific and support staff, and questioned the apparent discrepancy in budget figures between the Annual Performance Plan and presentation slides

The Council for Medical Schemes (CMS) presented its 2014 Strategic and Annual Performance Plans. It was confirmed at the outset that the former Registrar had been suspended, pending the finalisation of an investigation after certain allegations under oath were made. The CMS was empowered by its statute to exercise control over medical schemes, in the interests of the public, and to make recommendations to the Minister, investigate complaints and approve rules of medical schemes. Amendments had been proposed to its legislation to strengthen its position and tighten up on discrepancies, but these had been delayed by the Commission of Inquiry into private healthcare costs. The CMS aimed to ensure access to good quality medical schemes, ensure sound governance of medical scheme, and sound governance itself. These goals were further explained, with explanations being given also of the enrolment process, the principles behind the Prescribed Minimum Benefit (PMB), designated service providers and the managed care programme. It was noted that medical schemes must be run by a Board of Trustees, which may be suspended and curators appointed should there be lack of expertise or skill as required by the Act. Trends in the performance of medical schemes showed declines in both open and restricted schemes, a high average age of beneficiaries, increase of total health care expenditure, but stabilization of non-healthcare expenditure. Generally, the medical scheme industry was solvent. The budget and some statistics from 2012 were presented.

Members expressed their displeasure at what they saw, firstly, as outdated statistics, and secondly a “cut and paste” effort in the Strategic and Annual Plans, questioning the dates and whether the plan now presented was aligned with the Department of Health. It was explained, however, that there had been timing problems because of the elections, that CMS’s new five year plan commenced in 2015, and that it would be necessary to make some adjustments because the DOH had subsequently amended its plans. Members were concerned about the funding gap, given the increasing life expectancy, and the rising PMB, which they felt was unaffordable. They also questioned the fairness of the principles behind co-payment particularly given that most members were unaware of the precise details. These should be addressed by amendments t the Act, and the Committee suggested also that closer attention must be paid to where the CMS’s own rules fell short, to try to close the gaps on medical schemes’ compliance. Clarity was sought on the ICD codification for payment, and consideration of the risk adjustment capitation model for National Health Insurance implementation, which was said to be technically complex. Members wanted to know how the CMS communicated, particularly in rural areas. They requested more clarity on the budget variations, across the last two years, for goods and services, any legal challenges, and why there was a large budget for litigation. The role of brokers in medical schemes was questioned. The race and gender breakdown was requested.

Finally, Members adopted minutes of the meeting held on 9 July.

Meeting report

Medical Research Council of South Africa: 2014 Strategic and Annual Performance Plan briefing
Prof Glenda Gray, President, Medical Research Council, briefed the Committee on the scientific progress, performance, governance and strategic direction of the Medical Research Council (MRC or the Council). She mentioned the Council’s new performance indicators which included:
- administering South Africa’s health research effectively and efficiently
- leading the generation of new knowledge for policy and practice
-  innovation and technology development, which involved projects on new diagnostics, drugs, devices and vaccines
- capacity building of scientists.

She commented that HIV and TB vaccines would be game changers for the HIV and TB epidemic in South Africa as MRC was committed to working on the spread of HIV and TB in South Africa. She added that MRC was committed also to capacity development of diverse scientists who were committed to address the epidemic issues in South Africa. MRC planned to initiate some innovative strategies to identify people who were interested in science in high schools and BSc level to become medical scientists in the future.

South Africa’s burden of disease included the ten most common causes of mortality in the country, for which were HIV/AIDS, hypertensive heart disease, lower respiratory infections, cerebrovascular disease, tuberculosis, diarrhoea diseases, interpersonal violence and road injuries in adults and children. She added that South Africa (SA) also had two imploding epidemics, of communicable and non-communicable diseases. HIV/AIDS was a huge killer in South Africa. She added that another serious cause of death was women dying during childbirth, and the statistics were also high for newborns and infants. She added that interplay of violence, and injury from accidents and fire, were also of huge concern.

She said that the roll-out of Anti-Retroviral drugs (ARVs) had increased the life expectancy of South Africans from 2003 to the present. Much paediatric HIV infection had been eliminated by diagnosing HIV in pregnant women, and immediately starting treatments to prevent mother to child transmission (PMTCT) which had reduced the infection rate from 25% in 2004, to less than 2% in 2013. She added that the MRCl was working on innovations that could prevent haemorrhage in women, and that would be rolled out at a global level.

She added that MRC was funding diagnostic issues and treatment strategies to try to avert extreme and multi drug resistant (MDR) tuberculosis, which constituted about 3% of the TB burden in South Africa. The pipeline of TB drugs in SA was drying up, hence the need to fund innovations in drug development which could provide affordable TB drugs.

She gave an overview of an effective and efficient administration of South African health research system, through programmes like the Strategic Health Innovation Platform, flagship projects, training of the next generation of scientists, and focus on both communicable and non communicable diseases.

Prof Gray noted that the MRC received funding through both the Department of Health (DOH) and Department of Science and Technology (DST), to fund its intramural and extramural researches. It would constantly leverage government funding to increase spending on research. It was engaged in investigating disease pathogenesis and drug/vaccine discovery, validating models for predicting type-2 diabetes, discovery of links between HLA and clinical TB disease, prevention of brain injuries during sports, and research platforms like non-human primate facilities. R23.5 million was spent per year on the TB project. The MRC had the largest drug discovery project in the world and was working on Paediatric formulations, investigating urine based diagnostics for children. It was also interested in system biology and bioinformatics, and was investigating the transmission and protection of TB in order to find the right vaccines for TB.

MRC also had the largest discovery project in Africa for malaria, and was committed to supporting malaria work even though South Africa did not have such a high burden from malaria disease itself. MRC was working on the entire lifecycle of the parasite, one clinical candidate was to be delivered in 2014, along with one back up series profiles and two malaria insectaries in South Africa. She noted that malaria could be eradicated in the world, if everyone took malaria prophylactics.

Prof Gray noted that the MRC strategic goals included supporting innovation and technology development to improve health. Some of MRC innovations included SHIP, a new MRC unit aimed at developing new diagnostics and medical devices, vaccines and drugs. Another was the Umbilical artery Doppler, a software application and handheld probe to avert still births and early neonatal deaths and to support primary health care in South Africa by rolling out a triage prototype which helped nurses work with doctors.

MRC was interested in HIV drug formulation and treatment strategies. Unless HIV was activated, it would not be eradicated. For this reason, MRC had tried to find mechanisms to activate HIV in order then to attack it with drugs. The diagnostic and preventative strategies of HIV in women were of particular interest. South Africa had been the flagship of HIV development and testing in Africa and there was a clinical trial of this HIV vaccine in Africa and Europe. MRC was also interested in active and passive immunization. The Council’s HIV vaccines platform support included its non-human (primate) facilities for conducting research and identifying challenge models.

MRC was committed to developing clinical research capacity in areas in the country that had not seen clinical development .The Council had supported various initiatives in the Eastern Cape, both with laboratory support and clinical infrastructures, and was interested in community engagement and participation in whatever vaccines were rolled out. MRC had been a member of the P5 consortium and had funding of $100 million to conduct research on HIV.

Prof Gray described the non communicable diseases work, stressing that MRC was looking at early diabetes diagnosis in pregnancy, by using glucose tolerance testing. It was also funding breast cancer and diabetes pharma-cogenomics. Other flagship projects included stem cell research, mental health, cardiovascular and metabolic diseases.

