Parmed Act Legislative review: Parmed, SALGA & Office of the Chief Justice briefings

Meeting report

Ms Maseko welcomed the Committee and delegation to the meeting and stated the agenda for the day.

Parmed Briefing

Ms Dawn Davids, Principal Officer, Parmed, said that the document had been prepared by an actuarial team and the Parmed Medical Fund’s (the Scheme’s) Principal Officer in preparing for the meeting with the Ad Hoc Committee.

The report included the following scenarios:

Scenario 1:

“An outline of what Parmed reserves would look like if we did the predictable industry related increases over the next 3 years with minimal growth of approx. 300 members in the election year of 2019”

Assumptions used:

• The members will join uniformly throughout 2019, with the cumulative increases totalling 300 members by December 2019, ie the average membership for 2019 will be 2507 members
  • Thereafter membership is assumed to stay constant
• Increases of 10% in the contribution rate has been assumed (“predictable industry related increases”) for 2019 onwards
• Increases of 8% in claims have been assumed for 2019 onwards.
• No change in the mix of lives (ie age/chronic status/gender) has been assumed.

Comments:

• The scheme’s reserves in 2019 will drop due to the projected deficit for year-end 2018 as well as the inflow of new members.
• As the solvency ratio is expressed as accumulated funds divided by membership income, bigger membership income (all else equal) will lead to a percentage-wise drop in the reserves.
• Over time the slightly bigger membership base will lead to claims experience being slightly less volatile and scheme overheads spread over a bigger membership base.
• Investment income on a per-member per month basis will be diluted.

 

Scenario 2:

“A scenario of the Scheme based on the exodus of members i.e. those from all the legislatures approx. minus 400 members”

 

Assumptions used:

• The members will leave uniformly throughout 2019, with the cumulative decreases totalling 400 members by December 2019, ie the average membership for 2019 will be 2 154 members
  • Thereafter membership is assumed to stay constant
• Increases of 10% in the contribution rate has been assumed (“predictable industry related increases”) for 2019 onwards
• Increases of 8% in claims have been assumed for 2019 onwards.
• No change in the mix of lives (ie age/chronic status/gender) has been assumed.

Comments:

• The scheme’s reserves in 2019 will increase due to exodus of members.
• As the solvency ratio is expressed as accumulated funds divided by membership income, smaller membership income (all else equal) will lead to a percentage-wise increase in the reserves initially.
• Over time the smaller membership base will lead to claims experience being more volatile and scheme overheads spread over a smaller membership base.
• Investment income on a per-member per month basis will be higher initially.

 

Scenario 3:

“A scenario of adding approx. an additional 2000 members (each with an average of 2 dependants) …. with an average age of 48yrs”

 

Assumptions used:

• The members will join uniformly throughout 2019, with the cumulative increases totalling 2000 members by December 2019, ie the average membership for 2019 will be 3 267 members
  • Thereafter membership is assumed to stay constant
• Increases of 10% in the contribution rate has been assumed (“predictable industry related increases”) for 2019 onwards
• Increases of 8% in claims have been assumed for 2019 onwards.
• A change in the mix of lives in terms of age has been assumed.
  • The average member age for Parmed will drop from 64.7 to 57.

Comments:

• The scheme’s reserves in 2019 will drop due to the projected deficit for year-end 2018 as well as the inflow of new members.
• As the solvency ratio is expressed as accumulated funds divided by membership income, bigger membership income (all else equal) will lead to a percentage-wise drop in the reserves.
• Over time the bigger membership base will lead to claims experience being less volatile and scheme overheads spread over a bigger membership base.
• Investment income on a per-member per month basis will be diluted.
• Claims – on average – will be lower over the longer term due to the reduction in the average member age.

 

Scenario 4:

“Then adding another benefit option (new generation type) with 100% Hospitalisation, limited benefits and a savings pool for day to day benefits.  Option design should ideally be to accommodate younger members.”

To determine the potential impact on the scheme overall, one should consider the current age distribution and associated costs of the Parmed lives:

In the graph above one can see the differences in average claims between child, young adult and older adult on a per-life-per-month (plpm) basis. It is typically the younger and healthier members (i.e. the lower claiming lives) that will buy down to a hospital plan.

To show the potential rand value impact on existing plpm claims, an age distribution for the proposed hospital plan had to be assumed. This was based on a comparative hospital plan in the open market to help estimate what a likely profile for the proposed option will look like. This is depicted by the line in red in the graph below. The blue bar graph shows the existing age distribution of Parmed lives.

