Council for Medical Schemes (CMS) on Annual Performance Plan & Strategic Plan 2015

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21 April 2015
Chairperson: Ms M Dunjwa (ANC)
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Meeting Summary

The Council for Medical Schemes (CMS) presented its Strategic plan, Annual Performance Plan and Budget. CMS was created in terms of the Medical Schemes Act 131 of 1998. It regulated the private healthcare industry medical schemes, administrators, brokers and managed care providers. It aimed to protect the interests of the beneficiaries at all times and to control and coordinate the functioning of medical schemes in a manner that was complementary with the national health policy. CMS also investigated complaints and settled disputes in relation to the affairs of medical schemes as provided for by the legislation. It aimed to promote a spirit of shared co-operation and responsibility amongst public and private health providers, professionals and other role-players.

Its strategic goals were described, and these included achieving better access to good quality medical scheme cover. It would ensure that medical schemes were properly governed, were responsive to the environment and beneficiaries were informed and protected. It would be responsive to the needs of the environment, and be an effective and efficient organisation. It would provide influential strategic advice and support for the development and implementation of strategic health policy, including support to the National Health Insurance (NHI) development process. It was aiming to strengthen the regulatory mandate, through amendment of the Medical Schemes Act and regulations, and by measuring the quality and outcomes of healthcare in medical aid schemes. It would be making an assessment of the value added by managed care in the medical scheme environment. It would be developing a beneficiary registry and alternative benefit framework, and would be doing evaluations of the current solvency framework. Work would be done to enhance the effectiveness of the Council and improve its visibility and branding. It recognised that the private health care system was complex and policy intervention was required to enhance where the system was doing well, and minimise failures in the market. CMS would continue to have a focus on member protection. It needed to deal with challenges to Prescribed Minimum Benefit (PMB) regulations and open enrolment. The CMS was still battling with the fact that there was no price determination framework, which meant that a larger portion of benefits was going to prescribed minimum benefits. Affordability was considered the greatest obstacle to growth. Good governance in medical schemes was needed, and an assessment of the value proposition of managed care interventions. CMS exercised an oversight function over medical schemes. The budget for 2015/16 was presented and the programmes explained.

Members asked for more detail on the reference price list and asked how CMS was dealing with the void, and whether each medical scheme was self-regulating and how this would be handled in the NHI plans. Members asked about capacity, and questioned why CMS was employing consultants when there were many unemployed graduates who could probably be trained to do the job. Members pointed out that the aims were good but asked how exactly CMS was to drive programmes. The Chairperson asked how communication was handled, pointing out the need to find good ways to communicate in the rural areas also, and asked what strategies and languages were used. Members pointed out that there was a large structure to deal with complaints, asked about the successes and challenges, and the nature of the complaints and asked how non-health benefits were monitored. Members asked for reports on visits to other provinces, and on the transformation strategy, and also requested a copy of the NHI report.

They asked how medical schemes would deal with the issue of insolvency, in terms of compensation, and wanted more details on cases dealt with, and the turnaround strategy for resolving most of the challenges and complaints. They asked what the CMS had done to prioritise transformation and commented in particular that it must think about those above the cut-off age of  27 years or older who were still dependent on their parents’ medical schemes. Members wanted to put it on record that the CMS needed to prioritise internship programmes that would attract skilled graduates, especially those coming from the previously disadvantaged background.  

Meeting report

Council for Medical Scheme (CMS) Annual Performance Plan 2015 and Strategic Plan
Mr Daniel Lehutjo, Chief Financial Officer, but also Acting Chief Executive Officer and Registrar, Council for Medical Schemes, noted that the Council (also referred to as CMS) was created in terms of the Medical Schemes Act 131 of 1998.It regulated the private healthcare industry medical schemes, administrators, brokers and managed care providers.