MRC was funding grants for those trying to change research strategies in traditional medicine, brain and development, maternal and child health.

MRC’s long term strategic goals included the commitment to develop medical doctors to become PhD clinical researchers. It presently committed R500 000 per annum to this programme. It also provided funding for health and allied disciplines research degrees, to the tune of R70 000 for masters students (there were 32 candidates for 2015 intake), R100 000 for PhD candidates (of whom there were also 32 candidates for 2015 intake). MRC internship programmes included 10 females and 8 males. The “National Health Scholarship Programme (NHSP”) provided a tax free scholarship for full time PhD degree study, and here there were 35 candidates. In addition, she noted that MRC sometimes sent students and scientists abroad to learn, especially students of bioinformatics, in order to help the Council in research. MRC needed bioengineers to help with the research and development (R&D) of health innovation in South Africa.

Prof Gray then detailed another of the MRC strategic goals, to lead the generation of new knowledge and facilitate its translation into policies and practices to improve health. MRC led the campaign on lead poisoning (which impacted on intellect), to highlight and address the issue of lead content in paints and fuel, which particularly affected children in the fishing communities. MRC was looking at the links between alcohol and HIV, and ways of addressing the alcohol issue in South Africa. Discoveries of links for clinical TB would help MRC to design programmes and come up with diagnostic innovations to prevent TB.  Furthermore, MRC was involved in research into prevention of brain injuries during sport, and was doing research to identify risk factors for sports. It had also conducted research on intimate partner violence, and she made the point that it was important not only to prevent partner violence in South Africa, but to change global violence. Finally, it was involved in the roll out of HIV testing in rural communities, which would support government by identifying new models. She reiterated that MRC would leverage its resources by using funding provided by government also to generate additional money.

Financial report
Mr Nick Buick, Chief Financial Officer, MRC, briefed the Committee gave an overview and breakdown of the sources of income of the Council from 2013/14 to 2017/18. The main allocation from National Treasury was R540.17 million, which was coupled with other income of R64 million, and he reiterated that this was done through leverage funding, as alluded to by Prof Gray. In the 2017/18 year, the MRC was predicting a decrease of National Treasury funding, of R50 million, and this downward trend would have a significant impact on the Council’s flagship project. The higher the government funding grew, the higher MRC followed in health agenda.

He then gave a breakdown between the major spending opportunities. Intramural research took 38% of total budget, extramural research 22% of total budget, and research capacity development 3%. The SHIP accounted for 19% and Support for 15%. Expenditure by line items and programmes was also set out, with the percentage changes (see attached presentation for full details).

Mr Buick noted that income should grow by 31% in 2015/16 and MRC anticipated leverage funding of R35 million per annum for three years. There would be further leveraging funding from NIH to the value of R40 million per annum for three years. The spending on administration, as a percentage, would decrease from 23.9% in 2014/15 to 18.3% in 2017/18. Mr Buick reiterated that the main concern was the reduction of funding by R50 million in 2017/18.

Prof Gray made the point that funding of science institutions was critical to the wealth and health of the nation. South Africa was not publishing enough science journals at the global level, having only 9 793 internal ISI journal publications, compared to 369 258 in the United States. The relationship between knowledge and wealth had been recognised since ancient times, and she warned that if South Africa did not commit enough to research and development, in science and technology, it would never achieve health and wealth. She said that scientific productivity was a much better predictor of economic wealth and human development than any other variables.

Mr I Mosala (ANC) asked why some research units had been closed by the Council, and questioned the impact of the closure on the staff.

Prof Gray replied that there had been a review on academies of science and research units some years ago, which had found incoherence in funding and duplication of research. It was decided that MRC was not getting full value for money and some research programmes were not specific enough to address causes of death in South Africa, and a decision was taken to close some research units. New criteria were drawn up for research that would address diseases, productivity and value for money spent. The Council now had a programme streamlined to address the burden of disease, such as HIV prevention units, the diabetes platform and TB units. She stressed that priority areas were value for money and productivity, on which scientists would be judged. Some staff of the closed research units had joined universities and other places. MRC was funding a lean engineering programme for the extramural Space Unit and also had to close the intramural units to be productive.

Mr Khalipha Ramahlape, Division Manager, MRC, added that the human capital of the closed institutions were absorbed by universities and other science councils, according to their agendas, and some were absorbed elsewhere within MRC, so the MRC had not been responsible for increasing unemployment.

Mr Mosala asked about the Human Papilloma Vaccine (HPV) programme launched by the Minister of Health, and the effects and if any cases of death from the administration of the vaccine were reported.

Prof Gray replied that scientists in South Africa were involved in HPV vaccinations which had been rolled out around the world, and pharmaco-vigilance on HPV vaccination had resulted in no deaths being reported to date. The HPV vaccines appeared to be safe and averted cervical cancer.

Mr Mosala also asked for the contribution of South African private businesses to research programmes, especially in HIV and TB.

Prof Gray replied that there was no good philanthropy in the country to contribute to funding vaccines and the MRC was looking at how to persuade big businesses to fund.

Mr Buick added that there had been limited success with the corporate and private sector funding at the early stage of research activities, but MRC would keep trying to tap into the Corporate Social Investment budgets of companies.

Mr Mosala requested clarification on the proposed legislative amendment and when it would be brought before Parliament.

Prof Gray told Members that the MRC Act was under review and once the board concluded that, there would be public consultation process. The review would cover governance issue -  such as who should head MRC,  namely, a doctor or a scientist.

Dr P Maesela (ANC) commented that the Council’s research seemed to be biased towards curative and diagnostic issues, not towards preventive measures. He added that the public health sector paid a lot of money to external diagnostic laboratories whereas MRC was surely supposed to offer such services. He also asked if there was an overlap in researches done by MRC and DST. He also commented that he had not seen the research input of the Council on the social cause of diseases, and said that this would help other departments to come up with preventative social measures to stop some diseases.

Prof Gray replied that MRC was interested in the whole value chain of diseases in South Africa, as a lot of funding had been spent on the diagnostics and treatment aspects of TB, on cures for illnesses, on prevention of gender based violence and injuries. There were multi-component interventions that looked at saving children’s lives. Other preventive inputs include funding of TB vaccines, HIV vaccines, early screening, issues around obesity, and early screening to prevent hypertension, and all of this could save peoples’ lives. The MRC had also rolled out a demographical survey to help understand the burden of diseases, in order to make meaningful and quantitative efforts to address prevention, for instance, of hypertension.

She added that pharmaceutical companies were involved in diagnostic platforms, hence the interest in public-private partnerships for mutual risk and benefit. MRC was working also on the intellectual property component, to ensure that South Africa benefited from scientific research. She noted that MRC received funds from both DOH and DST, and all institutions worked closely, and without overlapping, to ensure that best use was made of funding.

MRC was studying the interplay of alcohol and drug use in rats, in order to isolate the diseases associated with foetal alcohol syndrome and the prevention of alcohol abuse during pregnancy, and she reiterated that it was also looking at gender based violence, making interventions on intimate partner violence and child deaths in accidents.

Dr Maesela asked for an explanation of the “untransformed nature” of the Council.

Prof Gray responded that there was a transformation agenda, which had been addressed at top management level. At the moment, the Council had 89 black female scientists, 51 colored female scientists, 44 Indian female scientists and 17 white female scientists. Transformation was thus being addressed in the council.