It was assumed that 25% of the existing membership will move to the hospital option. This then inferred what the resultant profile on the rest of the lives will be that remain on the traditional option.

Under this scenario, if the new hospital plan is priced competitively, this will lead to increases for the existing traditional option’s claims outgo of approximately 10% on a per-life per month basis. This would imply an approximately 17% increase when also considering the tariff (~5%) and utilization increases (~3%)).

If the traditional option’s contribution is not increased substantially, the Scheme will incur a much bigger deficit for 2019 due to the increase in claims cost without the commensurate increase in contributions.

The size of the deficit will depend to what degree the proposed hospital plan will be priced competitively or, alternatively, priced to cross-subsidise the losses on the traditional option.

Note that there will be second order impacts as well; for example, more members – after the seeing the price differential – might move to the hospital option after the first year.

 

Other considerations

• By creating another option, the scheme is splitting the risk pool. This will lead to increased claims volatility on both options.
• Due to the increase in contributions required for older lives, the bigger projected deficit and the increased volatility in results, there is a high chance that the CMS might not approve the new hospital option, especially given the scheme’s small size.

 

Scenario 6:

“Impact on the Scheme and reserves if the member numbers were expanded to include local government councillors and director generals. Kindly note that this scenario should include approximately 395 additional members with an assumption of the average family size of 2 adults and 2 dependants. Average age of 50”

 

Assumptions used:

• The members will join uniformly throughout 2019, with the cumulative increases totaling 395 members by December 2019, ie the average membership for 2019 will be 2553 members
  • Thereafter membership is assumed to stay constant
• Increases of 10% in the contribution rate has been assumed (“predictable industry related increases”) for 2019 onwards
• Increases of 8% in claims have been assumed for 2019 onwards.
• A change in the mix of lives in terms of age has been assumed.
  • The average member age for Parmed will drop from 64.7 to 62.6.

Comments:

• The scheme’s reserves in 2019 will drop due to the projected deficit for year-end 2018 as well as the inflow of new members.
• As the solvency ratio is expressed as accumulated funds divided by membership income, bigger membership income (all else equal) will lead to a percentage-wise drop in the reserves.
• Over time the bigger membership base will lead to claims experience being less volatile and scheme overheads spread over a bigger membership base.
• Investment income on a per-member per month basis will be diluted.
• Claims – on average – will be lower over the longer term due to the reduction in the average member age.

Salga Briefing

Mr Lance Joel, Executive Director, SALGA, stated that medical aid contribution is included in the total remuneration package for councillors. Councillors have discretion to participate in a medical scheme and if they do, may subscribe to any medical Scheme of choice. Most councillors do NOT have medical aid – largely as the medical aid contribution will holistically come from the total remuneration package. An Exception to this is that Councillors remuneration packages may not include medical aid, when they already subscribed to a medical aid scheme in full time employment outside of being a councillor.

SALGA recommended that, to create uniformity amongst all public office bearers, the compulsory participation in pension funds and medical aids should be extended to councillors. Consideration should be given to a single Pension Fund and a single Medical Aid scheme for all Public Office Bearers (national, provincial and local government). Funding of these benefits, at a similar rate as public office bearers at national and provincial level, should be extended to councillors and funded by the National Fiscus.

Office of the Chief Justice Briefing

Justice Colin Lamont, South Gauteng High Court Judge, said that judges are required by statute to belong to Parmed. Originally as part of the salary package the employer provided a medical aid scheme together with a contribution in the form of a subsidy. At that time the employer decided on the nature and extent of the benefits which the employer deemed appropriate for judges to receive as part of their package. Subsequent to 2007 and after the news salary dispensation, the employer decided that judges would no longer receive a medical aid scheme and a contribution as part of the salary but would instead receive a monetary benefit. The consequence of this is that judges were compelled by statute to belong to a benefit rich but expensive scheme and received money from the employer to assist in meeting the premiums charged by the scheme. From time to time over the period to date judges’ salaries were reviewed and various increases were applied. Those increases invariably were less than the increases required by the medical aid scheme to maintain the benefits which were being provided to judges. The result is that the contribution made by the employer covered less and less of the premium required to be paid. Parmed is sensitive to the needs of its members and has attempted to keep the costs of the scheme to members to a minimum. Nonetheless this gap has increased. In one-year judges received no increase at all and yet Parmed had an increase. This is 1 of the more patent examples of how inflation has eaten away at a benefit received by judges. Over the period an application was brought to declare the obligation to belong to Parmed unconstitutional. This application is pending. If the application is successful, then there is no doubt that the scheme offered by Parmed will fail.