Some CMS legislative mandates were highlighted as follows:

- To protect the interests of the beneficiaries at all times
- To control and coordinate the functioning of medical schemes in a manner that was complementary with the national health policy
- To make recommendations to the Minister on criteria for the measurement of quality and outcomes of the relevant health services provided for by medical schemes, and such other services as the Council may from time to time determine
- To investigate complaints and settle disputes in relation to the affairs of medical schemes as provided for by the legislation

Its other mandates included promotion of a spirit of shared co-operation and responsibility amongst public and private health providers, professionals and other role-players.

Mr Lehutjo set out nine priority areas (see attached presentation for full details), with several referring to required interventions to achieve a more effective health system in line with the National Department of Health (NDoH) strategic goals for 2014 -2019.

He outlined the five main goals of CMS, which were to ensure that:
- Goal 1: access to good quality medical scheme cover is maximized
- Goal 2: medical schemes were properly governed, were responsive to the environment and beneficiaries were informed and protected
- Goal 3: CMS was responsive to the needs of the environment by being an effective and efficient organisation
- Goal 4: CMS provides influential strategic advice and support for the development and implementation of strategic health policy, including support to the National Health Insurance (NHI) development process.

He then set out the strategic focus areas for the next five years. The points included:

- CMS intended to strengthen its regulatory mandate, through amendment of the Medical Schemes Act and regulations, and by measuring the quality and outcomes of healthcare in medical aid schemes.
- It would be making an assessment of the value added by managed care in the medical scheme environment
- It would be developing a beneficiary registry to facilitate the collection of data
- CMS would also be developing an alternative benefit framework
- It would do  an evaluation of the adequacy of the current solvency framework
- It would be enhancing the effectiveness of the Council and its Committees, improving the visibility and reach of CMS brand
- Development of information technology(IT) information systems and knowledge management would be attended to, in order to improve efficiencies in the organization
- CMS aimed for continuous improvement as employer of choice
- It aimed to ensure adequate and sustainable funding of the operations of CMS.

Ms Tebogo Maziya, General Manager: Financial Supervision, CMS, gave an overview of the CMS strategic plan. The Strategic plan 2015 to 2020 was developed taking into account the vision of the National Department of Health as the Executive Authority. Management held a workshop to identify key strategic matters, and a consultation was also held with Council. A strategic planning session was held, together with Council and Management, on 21 and 22 August 2014 and 29 October 2014 which culminated in the strategic plan. The first draft was submitted to Executive Authority 30 November 2014 with proposed levy, and the final draft was submitted in January 2015, and was based on National Treasury template.

Describing the situational analysis, she noted that the private health care system was complex and policy intervention was required to enhance where the system was doing well, and minimise failures in the market. The CMS would continue to have a focus on member protection. The CMS needed to deal with challenges to Prescribed Minimum Benefit (PMB) regulations. Open enrolment was a challenge.

In terms of cost, she noted that in the absence of a health price determination framework, an increasingly larger portion of benefits was going towards PMBs. The Medical GAP cover was driving up professional fees.

Speaking to income, she noted that a tax credit system was  in place.

The problem of affordability of medical schemes was considered to be the greatest obstacle to growth in the industry. Governance in medical schemes was needed, and an assessment of the value proposition of managed care interventions.

She then presented the trend analysis of performance of Medical Schemes and CMS Financial years. She explained that the financial year of medical schemes ran from 01 January to 31 December and the medical schemes were required to submit their audited financial statements four months after year end, by 30 April of each year. The CMS year end was 31 March of every year, as CMS was a Schedule 3A entity under the Public Finance Management Act (PFMA).

CMS exercised an oversight function over medical schemes, and the latest audited financial information available was 2013, as there was always a one-year time lag. For that year, in the regulated industry, the gross contributions were R130bn; gross claims were R113bn, and net assets of CMS were thus R43bn.

Mr Daniel Lehutjo returned to brief the Committee on the programmes of CMS. He set out strategic objectives for each of the sub-programmes (see attached presentation for full details).

Programme 1: Administration, covered sub-programmes for the offices of the CEO and Registrar, Office of the CFO, and ICT and Knowledge and Records management. It also covered the Human Resources (HR) management unit.

Programme 2 related to the Strategy Office, and dealt thus with the prescribed minimum benefit and provided clinical opinions.