Dr W James (DA) commented that if a successful vaccine was found for HIV, then MRC would be eligible for a Nobel prize. Most of the human population had no natural immunity against HIV, and vaccines stimulated and enhanced immunity. He asked for some clarity on the science behind the HIV vaccines and the actual science problem that was tackled to derive the HIV vaccine, noting that the second clinical trial on this was ongoing at MRC. He asked that the science problem for TB vaccines also be enumerated.

Prof Gray replied that a lot of work was being done to understand the pathogenesis and mechanism of protection in HIV vaccines, and MRC was also partnering with other institutions that were developing vaccines. At the moment, there was an HIV vaccine developed in Thailand, which was around 33% efficacious. Vaccine performance was durable for about one year after the vaccination, so improvements were needed to boost the protein and vector, to improve durability of the vaccines. Active and passive immunisation was required to prevent HIV. Neutralizing antibodies were needed to stimulate the immune system. She noted that South Africa had the best pipelines to identifying those neutralizing antibodies, and MRC was working with the manufacturing agencies to genetically engineer the neutralising antibodies. Vaccine trials would be carefully executed, to make sure that they worked. She mentioned that it was important to note the effect of the body mass index and alcohol, both of which could reduce vaccine-immune responses. She added that the platform for the TB vaccine was “pathetic” in the sense that the TB vaccination, globally, was far behind, as it had to be structurally designed to understand the variable and non variable areas of TB.

Dr James commented that the budget was too small and should be increased, from public, government and private sources, to meet the medical research demand in  human, animal and plant health. The Minister of Health had a target to raise R&D expenditure to match other developing countries. He added that R60 000 was insufficient for PhD training.

Prof Gray replied that MRC had a small budget, but that it added a lot of value in terms of good scientists and infrastructure. More money was indeed needed to make a substantial difference in health research and development. The expenditure was to be monitored carefully.

Prof Gray noted, in respect of the PhD training, that several models were being considered that could have long term and short term gains. As a member of the Deans Committee for Health, she noted that a programme on moving PhD training into the pipeline would be discussed.

Mr H Volmink (DA) congratulated the MRC on its input in saving lives in South Africa. He asked for clarification on the trend of the economic support package. He asked if MRC received research incentive grant funding for publications, and if its research grants were biased towards ensuring only that publications went out. He also asked about the translation of research into policy and practice, since it was difficult to get policy makers to understand the complexity of creating capacity to translate scientific findings into clear policy recommendations that could be taken up and implemented.

Prof Gray replied that medical research scientists were honorary professors of the universities, as MRC did not get money from publications. The Council was thus working with the various medical schools to enable its scientists to be full members of such universities, that were honoured with publications.

There was an ongoing debate on scientific impact and productivity, which involved conducting high class research, PhD training and so on. The goal was not merely to impact high class journals, but to bring about changes. One instance was that the Orange Farm study in Soweto was published in a lowest impact journal, as it was rejected by a high impact journal. However, it had changed the world in implementing HIV acquisition. This illustrated that it was not compulsory to publish in high impact journals in order to change clinical science.

Mr Volmink asked if the MRC was currently involved in any TB vaccine trials.

Prof Gray replied that the Council was funding the next study on TB, looking at RCD and various combinations of drugs, as well as clinical research into multi-drug resistance in paediatrics, and was involved in TB vaccines. She noted that empirical vaccine designs were not needed, but rather the country needed structural biologists to understand the structure of TB or other organisms.

Mr Buick added that the economic support package would continue to experience a downward trend as most of the research projects were long-term, but MRC hoped to see the economic support package being converted into core funding in order to make investments.

Ms L James (DA) asked for the role of the Council in promoting oral health, which was not mentioned as a priority in the presentation, especially in terms of prevention for children.

Prof Gray agreed that oral health had to be addressed as an issue impacting the quality of lives of South Africans, and would be taken as an issue of morbidity as the Council slowly cleared off the burden of diseases killing South Africans.

Ms M Scheepers (ANC) asked for the Council’s provincial targets, aimed at addressing indicators as reflected in its Annual Performance Plan.

Prof Gray replied that the MRC’s job was to make sure that its indicators were represented in all the provinces, as it funded research in all the provinces. The indicators were measured by scientific outputs. Community engagement was critical, as interventions could never be rolled out if the community did not work closely with the scientists. A sound theoretical framework on how to work with the communities was also important - for instance having community members on the Council’s Ethics Committee, community members giving input on the protocol and how studies were designed, and community engagement programs, where participants could be educated, through engaging with stakeholders, preparing communities and mobilising them to understand the issues, and deliver on the interventions.  It was of course also critical to get feedback at that level.

Ms Sarah Bok, Executive Manager, MRC, added that during the crafting of the Annual Performance Plan (APP), the MRC ensured that there was full alignment of provincial targets, Millennium Development Goals (MDGs) and the strategic plans of allied departments.

The Chairperson asked for a breakdown on gender, class, and race of the workforce, as a measure of transformation in the Council. She also requested a breakdown of funding in the APP.

Prof Gray confirmed that in the future, the MRC would give more information to the Committee on the APP funding and expenditure, and Mr Buick confirmed that this would be provided to the Committee at the next presentation.  

Ms Ramahlape gave the demographic breakdown of the MRC as 72% female,28% male, 41% Africans, 22% colored, 20% Indian, and 16% White. This showed quite a significant percentage of black people within the institution, although she agreed that transformation was needed at the senior level. The level immediately below the senior level had a good enough and balanced pool to fill the senior level vacancies, so she believed that overall it was a transformed institution.

Prof Mike Sathekge, Chairman, MRC Board commented that MRC was a reputable institution globally and its revitalisation had taken most its work to the clinics and hospitals. Its extramural units would address the disease of the people and improve access to quality health care. He added that transformation was not limited to the human capital only, but must also be linked to excellence. The MRC addressed the historically disadvantaged institutions by building people who had previously had less opportunities, to become the scholars of the future. He added that the Council was looking at the predictions of TB recurrence, and in terms of R&D it was 1,5%.

Mr A Mahlalela(ANC) requested clarification on the discrepancy in the budget figures, pointing out that the APP gave a figure of R808 million, whereas the presentation noted the same item’s figure as R828 million. He noted that all reports to parliament must accurately reflect the budget.

Mr Buick replied that the figures for 2011/12 and 2012/13 in the presentation agreed with the number in the APP of R580 million and R576 million respectively. However, in that, the 2013/14 figure was estimated. In the interests of transparency the Council had to include the numbers as audited in the presentation, and the projected outcome for 2015/16 as a result of the leverage funding anticipated. The estimated APP income as mentioned in the presentation had increased slightly.

Mr Mahlalela made the point that South African demographical surveys were an important tool that provided valuable information and were used by the World Health Organisation (WHO) for comparative analysis and could assist government in planning. It was therefore of concern to him to note that the MRC had been unable to proceed with the demographical survey because of funding challenges. He asked what implications this would carry, the implications of closing down the task, and how the Committee might be able to assist.

Prof Gray regretted that the demographic survey was delayed, but explained that it had initially been designed to monitor female fertility, female mortality and child mortality. The MRC subsequently took a decision to expand it to include also other burden of diseases, like obesity, diabetes, hypertension, and others. The MRC therefore had to look again at the design of the demographic health survey to now address the issue of non communicable diseases in a much more comprehensive way. This required that a much complex model than had ever been executed be introduced. The Council was working with other departments to ensure that the model was well planned and executed, and it was intended to pilot the first health survey in September/October 2014. There had been discussion with DOH on the financial implications of expanding the health survey.