It is necessary to first consider what role Parmed plays within the medical scheme industry. Parmed is a relatively small “closed” scheme. The registrar will not permit Parmed to offer more than one benefit. The financial affairs of Parmed remain particularly under scrutiny as they are fragile, a small miscalculation in the financial affairs could easily lead to Parmed being unable to maintain its required reserve. As a fact Parmed offers a good value for money scheme. The benefits which are offered are comparable to of the greatest benefits on offer by other schemes and the cost of such benefits to its members is comparable to the costs charged by such other schemes to their members. Accordingly, the affairs of Parmed are being properly conducted and are financially in order. A close look at the financial affairs of Parmed over the period will reveal that Parmed has remain financially viable with financial reserves well in excess of those required and that such reserves have only decreased from time to time as and when Parmed consciously took a decision to charge a lesser amount than the amount it could and should have charged. The Parmed trustees chose to use reserves rather than capital income for the particular periods with a view to minimising the impact of the small salary increase versus the big medical aid scheme increase on its members. There is of course the question of whether or not the members of Parmed wish to have as rich a benefits scheme as they currently do. This is a policy decision which historically was made by the employer and which if it is to be revisited must be revisited by all members in due course. 1 of the problems with a benefit rich scheme which is expensive is that the members find it difficult financially to maintain dependence on the medical aid scheme and hence there are some members whose dependence are members of a different scheme then Parmed purely with a view to providing those persons with a reduced value scheme. It appears to the judiciary on the face of it that the difficulty concerning the ability of members and the wishes of members to maintain an expensive scheme is a consequence of 2 matters. The 1st matter concerns the failure of the salary increase to equal the medical aid scheme increase the 2nd matter is that at the time the salary structure was changed from the employer providing a medical aid scheme to the employer providing an amount of money members came in receipt of money and wish to choose what to do with their money. It is natural that a person in receipt of money wishes to spend the money as that person perceives to be in his or her best interests. Hence if members do not perceive a need to buy a medical aid scheme providing rich benefits at a higher cost than a scheme which would provide lesser benefits members will seek to move to purchase the appropriate benefits for themselves. As there is no scope for Parmed to offer different benefits than the one currently offered this means that such members would have to leave Parmed to obtain a medical aid scheme providing the benefits of suitable for them.

It is apparent from what is set out above that the medical aid scheme Parmed is intrinsically sound but that for a variety of reasons, mainly related to the failure of salary to increase appropriately, the scheme may not meet the needs of all of its members. An understanding of this principle is fundamental to what is set out below. As there is nothing “wrong” with Parmed there is nothing to fix. The things which are wrong with Parmed relate to the changing salary structure of the judiciary and the failure of the salary to be increased appropriately to match the required contributions for Parmed. Simply put the problem concerning Parmed is not within Parmed it is within the salary paid to the members of Parmed.

It is apparent that the employer has no intention of reintroducing a medical aid scheme as a salary benefit for judges. The employer wishes to pay money in lieu of that obligation. The problem to be solved is how much money is to be paid and whether or not members’ judges should be allowed to freely select such commercially available packages as they wish and be relieved from the obligation to maintain their membership of Parmed.

If the members of Parmed are free to choose the packages they wish to receive then Parmed has no way forward and must close. If the financial difficulties faced by the members of Parmed can be overcome by increasing the amounts paid to such members, then there seems to me to be little doubt that the members would choose to have a benefit rich scheme subsidised by the employer. Assume the subscription is R5500 per month and the contribution made by the employer is R4000 per month then the member is receiving a benefit rich medical aid scheme for R1500. No such scheme is commercially available hence there is little doubt that the members will remain on Parmed.

It is possible using the records to establish what percentage of the Parmed premium was paid by the employer immediately prior to the cessation of the employer offering the medical aid scheme as part of the salary package. It is accordingly possible to calculate in modern terms what the contribution of the employer should be towards the current premium charged by Parmed. It is accordingly possible to establish by how much the current contribution by the employer should increase to match the historic position.