Programme 3 comprised the Accreditation Unit. Brokers would be accredited based on their fitness and propriety and CMS ensured that they were compliant with the requirements for accreditation. Managed Care Organisations (MCOs) would also be evaluated and accredited for compliance with accreditation standards. Administrators and self-administered schemes were evaluated and accredited for compliance with accreditation standards.

Programme 4: Research and Monitoring Unit, monitored compliance to Regulation 5(e). It ensured that the practice code number of a treating provider was provided for on the billing statement to medical schemes for services rendered to the member.

Programme 5: Stakeholder Relations Unit aimed to handle all stakeholder awareness and training; communication and engagement with stakeholders and stakeholder management.

Programme 6: Compliance and Investigations Unit was responsible for enforcing the Act to ensure compliance with, and strengthening and monitoring of governance systems.

Programme 7: Benefits Management Unit, analysed scheme rule amendments. Programme 8: Legal Services Unit, provided the legal advice for effective regulation of the industry and management of the office and supported the CMS mandate by defending decisions of Council and the Registrar. Programme 9 was the Financial Supervision Unit which monitored and promoted the financial soundness of medical schemes. Programme 10 dealt with complaints adjudication.

Mr Lehutjo went on to note that the assumptions behind the budget for 2015/16 were based on an inflationary increase of 5.6%, a general salary increase of 6.6% and allowed for building capacity for the Demarcation Regulations and additional office space.

Some new permanent positions, for Administrator, Helpdesk Technician, Senior Software developer, Clinical analyst, Senior Benefit Analyst, Compliance Officer, Legal adjudication officer, senior programmer, customer care consultant and junior medical advisor were budgeted for.

Mr I Mosala (ANC) referred to the Annual Performance Plan (APP), which noted that a judgment of the High Court had set aside the reference price list, which had then left a void in the regulation of the health care. He asked whether this suggested that each medical scheme was regulating itself and if this created a window of expectation for the beneficiaries. He also asked what implication this had in the movement towards the implementation of the National Health Insurance system. He asked what strategy would be used to address the situation.

Mr Mosala said that although the APP stated that the CMS was currently running at a full capacity, it was also noted that the capacity had not been fully addressed as a result of a number of financial constraints. He asked if the CMS was intending to engage external consultants, pointing out that the Committee was cautious about consultants; it was not suggesting that there were not times where they could be used, but wondered why CMS would prefer to use consultants when there were so many unemployed graduates. He suggested instead that one or two of these consultants should be used to train unemployed graduates who were in that particular field. Fees paid to the consultants were exorbitant, as they charged per hour.

He also asked for further comment on the statements that resources were urgently required to manage the content website and social media sites.

Ms L James (DA) noted that the highlights of the strategic focus were promising, but asked how exactly CMS would drive the programme. She said there was need for awareness on how people could best manage their funds.

The Chairperson required clarity on the statement that more money was utilised than was contributed by members. She asked which section of the community CMS would communicate with more, saying that there was a need for good communication not only in urban but also rural areas, and lack of awareness would make people vulnerable. She asked which of the official languages, and what type of media, were employed to communicate to people. She required elaboration on the huge structure that dealt with complaints and asked for the success rate of the complaints and who tended to be the most significant complainants. She also called for clarity on Non Health Expenditure. She asked how the medical aid beneficiaries were monitored, as the scheme could be abused.

Mr Yusuf Veriava, Chairperson, CMS, explained that the Prescribed Minimum Benefit (PMB) price list revolved around the rising cost of health care, as PMB accounted for about 53% of the cost of health care. He said there was no fixed price, and that health care providers charged different rates, and for PMB, the scheme had to pay out in full. Regulation 8 stated that PMB should be paid out in full and members must not pay in at all. This implied a rather high cost on one hand but on the other hand costs that were not so high. There was no consistent price-list and it was the responsibility of the Office of the Minister of Health to ensure regulation. A reference price-list would enable the CMS to provide actual cost of the provision of health care in the NHI, as there would be reliable data to cost health care.