Mr Mahlalela asked about the problems of the parameters for the identification programme, which was important for the negotiated service delivery agreement. It was directly supporting the strategic goals of the Department of Health, in reengineering of primary health care, and ensuring that clinical studies would be carried out in various districts in order to meet the challenges of implementing the National Health Insurance (NHI), which was currently facing financial constraints.

Prof Gray agreed that the country’s primary health care clinics had to be reengineered, to understand the health system, and had to be strengthened to meet the challenges of a National Health Insurance system. The primary healthcare clinics and hospitals had to be ready for such a system. The MRC had a health system research unit, and this was working with DOH, on issues such as PMTC evaluation, to assess what factors in the health system could make one child more susceptible to HIV than another. She stressed the need for good research on health systems. The MRC was also working to address human resource issues and challenges facing the primary health care area. The Council was also working with the DOH to gain a better understanding of the demographics and the burden of diseases in the Eastern Cape.

Mr Mahlalela asked for further clarification required on the schools abroad that were involved in student funding support.

Prof Gray said that some scientists went to world-class primate research facilities in Africa. One PhD student was sent abroad to learn from the best practices of managing a non-human primate facility and new techniques. The Council had a bioinformatics programme in South Africa that was still in its infancy, and was developing it, so some students were sent to Harvard and Alabama to look at their whole approach to bioinformatics. Some others were sent to vaccine research centres, to learn methodology in the laboratory, and other universities like Columbia University, Seattle to learn specific techniques that were useful in the laboratory to conduct research. Most of the students studying abroad were black scientists.

Dr P Maesela commented that a disease could not be properly cured if not properly diagnosed, and repeated that prevention was better than cure, which led to his point that the MRC’s focus should be on prevention of diseases, and the social drivers behind diseases .He asked whether statistics reporting that mortality rates from a certain disease had fallen indicated whether this was due to a curative, preventive or social mobility measures. He added that if the MRC were to work more closely with the Department of Human Settlement or provincial housing departments, this might help to control pneumococcal infection, streptococcal infections and cardiac disease. He added that the National Schools Nutrition Programme (NSNP) that had been neglected should be crafted into the Council’s programme in order to inform the type of nutrition to be given to children in schools, to boost their immune systems to combat diseases. Finally it was vital to ensure that children were not exposed to agents that caused asthma. He expressed concern over lead poisoning in children.

Prof Gray replied that prevention could take the form of vaccines, or understanding the causes of, for instance, obesity. Many babies died of Group B strep pneumonia, and because there was currently no vaccine for this, the MRC was working closely with Biovac in order to speed up the production of this group B vaccine, which should be able to be manufactured in South Africa. Many social factors, including overcrowding, did cause the spread of disease and had to be addressed. However, unless the determinants of diseases were addressed, some of the interventions would be hard to roll out.

She commented that the MRC’s “Saving Brain” initiative dealt with early brain nutrition, and MRC would announce a partnership involved in TB interventions and saving brain nutrition. Lead poisoning in children was still found, despite all the work done by the MRC. The MRC had actively to go into certain pockets of the communities, especially the fishing communities where lead sinkers were used. Gunshots also emitted lead, and a relationship between lead level and violence in our society had to be investigated. She added that certain agents and pollution impacted on asthma and the Council would work on them. She agreed that there was a need to modernise and use good devices.

Mr N Matiase (EFF) noted that MRC’s vision was to build a healthy nation through research and innovation. He asked for examples of unique innovations the Council had produced.

Prof Gray responded that the MRC  innovations included a Doppler that had the potential of averting neonatal death, an HIV resistant diagnostic evaluation system so that a nurse could understand the HIV resistant pattern of a patient without having to call a doctor, and two vaccines on HIV designed through South African knowledge.

Mr Matiase asked when the MRC would adopt a paradigm shift of advising government to move from disease management into tackling causative effects of diseases and illnesses. He asked how the MRC dealt with the causative effects of diseases. He also called for an explanation on innovative plans for the advancement of the African agenda, and collaborative platforms with SADC and other African countries.

Mr Matiase asked at what point the country might invest in alternative medicines over Western medicine, and whether this could be done rather than investing so much on vaccines.

Prof Gray commented that MRC would continue to invest in indigenous knowledge systems and support universities involved in indigenous knowledge systems. MRC had cataloged about 120 plants in the Eastern Cape, ranging from plants that could prevent gangrene to nutritional issues, and MRC was aware that modern medicine was not the only area to invest in. There was a need to understand the mechanisms of alternative medicine.

Mr Matiase asked whether MRC, as a research institution, had conducted studies on the role of Genetically Modified Organisms (GMOs) and the impact of GMO and chemicals on maize, soya and other agricultural products responsible for obesity and illnesses.

Prof Gray replied that the Agricultural Research Council (ARC) was involved in research into some of the agrochemicals in maize that could lead to obesity, and MRC could engage with that Council but did not want to duplicate its mandate. The ARC would assess developments in the GMO space.

Mr Matiase asked if the MRC had any tools to assess or judge all the 100 HPV vaccines, to be able to know which could be prescribed to the people of South Africa, and at what price. He asked if the HPV vaccine administration had been shown to have other serious side effects, like infertility.

Prof Gray replied that there were many stereotypes of the Human Papilloma virus, of which some caused cervical cancer. Currently, there were only two HPV vaccines in the market, by GSK and Maersk. GSK had designed HPV vaccines to work against two stereotypes of HPV, whilst Maersk had designed a vaccine to work against six stereotypes, and another would be designed to work against nine stereotypes of HPV. She wished South Africa was manufacturing HPV vaccines, as, although they were expensive, having the vaccine was important. She added that before a vaccine was used on humans, extensive preclinical testing would have to be done, both into the vaccines and reproductive toxicity. The HPV vaccine was also to be evaluated on older people before it was allowed in younger people.

Dr W James asked how to gear MRC research into tackling TB vaccine development. He asked what quantum would be required into the high science dilemmas of TB vaccine.

Prof Gray agreed that not only should the Council be publishing in high impact journal, but research done should have value for South Africans. Spending in health research and development created wealth and health and such research funding was valuable to governments. She noted that the TB vaccine development required brains, good laboratories and an innovative approach. In South Africa, and globally, there had not been enough investment in TB because TB was no longer such a problem in the developed world, and there were not TB vaccines. In South Africa, where it remained a problem, there was a need for more than R1 billion investment to make a substantial TB vaccine agenda.

Mr Volmink asked about the social determinants of health, saying that the WHO Commission had clear recommendations and explanations on the translation of research into policy and practice.

Prof Gray commented that the social cause and determinants of TB required new brains like bioengineers, and laboratory scientists to bring in new ideas on the social determinants of diseases. Effective communication was needed to enable translation of interventions into policy and practice. It was also important to talk about cost effectiveness, savings, affordability and quality of life issue.

Prof Sathekge commented that the MRC also collaborated with Human Sciences Research Council (HSRC), whose mandate was primarily to deal with social determinants of diseases.

The Chairperson commented that the human resource breakdown given laid emphasis on the academic scientists. However, she had also wanted a breakdown and list of challenges across the whole labour force.  She thus requested a comprehensive breakdown of gender and class within the Council.