The view of the judiciary is that steps should be taken to restore the status quo so that the contribution by the employer is restored to approximately two thirds of the premium charged by Parmed and that appropriate steps be included in the salary package to ensure that each year the salary increases in respect of the Parmed portion so that all Parmed increases are covered. This means that the question of the medical aid scheme would need to be dealt with especially at the time increases are considered and that the increase for the medical aid scheme portion of the salary would have to match the increase of Parmed for the period.

The judiciary feels that it would be a matter of great sadness that a viable functioning medical aid scheme cease to be operational when in itself it is a viable entity and the cause of the difficulty arises outside the ambit of matters which Parmed can control (namely the salary paid to judges).

This memorandum has not dealt with the comparison of benefits which is contained within the document which was previously furnished to the Workshop and which sets out the reasons why Parmed is good value for money and is a commercially viable entity.

This memorandum similarly has not dealt with certain of the matters raised by CMS. The bulk of those matters relate to certain specific aspects of Parmed and not deal in a contentious way with the matters of principle which is set out herein.

One of the great advantages of Parmed for its members is that sport is comprised of trustees who are members of Parmed and render service for free. The trustees have a heart the interests of the members of Parmed and throughout seek to maximise the return the members receive from the medical aid scheme to which they belong. As there are only relatively few members it is possible for members to receive individual attention to matters which they raise and also urgent reaction to matters which they require to be dealt with urgently. Throughout the board of trustees of Parmed has been sensitive to its membership and has sought to assist the members in any way possible. Although Parmed is a commercial entity this facet of its management represents an approach to membership as if all the members were “family”. I have been a member of the Board of Trustees for some number of years and am frequently approached by members for assistance which I’ve been able to render due to the personal nature of the relationships between the members and the trustees. This type of relationship is not readily available in the commercial field and is a relationship which should not readily be foregone. It is a matter of comfort to members who require urgent authorisation or urgent assistance with the matter to know that they are known to a person who can render assistance to them and who is able to and does render such assistance to them.

 

Discussion

Deliberations with Judge Lamont and Parmed

Ms Maseko commented that some of the Judge’s statements were conclusive. She said the mandate of the sub-committee was not to kill Parmed, but to make it sustainable. The main thing was not about changing the benefits, but what needed to be addressed was the salary package structure. She indicated they needed to be holistic and strategic in their approach when addressing this matter.

Mr S Marais (DA) remarked that MPs were in the same position as the judiciary. It must be remembered there were years when they had no increases compared to the Parmed increases of 8% to 10%. Another matter that has not been mentioned was that of tax regime. It doesn’t allow you to deduct medical aid contributions to the extent that they were allowed in the past. All the costs related to that were deductible in the past, but now only a third. He said this made a huge contribution in terms of what you had as a gross net package in the past after Parmed was paid and even after tax compared to now. Members have now become much poorer. Parmed was a good scheme with excellent benefits, but has become unaffordable for members in relation to their salaries and outside costs. What needed to be addressed was affordability. He further wanted to know if Judge Moseneke consulted the other members of the judiciary before making such far reaching recommendations because he changed everything. He noted that for members to say they need more money to cover for the medical scheme was a complex process because members were seen as being paid more. He said it was not good for citizens to pay more taxes for the members’ salaries. He stated they needed to identify how they were going to come up with amendments to the problem in going forward. He also wanted to know who was deciding on the medical aid rates and benefits for Parmed. He said it was important to identify where benefits could be amended in the future. He indicated it appeared that Parmed was doing things in a haphazard way. He pointed out that much research was done on alternative medication and this was another option for members instead of going for the expensive option Parmed was offering. Parmed needed to be creative as there were many options available. Lastly, he indicated that he was under the impression that 95% of the benefits came from contributions and he assumed the other 5% was from the reserves. Now he wanted to understand how the return on reserves was when compared with the 5%.

Judge Lamont stated he was not privy to the details of the recommendations made by Judge Moseneke. It was something imposed by him. Regarding the 95% in relation to the 5%, he explained that part of the issue with Parmed at the moment was that it was drawing on reserves because it does not increase the premium or contributions as much as it should be. A decision was taken last year or the year before that that the reserves of Parmed would to an extent be used. That was why on Parmed’s balance sheet the reserves went down by 65% or less than 60% and it was indicated they would recover again. The bulk of 5% comes from the investment income. It was not capital that was being drawn, but income on the capital. The investment was being used to fund the income. While that might not be the practise, they have more than doubled what they needed. The reserve requirement was 25% and Parmed was about 60%. He stated they have got lots of reserves, and to meet the needs of their membership, they have made a decision to increase some of the capital. The general impression was that this would not carry on.