Prof Veriava reported that the former Registrar of CMS was suspended on 14th April 2014, and because of the importance of having a very clean organisation, it was necessary to have a full and independent investigation. The investigation was precipitated by allegations of corruption against the Registrar by a Provisional Director. He said the Council could not interfere with the investigation because of the nature of the stakeholders involved. He said there were also allegations of administrative misconduct. CMS had appointed a legal firm to handle the matter and the Chairperson of the inquiry hearing panel was a Senior Counsel. Both the legal firm and the Chairperson were neutral and independent of CMS. He said the process was ongoing and there had been an exchange of documents between legal representatives of the suspended Registrar and CMS's external lawyers. This disciplinary hearing was set for 9 May 2015. He reiterated that CMS had decided to have a fair and independent hearing to maintain the integrity of the Council.

Mr Lehutjo stated that CMS had tried to put staff retention programmes in place, for easier succession planning, as it knew that, like any organization, there would invariably be resignations. He said people left one organisation for another because of better jobs and better pay. He said the Council was satisfied that it was offering very competitive benefits.

He added that the Council had filled all the required positions at the moment, but that CMS was trying to employ someone to fill the post of a strategist, as the last strategist had resigned and although the position was offered to another person, the offer had been turned down.

Mr Lehutjo noted that the CMS looked carefully at the position, before employing a consultant, bearing in mind both the complexity and the nature of the work. Overall, CMS had reduced the utilisation of consultants. In particular, he noted that CMS employed health economists, because it was a health care financing industry where there was need to understand economic variables and health variables and take all into account. He said unemployment was an economic structure, while poverty was a social variable, and people were poor because employment opportunities were not emphasised, and CMS needed that particular expertise to address the variables.

Speaking to communication, he noted that during the development of the strategic objectives, the Council noted that it needed people who could manage social media because this was identified as an urgent need. He added that it would help the Council to communicate much more effectively. He said it could not employ some people because of the budget constraints, but was presently awaiting the approval of the Committee and the concurrence on the budget.

He said CMS communicated in rural and urban areas using radio stations, trade unions, schools, television and widely read newspapers. He said that two weeks ago, CMS had placed a full four page commercial in Business Report newspaper. He said the Scheme was trying to use four official languages and permission was required from the local authority in the rural areas. He said only three people were doing the educational training, though they were adequately trained to do so. He said CMS had tried to employ radio groups to increase the message.

CMS audited its financial statements annually and aimed to have an unqualified audit opinion on the finances and the performance management system of the Council.

CMS submitted reports on NHI to the Minister annually, and the Council could only make an input in the fourth quarter of the year, when the White Papers arrived.

The Chairperson said the Members of the Parliament were asking questions in pursuance of their oversight function and asked that CMS not generalise, but be more specific. She said Members would appreciate responses that would enable them to do their work effectively. She required more elaboration on the Council’s Limpopo encounter.

Mr Lehutjo replied that the CMS would send specific reports on its visits to Limpopo, Northern Cape and other places.

Mr A Mahlalela (ANC) asked how CMS wanted to achieve affordability. He noted that nothing was noted in the APP to support the statement that CMS wanted to amend the legislation. He also required elaboration on the transformation strategy of the Council, as it was not stated in the strategic objectives of the Council’s APP. He asked which of the strategic plans was aimed at transforming the industry. He asked how far CMS intended to implement the strategic focus areas for the next five years. He added that there were complaints in the municipalities about the employment of consultants, whereas CMS claimed that there was a reduction in the use of consultants.

Mr Paresh Prema, General Manager: Benefits Management, CMS, said that in order to bring down the cost of the PMB, CMS needed to find a balance, as there were 8.8 million people affected. He said there was a need to allow new options into the industry, and South Africa needed medical schemes that would be affordable. He said that six million people were not covered by medical schemes and there was a need to provide minimum lists of benefits, based on contribution.

In regard to the complaints, he noted that the success rate was that about 6 000 complaints were resolved within 120 days. Around 80% of complaints related to PMBs.