Prof Gray noted that the male semi skilled workforce included 18 African, 7 coloured, 2 Indian, and zero whites while the female semi skilled workforce included 47 African, 9 colored, 10 Indian and 6 whites. She promised that, in future, the full workforce distribution would be displayed, showing the scientists and other workforce members across the whole MRC, to demonstrate how the Council dealt with diversity, gender and class.

Ms Ramahlape commented that the Council had two workforce streams - researchers and the support team. She said the scientists made up 78% of the workforce, while 22% were in the support (semi skilled) team. There was a good programme of accelerated development and study support applicable to all employees, as the MRC was strong on developing capacity across both scientists and support staff.

The Chairperson noted that when mention was made of collaboration with DST, it addressed the funding and she asked if there were not overlaps in innovation and research with DST. She observed that there was also nothing mentioned on grants. She suggested that any further questions from Members should be addressed to the MRC in writing, through the Office of the Chairperson.

Prof Gray commented that the Council worked closely with DOH and DST, and these departments oversaw how funds would be discretely allocated so that there was no overlap. She said that the explanations on this could be improved in future.

Ms Ramahlape commented that the process of developing strategic plans was informed by certain reviews that were not linked to grants. MRC went through this process every three to five years, depending on the need at the time to look at how the institution was performing and areas needed for improvement.

Mr Mahlalela did not understand the explanation given earlier on the budget figures. He asked which figure would be amended; the Committee needed to adopt the budget.

Prof Sathekge apologised for the figures that did not tally and explained that this was due to the manner in which MRC had been instructed to present them.

Ms Trish Hanekom, Audit Committee Chairperson, MRC, amplied that this was a question of timing. The MRC was required to comply with the time limits set out in the Public Finance Management Act, but at the time that it must hand the Annual Performance Plan and Strategic Plan to the Minister for approval, before submitting these plans to Parliament, the figures were not final, but estimated. The MRC was not asking that the budget be adjusted. The audited outcome (as in the presentation) was the correct figure. MRC had reliable financial statements and could show how both the estimated and audited outcomes were reached. There were no contradictions in the figures.

Mr Mahlalela commented that the MRC’s reason for delaying the demographical survey was stated as “financial constraints”, but that was contradicted by Prof Gray when she noted that the survey model had been expanded. He needed clarification to enable the Department to intervene. The same applied to the identification programme, where although the presentation noted that there were funding challenges, this was not borne out by Prof Gray’s explanation.

Mr Anban Pillay, Deputy Director General, Department of Health, explained that the National Treasury allocated funding for the demographic health survey directly to the Department of Health instead of the MRC. At the time when the demographic health survey was first scheduled to be done, the funding allocated was insufficient for MRC to conduct the survey, so it had been impossible for it to attend to this in time. Subsequently, the DOH asked the HSRC to do a lower level survey. DOH then convinced National Treasury that it would be good to know, from a fuller demographic health survey, exactly what was happening to the population. It hoped that National Treasury would be convinced by the need for the full survey and would continue to fund the survey independently.

Prof Gray commented that the Council had funding allocated to NHI and support. It was working closely with DOH to assess the best programme to meaningfully support NHI in the health insurance programme.

Dr Maesela commented that the transformation figures did not tally. The MRC explained that the support groups were trained up to PhD level, but the documentation stated that the Council was no longer doing apprenticeships. With nine European PhD students and three blacks, three colored and three Indians, it would take years for others to catch up. Transformation was a government imperative and had to be achieved.

Prof Gray commented that the Council reviewed the capacity development in PhD programmes and found it faulty, so had to streamline a process whereby more programmes would be directed towards PhDs. MRC was working with the National Research Foundation and universities to ensure that every PhD programme it funded was successful. MRC was committed to transformation.

The Chairperson thanked MRC for the presentation and explanations. The Committee would revert to the MRC on any explanations that needed to be further amplified, and hoped for a rapid response on these from the MRC.

Council for Medical Schemes (CMS) briefing
The Chairperson welcomed the representatives of the Council for Medical Schemes (CMS) and commented that the Department of Health must play a role in addressing all challenges in the health sector and implementing programmes to address the burden of diseases in the country .

Mr Trevor Bailey, Deputy Chairperson, CMS, briefed the Committee firstly on the media reports published around the suspension of the Registrar of the Council for Medical Schemes, Dr Monwabisi Gantsho. Allegations under oath were made against that person in relation to MedShield, so the Minister of Health was obliged to investigate those allegations. The CMS formed a task team, made up of members of the Council, representatives of the Minister’s Office and members of the largest law firm in Africa, which then conducted an investigation. The Registrar had been put on leave, while the Minister considered whether or not a suspension was warranted. Following the necessary legal procedures, Mr Daniel Lehutjo, Chief Financial Officer of CMS, as the Acting Registrar and Acting Chairperson of CMS. Investigations was under way, the CMS hoped that these would be finalised shortly and awaited the report. He stressed the need to follow a free, full and impartial investigation that complied with due process in every respect.

Mr Daniel Lehutjo, Acting Chairperson, CMS, briefed the Committee on the legislative mandate under which CMS operated. CMS was established in terms of the Medical Schemes Act No 131 of 1998, and section 7 of that Act defined its role, which was the protection of members, coordination and control functions over medical schemes. It would make recommendation to the Minister on relevant matters. It would also investigate complaints, approve the rules of the medical schemes and advise the Minister on matters pertaining to the functioning of the medical aid schemes.

CMS had four strategic goals. The first included ensuring access to good quality medical schemes, ensuring that cover was maximised. Secondly, CMS must ensure good governance of medical schemes and in this regard he explained that this meant that CMS was responsive to the environment and beneficiaries were informed and protected. Its internal processes must also be responsive to the needs of environment, so that CMS must be an efficient and effective organisation, through regulating its financial, HR and IT systems properly. Lastly, in compliance with its role of providing advice to the Minister, it must undertake strategic reviews from time to time. CMS was fully aware of the health reform process that were being undertaken by DOH and the NHI in particular.

Dr Anton de Villiers, Head: Research and Monitoring, CMS, elaborated on the strategic goal to promote access to good quality medical schemes. He said that CMS ensured that access by relying on it founding legislation. The CMS had an “open enrolment” or “social security” principle, which ensured that any applicant may join a medical scheme of his/her choice, in terms of section 29 of the Act, and the Act further provided that no scheme may discriminate against any member on any ground - for instance age, gender or health status. A waiting period prescribed was intended to prevent beneficiaries from “hopping” from one scheme to another. In this regard, however, he noted that recent challenges included the transfer of Transmed members to the Open Scheme, and refusal of some schemes to enroll members due to non-disclosure.

He further noted that “community writing” meant that members were expected to pay the same contribution amount, and must not be discriminated in a benefit option. He explained that the “Prescribed Minimum Benefit” (PMB) was a set of defined benefits that must be funded in full by the scheme. PMB costs were managed by using Designated Service Providers (DSP), Managed Care, and Protocols. There had recently been some challenge with ensuring the full PMB payment, which were aired in the case of Board of Healthcare Founders (BHF) v Council and Registrar for Medical Schemes.

The objective of PMBs was to maximize the health care being paid to members, rather than spending so much on administrative costs.

He explained that medical schemes were intended to be non-profit making, although administrative companies could make a profit. If medical schemes were not protected, the public healthcare system would be flooded with patients who usually made use of the private healthcare system, hence the need for a strong regulatory framework to protect the public healthcare system as well, and to promote financial soundness and good governance in schemes.