Ms Davids, on benefits and rates, explained that historically doctors, hospitals, and specialists could charge a scale of benefit rate and that has changed legislatively. This has resulted in doctors and service providers charging whatever they want and that was where disparities occurred between the doctor’s charges in relation to what medical aid schemes paid for. She elaborated that Parmed was currently paying 100% of that rate, but doctors and specialists were allowed to charge up to 600% and 800% in excess rates. Parmed was one of the only schemes that paid up to 300% of the fee for members who were in hospital. With regard to alternative medication, she explained Parmed does have an alternative health care benefit. She stated a competitive amount was being offered. Most schemes that Parmed was compared to were providing this as part of the day to day coverage. Parmed has got a separate benefit to the tune of R13 000 per family which members were allowed to access. The only difference with homeopathic medication was that Parmed was not closed or blind to it, but was only trying to stay abreast of new alternative and latest medical technology and that some of its members have been receiving treatment offered to it. She stated a lot of alternative medication was not, in actual fact, properly coded and that they were making provisions of a dummy code when processing it because this has to be clearly defined and cleared for they were being audited by the Council of Medical Schemes on what they were paying for. She said if something was not properly coded, perhaps, that was where people were seeing stumbling blocks when it came to payments of specific claims. It could be that they were not properly coded, but were being used and funded by themselves.

Ms Z Ncitha (ANC) stated that no one was denying the Parmed benefits, but the fact of the matter was that it was too costly for the MPs. She further indicated South Africa was a democracy and members had a right to choose the medical aid scheme they wished to belong to, but they were bounded to Parmed and that was problematic. She also wanted to understand how far the government was on the issue of privatising medical aid schemes because the government was talking about NHI on one hand, while on the other there was a debate on privatising medical aid. She pointed out that it was important to consider the age and medical conditions of the MPs because they have got different needs which appear not to be addressed by Parmed. She agreed with the chairperson that their intention was not to kill Parmed, but to find solutions to challenges affecting them as members because Parmed was too costly. She also suggested that some of SALGA’s concerns like salary structure and part-time councillors should be forwarded to the COGTA portfolio committee because those issues were not part of their committee.

Ms Davids elaborated that the Minister of Health has released the latest information in terms of the NHI, and the private health care was looking for more details and information. Affected stakeholders have been engaging with the minister on the way forward and what their role was in this matter. Parmed had realised there were huge disparities between the haves and have-nots. Unfortunately, this was out of its hands as Parmed because they were servants to Parliament and have been established by Parliament for its members. But this does not mean they were burying their heads in the sand regarding these disparities in terms of who could afford and could not. She went on to say Parmed was sitting in a catch 22-situation because it was unable to expand due to the existing legislation which made it a closed, restricted and compulsory scheme. Because of this, it was unable to offer members choices. She said they would love to offer choices, but they would do so if they have sufficient members to expand their risk because, currently, they have got an ageing demographic. Parmed was now getting new fewer younger members with each election. The last election introduced to Parmed few young members. But, historically, the membership was ageing. So, they do require younger members to revive it and to even out their risk. Pertaining to the restrictive nature of the scheme, she expatiated that Parmed was quite unique because the parliament was the employer of the medical aid. He indicated they have had a query from the Council for Medical Schemes where it felt Parmed was not adhering to legislation in terms of 50% from employers and 50% from members. She said they tried to explain to them that Parmed was parliament and such their future was in the hands of their members. Parliament has got a part to play in terms of the contributions they provide to members by means of the medical aid scheme.

Ms T Mokwele (EFF) remarked that South Africa was a diverse country, and that meant the needs of the members were not the same. The constituency she was representing would not understand when she advocates for MPs to have an affordable medical scheme that benefits only individuals that represent them. People were struggling to have pain killers. MPs could afford to have better access to health at the expense of public funds. That was why when they got to Parliament they questioned this piece of legislation to see if it was serving the interests of individuals or mandate of the people they represented. She said the judge’s presentation was meant only for the judiciary. This made her to wonder who the employer was and the answer was Parliament, and she then wondered who Parliament was and the answer was them (MPs). This has made them as public representatives not to know whether they were employees or employers. They have been advocating for NHI and sustainable health care system. She noted that before she joined Parliament she was on category A of Hosmed which catered for her family needs and was paying far less on Hosmed than Parmed. She then decided to go for category C on Parmed because it became too expensive for her. She pointed out it was important to check who was benefitting from the scheme because administration was done by other people. It was important to know the initial purpose of the legislation because it was enacted in 1974. The legislation was not addressing the holistic mandate of their constituency, but that of an individual and not the society. She wondered if the manner in which they were doing things should not be changed because life in SA has changed since 1974. Because the needs of the members were not the same, the scheme should be opened up for other people.