Prof Veriava added that it tended to be the case that older people had many more illnesses, and the younger people often subsidised the older ones.

Mr Mosala requested that the NHI report that was being processed should be forwarded to the Committee. He said that CMS response on the issue of consultants presupposed that there were no other skills out in the marketplace, and it seemed to suggest that it would prefer simply to employ consultants rather than seek other qualified people. He suggested that newspaper advertisements should be placed, calling for unemployed graduates who could be trained.

Mr Lehutjo replied that the level of unemployment in South Africa could not be ignored. CMS did have an internship programme. However, there were times when CMS still needed to employ consultants, and that was a fact.

Ms Maziya indicated that at the end of December, the books of the scheme would typically closed off with a four months of run-off. Schemes were required, in terms of the law, to only report to the regulator on their performance from the preceding year in April of the following year. This meant in the next two weeks, the CMS would be receiving the audited financials for medical scheme for the year ended 2014 and there was always a one-year time lag in terms of reporting of medical scheme. However, the financial year of CMS as a regulator ran from 1 April up until 31 March and the entities that were regulated by the Department, particularly medical schemes, had a different reporting period. It was important to highlight that in the annual report, to be published this year, there would not be 2014 medical scheme data, simply because of that lag-year.

Ms Maziya mentioned that there was no information on the schemes in quarter 1, because the first quarterly report of 2015 for medical schemes would only come in July 2015. If this was aligned to the report period of CMS, it meant that the entity would only be able to produce a quarterly report on medical schemes in the second quarter of CMS’s reporting period. The only reason that CMS would not be publishing the report on quarter 4 was that this would happen at the same time as the entity would be required to produce an annual report. This meant the entity would "drop" the report on quarter 4, being an unaudited report, in order to work on the annual report, which would contain audited information, based on the same set of data but obviously, being audited, it was more reliable. All this information would be available on the entity’s website.

She added that non-healthcare expenditure comprised of a number of matters. Some schemes would outsource their  business to third parties. For example, Bonitas was also administered by a third party and the scheme paid the third party for carrying on the business. That fee would typically be known as an "administration fee" and part of the non-healthcare expenditure. In essence, the non-healthcare expenditure was whatever expenditure was not related to healthcare. It included administration fees, salaries that were paid to trustees of medical schemes and broker fees. The CMS had a process of monitoring non-healthcare expenditure. For some medical schemes there was a monthly reporting process which would allow CMS to adequately monitor the non-healthcare expenditure, on an annual basis. The monitoring process was able to pick up cases such as trustees paying themselves excessive fees or issues around bonuses paid to the principal officers, and even the fees paid to administrators.

Ms Maziya added that currently, the Act was very limited in terms of the interventions that the Registrar and Council could make, in respect of non-healthcare expenditure, if they deemed it to be excessive. The Act said that CMS could intervene only in respect of administrator fees, rather than the entire body of non-expenditure fees. The CMS had to find creative ways of engaging with schemes in that regard. CMS would often amend the contribution of the schemes in cases where the scheme had excessive non-healthcare expenditure, in order to force the schemes to bring the costs down.

The purchasing of non-health related products on medical schemes was done before the promulgation of the new Act, and the benefit option entitled the members to a very specific set of benefits. There were certain medicines which could not be purchased if they were not in the formulaic list of medical schemes. There was much education and awareness that still needed to be done, in terms of alerting members on the medicines that they were entitled to, and on specific options. Both members and healthcare providers had a responsibility to use and provide their medical schemes responsibly. Medical schemes nowadays had very sophisticated fraud detention mechanisms, and this had been helpful in investigating those medical providers who had been providing those medicines that were not prescribed in the list.

Ms Maziya noted that CMS had just finalised a report that looked at non-healthcare expenditures of the industry over the last six years. This would assist in understanding the cost drivers and the areas that needed to be reviewed. The report would also assist in assessing whether the medical schemes were charging members fairly. It would be made available to the Committee Members.