He noted that the estimated cost of PMBs per month, in 2013, was R508,20 per beneficiary while the actual cost was R512,00 per beneficiary. PMB made up 53% of all the risk benefits being paid out while non-PMBs made up 47%.

Dr de Villiers then outlined some of the principles adopted to manage the financial risk. Schemes could contract Designated Service Providers (DSP), and for any member who chose to use a service provider outside the DSP list, the scheme may impose a co-payment. The Managed Care Principle was also important, and, along similar lines, if a beneficiary declined to use a clinically prescribed drug by DSP, the scheme may impose a co-payment for the alternative drug.

The value principle for managed care was that value was defined by quality versus cost, meaning that value aimed for higher quality, at lower cost. CMS would have to define the service indicators, such as what the service provider was expected to do, the outcomes (for instance, the medical care providers must measure CD4 count and diagnosis half-yearly), and the basic requirements for collection of minimum data, otherwise it would be difficult to diagnose the value of the programme. The bulk of the money was being paid to hospitals and medical specialists. The focus of all schemes should thus be to keep the patient out of hospital.

Dr de Villiers noted that in 2010, the CMS had made a submission to the DOH on the need to review the PMBs. In April 2014, it received the feedback from DOH. There was now a need to look at the PMB package and revise it, particularly the preventive and primary health component, and expand the PMB package on those areas. The cost of expansion of the package had to be considered. CMS is now working with DOH on the revision of the PMB package.

Speaking to the affordability of healthcare, Dr de Villiers noted that PMB was not designed to operate in an environment without price regulation. There should be a price regulatory mechanism in the medical scheme industry, as larger proportions of health benefits were paid towards PMBs because the schemes must pay PMBs in full. This was not a fair situation.

The cover product principle was introduced because of the affordability of health care. 18% of the amount charged by providers were paid out of the pocket of beneficiaries. Affordability had been the greatest obstacle to the growth of the health industry. At the moment, the difference in risk profiles in the medical schemes, as reflected in the presentation, resulted in less efficiency and less effectiveness of the PMBs.

Ms Tebogo Maziya, Head: Financial Supervision, CMS briefed the Committee on the trends in performance of medical schemes. She informed the Committee that the annual report data were for 2012, and were thus outdated, but the latest Annual Report for 2013 was yet to be finalised.

The figures showed that there was a decline in trends, in both open and restricted schemes, over time, which was indicative of the consolidation occurring in the market, especially the small and restricted schemes. Consolidation was a positive, as there were currently too many schemes when compared to the  number of lives covered. The average age of schemes showed an increase for the Government Employees Medical Scheme (GEMS) and restrictive schemes.

She explained the total monies spent by schemes (extremely saving/risk pool), saying that for every health care rand spent, 87.7% was going to pay for the benefit, whilst 11.4% was going to non-healthcare expenditure.

Of the total health care expenditure, hospitals, medicines and specialists accounted for 25%.  The cost per beneficiary and per annum had increased by more than 80% over the years. Trends in private hospitals had been upward over time. In the non-healthcare expenditure, there had been, in earlier years, a double-digit increase, but over the last few years this kind of expenditure had stabilised.

Ms Maziya spoke to the issue of solvency in the medical scheme industry. All medical schemes were required, by law, to show 25% growth in their annual income. There was a general upward trend in the earlier years, but overall, the industry had remained solvent. There were some schemes which were troubled, and CMS would continue to engage with them on a regular basis.

Mr Craig Burton-Durham, Head: Legal Services, CMS,  briefed the Committee on the governance aspects of medical schemes and structure of medical schemes. CMS’s own governance structure comprised a non-executive board, who would oversee the activities of the Council and interface with the Ministry of Health.

Section 57 of the Medical Schemes Act provided for the governance structure for medical schemes, and each must have a Board of Trustees, which could be elected or nominated, but the members of that Board must be fit and proper. The trustees had to appoint a principal officer, who was also required to be a fit and proper person. Medical schemes could use third party service providers, or in-house administration, and some were using third-party administration.

The Board of Trustees played a central role in carrying out the responsibilities over the schemes who were members of CMS. Should there be a failure of governance in a scheme, then the Registrar of CMS would be required to take remedial action. It must investigate the problem in the scheme that was failing, and recommend removal of an erring trustee member, or the Registrar could also appoint a curator to take control of the scheme. The Board of Trustees would step aside for the duration of the curatorship.

Aside from actual failure, it might be of concern that a strong administrator could influence the affairs of certain medical schemes, or trustees might be prevailed upon not to carry out the duties required in terms of regulation, which could lead to the need for curatorship. It might also happen that the relationship between the Board of Trustees and third party administrators was not cordial. There might be a lack of expertise and skills on the Board of Trustees, or the Board or individuals may fail to comply with the fit and proper standards as set out in the legislation.

Summarising again that the Registrar may need to have curators appointed, Mr Burton-Durham noted that this had happened in relation to MedShield and Hosmed, which had been placed under curatorship after a long battle to ensure their compliance with the legislation.

The Council also made use of alternative dispute resolution (ADR) processes, to resolve disputes that could not be resolved by the parties who were directly involved, and this applied not only at the regulatory level but also at the level of commercial litigation. CMS had implemented a pro bono legal process, offering free legal services for members who could not afford to follow the full legal process themselves. However, the ADR mechanism prevented undue costs and delays, relieves congestion of cases in court, and mitigated any negative effects on relationships.

There were amendments to the legislation being proposed, that would improve information management, allow for intervention in NHI, incorporate code numbering systems, deal with matters around membership, the complaints procedure, and appeal processes.

Mr Lehutjo briefed the Committee on the infrastructure of CMS, which was intended to ensure that it be an effective and responsive organisation. He noted that proper IT infrastructure was a necessity but regrettably the current IT systems were outdated, and there would be a need for CMS to receive more funding dedicated to acquiring the necessary IT tools that would allow it to be a fully efficient and effective regulator. Employees were the most valued resource in CMS and HR management was regarded as a vital process. In terms of its financial management, CMS was governed by the Public Finance Management Act (PFMA) and was establishing a supply chain management unit. It had strong internal control systems. CMS had been receiving unqualified audits for some years. It needed more office accommodation, but was limited by its budget. .

Expanding upon the need for amending legislation, Mr Lehutjo added that in addition to the amendments outlined earlier, there would be a need to amend the PMB regulations. CMS was intending to contribute to the NHI functioning.

Mr Kariem Hoosain, Council Member, CMS, briefed the Committee on the budget for 2014/15. He reiterated that for many years, CMS had received an unqualified audit opinion and no impropriety was found in relation to the financial management of CMS.

Mr Lehutjo said that the budget considerations had included a 6.9% increase to the salaries of employees, before the CMS had reduced this to a 6% increase. CMS had moved into a new building and was trying to use in-house venues for conferences, to reduce expenditure. CMS had recently approved three new positions and had appointed an accreditation officer, an investigator and supply chain officer. Its operational budget was about R123 million, which was small in comparison to the annual turnover of the industry, which was R107 billion. The budget determined the levy that CMS would charge to members. Currently this was at R27.80 per member of a scheme, per annum, which represented a 6.95% increase from last year. Between 2009 and 2013, the levy had increased from R13.89 to R27.80 per member. Finally, he gave a breakdown of the budget, saying that 59.57% went to salaries, 38.50% to goods and services, and 1.93% to capital expenditure. CMS was employing about 105 people at the moment.