Ms Maziya added, to clarify the question around claims and contribution, that a member could only claim based on the need, and not based on the amount of money that had been paid to a medical scheme. This was where the reserving component of the medical scheme came in, and that was how CMS would assist in ensuring that schemes could carry on their obligations. "Solvency", in terms of medical schemes, was determined by the amount of reserve that must be held all the time, so that schemes were covered in the event that there was a significant increase in claims. 

Prof Veriava responded that there was a rigorous process of amending the current Medical Scheme Amendment Bill, and a draft version had been engaged with, over a period of months, through consultation with Senior Counsel experts. The priority was to achieve improved efficiency of the entire environment through better information management. The draft legislation now makes provision for a central beneficiary registry and provider registry. All providers of medical services would be required to register, and this Registry would be under the control of CMS. The central beneficiary and provider registries would play a key role in the NHI scheme. CMS was taking proactive steps to further assist in the implementation of the NHI. The PMB would then be provided for, as a mandatory minimum benefit, and this would be set out in the main body of the legislation. The provider of the services could be requested by the Council to provide information on how efficient were the services rendered to the members of medical schemes by the particular providers, which would form a part of oversight and assessment.

Prof Veriava also noted that there was a complaints procedure. A ten-day turnaround time was proposed in cases of emergencies, especially in life and death situation. The procedure for appeals was also being streamlined, to take out one of the layers. If the Bill was passed, there would be an appeal directly to the Appeal Board, instead of to the Council. This would improve efficiency in the process. There was better improvement and streamlining provided for, not least by specifying what qualifications the trustees must have for appointment to the Board. The new legislation also intends to allow the Registrar and Council to publish what the "fit and proper" requirements are, as they change,  to ensure that there is efficiency.

There had been engagement with the National Department of Health, and there was a workshop also where CMS engaged with the State Law Advisors to get their advice on issues requiring more clarity or input. The Bill was no longer reflected in the Annual Performance Plan of CMS, because it was now residing with the Department of Health.

He added that the Medical Schemes Act provided very precisely for the provision of the business of the medical schemes. The PMB provided very wide protection for members of medical schemes. Benefits would also cover catastrophic types of events, and members of medical schemes would be assured of coverage for cancer, heart attacks and similar where expensive treatment was required. CMS had noticed that there had been a proliferation of the number of insurance products that did not have to report to and did not fall under CMS legislation. It had engaged with National Treasury (NT) and the Financial Services Board on the regulations for these products, particularly those which seemed similar to medical schemes, which were typically much cheaper but failed to provide real benefit.

Prof Veriava also confirmed that transformation issues were central to the priorities of CMS. There had been engagement with different industries. The legislation provided, in section 57, that 50% of the members of the trustees who served on the board of the medical schemes must also be members of the medical schemes, and have a certain degree of expertise. It had been difficult to achieve transformation in the industry, and control had been retained by the present structures. However, CMS had been engaging on transformation issues, through the Stakeholder Relations Unit, and the principal offices of the Forum, to take the issue of transformation forward.

Mr Prema addressed the questions that had been asked around affordability, and the comments made around the exhausting of benefits. PMB formed the basic part of the benefit, and the cover for catastrophic events was the main purpose of any benefit option in the medical scheme. If a member was   admitted to hospital for a catastrophic emergency event that was one of those conditions, then the cost would be covered in full by the scheme. The cost in this case could become so high that it could take up most of the contribution that had been made towards the medical scheme. The rest of the benefits that would be provided by the medical scheme were then determined by the Board of Trustees, in terms of the level needed to provide the day to day benefits, as it would have an impact on the contribution. The Board also needed to decide on certain conditions - for instance, implants - and here, the health economists would be involved so that the cost effectiveness of the treatment would also be reviewed by the medical schemes, looking at the affordability and accessibility of certain benefits. It was important to note that a member of a medical scheme may contribute according to his/her level of affordability, but when it came to catastrophic events, those must be covered in full.