The Chairperson commented that some of the points mentioned were not in the presentation document.

Mr Mosala observed that the date on which the report was tabled in Parliament had not been updated and the cover page date was incorrect, reading 13 November 2013. He also noted that the CMS Strategic Plan was not aligned to the Department of Health’s strategic plan, and it was not a five year plan. He complained further that the Minister’s Foreword on the Strategic Plan was a “copy and paste” from the previous strategic plan, and that there was no update despite the recent court ruling, and he wondered if this implied that there had actually been no progress. He also wondered why there was such a lag in giving the trends and statistics. Equally, the explanatory notes that were included for the figures were an “exact copy and paste from last year’s report”. The Research and Monitoring aspects of the Annual Performance Plan were unchanged from the last financial year.  He asked if it was even worthwhile for the Committee to continue discussing this report. He wanted a properly updated report.

The Chairperson requested clarity on why the data of 2012 had been presented to the Committee, and why more recent data was still apparently being prepared.

Ms Maziya responded that the Medical Schemes Act required the various schemes to submit their audited financial statements four months after the financial year-end, which meant that for those with a financial year-end of December 2013, reports were received only in April 2014. That data still had to be analysed and processed before it could be incorporated into an annual report. The statutory requirement for submission of the CMS Annual Report was that it must be submitted in August. CMS was thus on track but the 2013 data was not yet in the public domain, not having been processed yet, and this was merely a timing issue. The CMS had just done its own first quarter report of 2014.

Mr Lehutjo added that the CMS Strategic Plan for the financial year 2014/15 was developed in 2013, which was the reason for the date of 13 November 2013 appearing on the Plan, that being the date on which it was submitted to the Executive Board for approval. The Council had originally been due to present this plan to Parliament on 12 March 2014, but because of the election timing was unable to do so. It was only now – four months into the new 2014/15 financial year – that the plan could be presented. He clarified that this was a five-year plan, from 2010 to 2015, and the new five year plan, covering the period  2015-2019 was being developed. The Strategic Plan for CMS coincided with the government’s terms of administration. CMS was aligned with the 10-point plan of government, and that would be updated in the new Strategic Plan.

The Chairperson commented that the Council had not been fair to the Committee as it should have informed the Committee, before making this presentation, about the outdated data.

Dr Maesela commented that if the current data was yet to be printed and the strategic plans were yet to be aligned with government’s new Strategic Plan he wondered why the Committee was even dealing with the outdated information. He thought this was a waste of time.

The Chairperson again commented that it was unfair to the Committee to be left in the dark. Clarification was required on the outdated data.

Mr Lehutjo again apologised if anything in the presenters’ body language had been taken amiss. He reiterated that the documents were not outdated, and the Annual Report of CMS was to be published 5 months after a financial year end. The CMS financial year did not match the calendar year. The documents presented now, for the 2014/15 financial year, were developed in 2013. The next cycle of strategic planning had just started, for plans that would be presented in March 2015.

Dr Maesela commented that Members had to extract their questions from the documents presented and had to do oversight on what was contained in the document. The Committee was constrained today by the information in the document and would appreciate getting current documents aligned with the plans of the DOH.

Mr Pillay commented that in general, strategic plan documents were supposed to be discussed in March of each year. The CMS was already developing its document for 2015. However, in this year it was impossible to hold hearings on the strategic plan in March. He confirmed that indeed the CMS’s plan was aligned with the DOH plans. CMS had presented this document in March to the DOH. That Department then changed some plans, which meant that further alignment was needed.

Mr Hoosain added that there had been gaps in the expectations and timing, and he apologized for the gap. He said the CMS had to present this document now, although it should have been presented much earlier in the year, and the presentation today clashed with the CMS already preparing for the next cycle of strategic plans. He admitted that CMS’s plan was no longer fully relevant if not fully aligned with the new strategies of DOH, and where this was the case, CMS would now have to go back and update all its documents, to ensure that they were properly aligned with the new strategy. It may be necessary for the CMS to meet earlier with the Committee than March 2015, to do an update.

Mr I Mosala said that the latest input had set matters in perspective, and suggested that the Committee proceed.

Dr James commented that the present patterns on life expectancy showed that South Africa had managed to extend life expectancy of South Africans by five years since 2004, as a result of getting HIV/AIDS under control. This trend should continue into the future. This would result in a decline in revenue for the medical schemes, which would only be met by increasing the rates charged or out of pocket payments. He noted that the country was in the midst of a transition from high mortality and high fertility to low mortality, and that would result in an increase in the funding gap. He asked how the CMS would address this point.

Dr de Villiers replied that the CMS was aware of the challenges. Affordability was a real issue. There was an upwards trend of all the conditions of prevalence in the medical schemes, as well as with HIV predictions.  CMS would look at the price regulations, the regulatory framework and the life expectancy plus age, which could also put more pressure on affordability issues. There was need to work together with DOH to find ways to make health care more affordable. The prevalence rate in the medical schemes was much lower than was found in the  public healthcare system, for HIV was sitting at around 3% in medical scheme members. CMS, together with the DOH, needed to look at preventative care in the primary healthcare sector.

Mr Volmink noted that when a service provider prescribed a drug outside the managed care model, there may incur a co-payment. However, it would be unfair if the beneficiary had to pick up the co-payment, given that this decision was being made by the healthcare provider. He asked if there was not a way of adjusting the model so that the beneficiary was not penalized, because of potentially improved care of the patient.

Dr de Villiers replied that the scheme may impose a co-payment under some conditions. If members obtained services from a designated service provider (DSP) then there would be no co-payment, but if they did so from a non-designated service provider, there would be a co-payment. If this was purely involuntary, then no co-payment would be sought.

Mr Volmink commented on the Council’s goal of advising the Minister on NHI, and its concerns about the technical capacity required to implement the model asking if it would be technically cost-effective and whether its administration would not be difficult; he wondered if it was practical to include the NHI model from the onset.

Dr de Villiers commented that risk adjustment should be considered in the implementation of NHI, as there could be unfair competition in the NHI environment. The risk profile may be different, depending on the variables used, and CMS would be willing to help with risk adjustment on NHI.

Mr Volmink noted that the CMS used ICD and other internally based diagnostic related groups (DIG) codifications for payment, and asked what it took to use such codifications for payment.

Mr Pillay commented that co-payment was a problem in the health industry. Co-payment for medicine applied when a person presented a drug prescription to a pharmacy. If there was an alternative available, the pharmacist had a legal obligation to offer that generic, and indicate that the generic was covered by the medical scheme. Unfortunately, due to the complexity of the matter and patient abuse, the pharmacists would generally prefer to sell more expensive drugs, perhaps claiming that the generics were out of stock, and this would oblige the person to pay a co-payment. The providers at higher level (being specialists or hospitals) were designated, according to what the medical schemes negotiated with them. Co-payment for procedures applied when a patient went to a provider outside the group, and here the patient would be forced to pay the difference if the provider charged more. The amendments to the Act should address these issues.

Mr Pillay added that there was some challenge in bringing the amendment to the Committee, as a parallel process was ongoing with the Department of Economic Development, where there was a Commission of Inquiry into pricing in the private health sector. It was anticipated that the Commission would make findings and recommendations that the Department and Regulator would have to take on board. A number of other challenges like governance and so on were currently playing out also in the industry.