Mr Prema explained that the CMS sought to ensure that the members were not being required to pay out of their own pockets for things that were needed; clearly, members could not control the catastrophic events. A balance had to be maintained by the scheme, in terms of measuring the contribution versus the benefits which could be provided. Medical schemes were not supposed to extract money for profit, as the priority should be the benefit of the members in the scheme. CMS had to prioritise bringing down the cost of PMB, so as to make it affordable, and also to expand coverage, whilst the schemes needed to have enough money to pay their members.

The current coverage by the medical aid schemes was 8.8 million people. There had been engagement to ensure that this figure was massively increased, to cover a wider population. The Council had already approved a proposal that CMS should look at other available options in the industry to deal with the majority of people who could afford the option of the full PMB in their package. It was of particular concern that there were 6 million people in the formal employment sector who were not covered by medical aid schemes. The options should include integrating those in the informal sector also.

He explained that the project of providing an option for minimum benefits for the members did not appear in the APP, as this was still a new project which had been identified as possibly providing a way of expanding the benefits and improving the coverage.  

Mr Prema also expanded on questions around complaints. CMS aimed to resolve all complaints. There had been 6 000 complaints received, and the target was to resolve as many of those complaints as possible within 120 days. Most of the complaints were related to PMB, as most of the members were concerned that schemes are not paying in full, which was a big challenge at the moment. The CMS aimed to ensure that the schemes did comply with the Act. He pointed out that a complaint was often a symptom of bigger problems in the scheme and it was crucial for CMS to guide and monitor the schemes. The success rate of CMS on complaints would be measured by resolving the complaints, in favour of either the member or a scheme, depending on the nature and extent of the complaint. CMS would often have to rule on whether the problem lay with the scheme or the member, and the resolution was often about ensuring that the Act and the regulations were implemented correctly.

Prof Veriava added that medical schemes tended not to spend so much on younger people, and older people used the health services more frequently, as they had more illness. It was necessary for the health economists to find the right balance, since the younger members often subsidised the older ones, and this sort of issue required the expertise of a health economist, to be able to guide the entity. 

Mr Mahlalela requested that the Committee should be provided with more information on the project of providing an option for minimum benefits for the members, as it sounded like an interesting project. He asked whether there was a strategy in place to absorb the unemployed graduates with the skills that are required within the entity, so as to play a role in the fight against unemployment. It was of concern that the CMS seemed to rely on consultancy instead of employing young people with the specific expertise that it required.

Ms C Ndaba (ANC) also expressed concern around the utilisation of consultancy and said the Committee wanted to make it clear that CMS must reconsider its over-reliance on consultancy, and find a way to create jobs. It was not correct to assume that there was lack of interest or the required skills in the industry, as there were many competent young people who were unemployed. Skills would have to be transferred during the consultation process.

Ms Ndaba asked what would happen if medical schemes were to become insolvent and what would then happen to the compensation. She requested that CMS must provide the Committee with information on the cases that had been dealt with, and the turnaround strategy on how to solve most of the challenges and complaints.

Ms Ndaba highlighted that it was important to know how CMS was dealing with issues where the doctors would charge a patient a fee for consultation although not providing any treatment. There was a need to ensure that the information around the medical schemes and PMB was dispersed to rural areas, and CMS must also ensure an increase in the coverage of medical schemes. She suggested that CMS must not rely on national newspapers like The Star for spreading information as most poor people read the Daily Sun, and she stressed that CMS must talk to people in the language that they best understood.  Community outreach programmes were often useful in spreading information, as they gave an opportunity to directly interact with community members. She wanted to know what CMS had done in order to radically prioritise transformation. It was also important to know whether CMS had given any thought to assisting those who were still dependent on their parents’ medical schemes, although they were above the cut-off age of 27 years.

Ms M Scheepers (ANC) added that the usual cut-off age for dependents under a medical aid scheme of the parents was 27 years, but this ignored the African culture of assisting extended families, and it also did not take sufficient account of the youth unemployment in the country.

Ms Scheepers said that CMS needed to prioritise internship programmes that could attract skilled graduates, especially those from  previously disadvantaged backgrounds. She too emphasised that any consultancies should also include a component of skills transfer, to help in absorbing the unemployed graduates. 

Prof Veriava responded that the economic circumstances of people were obviously putting a strain on the medical services, and there had been discussion on how to transform the system to radically approach the triple challenges of poverty, inequality and unemployment in the country.

Prof Veriava confirmed that CMS would provide the Committee with detailed information on the nature of the complaints, as it would be important for the Members to see the numbers and types of complaints that had been received, and the way they had been dealt with.

He said that the issue of consultancy was difficult. CMS was often challenged in court by the medical schemes. It was crucial to rely heavily on medical expertise. There were many areas where CMS lacked specific medical expertise and thus was often forced to bring in outsiders. The question of job creation could not be ignored, but it was also important to investigate the types of consultancy and how to ensure that there would be training and passing on of skills.

CMS also has a problem with doctors who charge patients for consultations but not treatment, and it was often very difficult to monitor the problem, although CMS had placed emphasis on looking at the quality of  healthcare, in particular to ascertain whether the members of the schemes were getting the right quality. CMS would, again, need to use consultants to check the indeces and determine whether members of the schemes were receiving quality of healthcare. The schemes also needed to play a role in this regard, as it was difficult to monitor each and every individual.

Prof Veriava admitted that there seemed to be little information in the public domain about rights of the members of the medical schemes. He agreed that CMS needed to do an introspective assessment on how to improve its communication strategy, and how to reach people from the remote rural areas, as they were often disempowered. There was an established industry that was dominated by the previously disadvantaged individuals, and there was a need to get data on how it could be replicated to other industries within the sector. The accreditation process often took into consideration any transformative measures that had been implemented, but it was still a complex issue. However, he reiterated that CMS would look into the concerns raised by the Committee, and try to find a way to address them. There should be a dynamic, progressive approach towards transformation, to accommodate need.

He asked that, if there were any outstanding issues, he be notified of them, and he would ensure that the Committee received a written response.

Mr Lehutjo wanted to underscore that CMS had an internship programme that was aimed at unemployed graduates. A division of attorneys would be formed, which would open up opportunities to source internal skills and reduce the over-reliance on consultancy. There was currently an intern in the Information Technology (IT) unit, and this was part of skills trading. CMS could not ignore the plight of the unemployed graduates in the country. However, communication of information required resources, and these were limited. There were only three people in CMS responsible for the community outreach programmes and the reality was that it would be difficult for CMS to reach out to all the communities. He would provide the Committee with information on the areas that had been reached, including those located in remote rural areas.

Ms Maziya noted that there was a provision in the Medical Schemes Act setting out what the reserves of the medical schemes ought to be, particularly when the scheme had operated beyond five years. She noted that there was regulation around insolvency; the schemes were required to hold 25% of their annual contribution in reserve, but it was still notionally possible for the medical scheme to be below that level of solvency but still continue operating for the foreseeable future. There were set processes to engage for any schemes that were below the "regulatory insolvency" level, to begin to turn them around.  Currently, there were seven registered medical schemes that were below the solvency requirement, for different reasons. She noted that solvency was calculated as the net of contribution, and as new members came into a scheme, the denominator was also growing at a much faster rate than the numerator, which would immediately cause a dilution in solvency. A scheme like that would be monitored differently to a scheme that possibly had an ageing population of members, and consequently would have the risk of receiving much higher claims.

South Africa had around 84 medical schemes and that was far too many for the number of lives that were covered. It was very important to manage those schemes that were in financial difficulty, to ensure that there was no member left uncovered or not compensated. Liquidation or merger of medical schemes happened for different reasons, including financial difficulty, or poor marketing, but there was a a regulatory process that those schemes must follow.

Chairperson's Closing Remarks

The Chairperson thanked everyone for their contributions and patience. She said the CMS needed to improve in the area of communication. Together, the Committee and CMS had a responsibility to change the social condition of the people of South Africa. She added that the Committee, in asking probing questions, was not being antagonistic but rather was contributing to South African society. The Committee would come back for any further information that was needed from the Council. Finally she noted that the Committee also wanted to deal with the policy and ideology of the health centre.

The meeting was adjourned.

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