Mr Mosala noted that CMS had referred to the fact that sometimes there may be lack of expertise and skills of some members of the Boards of Trustees, which it was hoped could be addressed by amendments to the Act. However, he asked what would be done to address the lack of skills in the meantime and if it implied that the lack of skills would simply persist until there was an amendment, no matter how long this might take.

Mr Burton-Durham replied that the Medical Schemes Act made provision, in section 57(4), for lack of expertise and skills of the Board of Trustees, as it stipulated that the Trustees were obliged to ensure they outsourced the expertise from outside, if it was lacking internally. The amendment was needed to strengthen the capacity of the board itself in cases where the trustees might fail to act as required.

The Chairperson said that the presentation document was not user-friendly and was confusing.

Mr Mosala asked for clarification on the budget variances between the last financial year’s allocation to goods and services of R41,4 million and the amount of R8,3 million allocated for 2014/15, asking if the figures were correct.

Mr Lehutjo replied that the CMS was seriously challenged in terms of decision making and hence had needed to acquire the legal services of highly skilled advocates, at high fees.

Mr Burton-Durham added that the Council had found, upon inspection of certain medical schemes, that some had legal budgets set aside for pursuing specific cases, while others had low legal budgets because they did not anticipate any disputes with the Regulator. The Council’s own legal budget may look high, but in fact was relatively low when considered against the roles and functions that the Regulator was required to perform, particularly to ensure that medical schemes complied. There was an active compliance and investigation unit, and many of these cases translated into court applications and other activities which incurred fees.

Mr Bailey commented that CMS was very cautious about embarking on litigation and would give careful consideration before doing so. This was a very complex environment. CMS employed diverse skills, ranging from doctors to economists, and it would be true to say that some of the smartest minds were involved in the medical schemes. The Council monitored litigation consistently, and took advice freely. It must be noted that CMS had never lost a court case.

Mr Mosala asked what mechanisms and strategies were in place to reach stakeholders, particularly the rural communities, and asked why so much money was spent under the litigation budget.

Mr Lehutjo replied that there was an education and training sub-unit within the Stakeholder Relations unit, that reached out to the target audience through exhibitions and community radios. Reaching out to rural communities was a challenge, as the modern facilities and communication methods were lacking, and in this case, the CMS relied mainly on community radio stations’ slots to educate the community about the CMS role in the health industry.

The Chairperson commented that she had been asked to pay an extra R6 000 for a medical procedure, and when she questioned her medical aid scheme, she was told they only paid certain amounts. He expressed displeasure and requested clarification on the pricing of the medical scheme. She also requested more information about the roles of brokers in medical aids. She had been asked to pay a huge amount for an anaesthetic procedure. This led her to the conclusion that the medical aid scheme was more about profit making than client service

Ms Maziya replied that brokers were intermediaries who were supposed to recruit new members and also offer ongoing services to existing members. Members’ monthly contributions included a broker fee, and that did create an agency / principal problem, because of the information gap. Potentially, the broker possessed more information than the person whom that broker claimed to represent, so there had been a proposal to change the contract terms so that the relationship between broker and member would be direct, rather than channeled through the medical scheme, to allow the member to be in control of the services s/he obtained and to pay for that directly.

Dr de Villiers sympathised with the Chairperson on the R6 000 extra paid for a medical procedure. He said if the procedure was within the PMB, the medical scheme should have paid in full. If it was non-PMB there would be a co-payment required. He reiterated that the issue of affordability of health care in the health industry had to be looked into.

Mr Volmink appreciated the contribution on risk adjustment capitation, and reiterated the question on the complexity of implementing risk adjustment capitation models in the NHI dispensation, and how the CMS would ensure that there were enough skills to handle that type of shifting and payment. He asked how far the CMS had gone with the collection of outcomes data, in order to have quality care, and said that the ICD code could help.

Mr Pillay replied that the co-payment model (also called fit-for-service model) had its risks. In order to make enough money out of a patient, the doctors had to service the patient to a certain level. The less the doctor did, the lower the charges. In order to remove that risk, it was necessary to move to a capitation model. This was technical, as it involved medical procedures, time and equipment. The Capitation complexity, in preparation for the NHI system in central hospitals, involved identifying 80% of procedures that were done on a regular basis. Those would then be timed (with a stop-watch) and costed, to assess exactly how much time on average it took for a doctor to complete a certain procedure, to look at the equipment used on the procedure, and then calculate the cost. For instance, when carrying out a caesarian section, the cost, time, drugs and equipment would be calculated. The NHI would reimburse the hospital for the procedure, based on this calculation. Over time, this model would be expanded from central to regional and district levels. Capitation was very complex and would take a longer time to do. It tried to encourage doctors to treat the patient well.

Dr de Villiers added that although the outcome collection was very complicated, it had to be started. Processes must be put in place to collect relevant data and a number of tasks must be followed, to help the industry to transform. This would require more resources.

Dr Maesela commented, following on the Chairperson’s question, that if the PMBs were not affordable, then it could not be said that the managed care programme offered value for money. He noted that the CMS intended to revise its PMB packages and schemes around curatorship. He suggested the Council perhaps needed to strengthen its own rules to counter all these issues, and be in a position to defend its position properly against those who acted contrary to the rules.

Mr Hoosain replied that the Council had learnt, from the various legal challenges it was facing, that the schemes and the lawyers they employed came up with different ways of trying to get around what was in the legislation currently. He agreed that CMS would need to write its own rules clearly and precisely to reduce opportunities for challenges. It had been engaging with DOH to get the amendments through, in order to implement the changes to the rules.

Mr Pillay replied that PMBs were affordable, but the PMB legislation stated that when a PMB condition was identified and billed, the medical scheme must pay for that in full. However, because there was no control of what an individual could charge, the PMBs had become unaffordable. For this reason, it was necessary to have a strong regulation system for PMBs.

Dr de Villiers argued that it was perhaps not so much that PMBs were unaffordable, but regulation was a concern on payment in full. He also said it was not the case that managed care was not offering value, but it was necessary to ensure that it was the beneficiaries who were seeing that value, hence the need to maximise the process. Without the managed care principle, private healthcare systems could collapse, for instance if authorisation processes were affected. CMS and DOH had to work together to get the relevant data to manage the process, ensure value for money and improve the system and quality of care.

Mr Lehutjo said that the CMS had tried to clarify its presentation, and would be presenting its Annual Report later in the year. He appreciated the comments on the amendments, which had been in the process for some time.

Mr Bailey thanked the Committee for taking time to read the documents, and for its consideration and questions in this significant meeting. CMS would be willing to attend whenever it was called. In answer to a comment from the Chairperson, he also noted that CMS would try to ensure better gender representivity in its presentation team.

The Chairperson noted that for the moment, the Committee would not make further demands of CMS.
Any entity of DOH knew its duties, but should any not be working, the Committee would be giving instructions. She hoped CMS had noted all areas of concern, and stressed that the Committee was merely being vigilant.

Minute adoption
Members adopted the minutes of 9 July 2014, with no amendments.

Closing remarks
The Chairperson thanked Members for their contributions, and the clear evidence from the interaction with CMS that they had carefully read the documents. She urged Members to communicate with one another on their constituency work on health, irrespective of their differing political and ideological views.

Dr James thanked the Chairperson for her strong leadership, commenting that despite their different political orientation, it must be remembered that all Members must deal with the health issues in the interest of the country in a united fashion, and take care of their constituencies.

The meeting was adjourned. 

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