Ms Davids indicated it was important to look at the age group of Ms Mokwele, dependents and claims history to see what Parmed had to offer. Hosmed and Parmed were different medical schemes. She, however, stated they do realise that Parmed was in esxistence because of this particular legislation and they would uphold it until they were informed by parliament to do it differently.

Judge Lamont explained he used the terms “employee” and “employer” for simplicity’s sake because some people have to do work to get paid as there are contractual obligations, but not to define an “employer” and “employee”. He apologised if that caused a misunderstanding.

Dr P Mulder (FF+) wanted to know if the administration fee per member included dependents as well. He reasoned that in 2007 the remuneration structure of MPs was changed. Before that the state made a two-thirds contribution which was not reflected in the payslip, but now that contribution was shown in the payslip. Now the two-thirds contribution by the state was included in the total cost to company and reflected on their payslip, and then that same two-thirds was deducted as a deduction and then it seemed as a huge deduction. If you looked at the comparison it was not that costly. He further indicated the judge pointed out that the problem was the salary structure. He suggested the committee should engage with the Commission for the Remuneration of Public Office Bearers because it was busy with the total overhaul of the remuneration structure of the MPs. The committee needed to make the commission aware of the medical aid problems and make provisions for that. He also wanted to understand if the admission of magistrates and councillors to the scheme would assist in making a difference because they had to be made aware of their salary structural adjustments.

Ms Davids explained that the member per month scenario made a reference to the entire family unit. You do not pay more or less just because you have 5 dependents, for example, but it was something that has been worked out for that particular problem. She stated they looked at other various scenarios and at the end of it all you add SALGA and magistrates, and then ask if this would make a difference. She felt it could make a big difference if you have more membership because that would change and provide members with various options. Currently, Parmed has got one option which does not necessarily fit everybody. Members had different needs and were on different stages of their lives. The one size fits all approach was helping no one, especially when one looked at how the face of Parliament was changing. It would allow growth and change, and provide different options for the members. She, however, indicated she did not know if the admission of magistrates and councillors would be lucrative to the scheme because a lot would depend on their subsidy arrangements and agreements. She said they have engaged with magistrates since 2006 and tried to ascertain where Parmed might fit for them. They discovered the magistrates would like to join, but the problem was the affordability issue because their subsidy arrangements were completely different and there was a 3% to 8% difference in their earnings. She stated they asked the judiciary department if it would be willing to up their salaries to bridge the gap in order to make it lucrative for them, but the judiciary department has far not made any commitment.

Mr S Tleane (ANC) remarked there were changes that were being made in the process. The general agreement was that certain changes needed to be done. The point raised by the judge regarding salary structuring needed to be looked at because this had a negative impact on the status quo. All the elements were intertwined. He appreciated the preparedness by Parmed to create options. Option 3 promised to be viable. The committee needed to create something that would be sustainable because when you change something, you need to learn from history. What the committee was trying to do was to create a better future because it was not easy from the past. He stated the committee needed to take better decisions going forward. It was greed changes had to be made and create space for members who need to go elsewhere in terms of freedom of association, and transformation has to be agreed to in a proper context because it was not possible to change things at one go.

Ms Maseko indicated that their backgrounds were different. The reality was that being a black African you have to take responsibility for the medical care of your immediate and extended family.  Now the situation was forcing them to reduce the number of their dependents because they were paying R14 000. He said the intention of the committee was not to collapse Gems and Parmed together, but Gems has to sort out its problems. He asked for clarity on the matter of two dependents the judge talked about.

Judge Lamont explained he was making an example when he talked of a couple with two or more dependents. The intention was not to define the number of dependents by reference to 2, 4 or more. It was true that, historically, the medical aid scheme catered for white privileged people who had a particular family structure with one or two dependents. But in the modern day, you had to undertake an obligation as a person to take care of your extended family members and that should be embraced and reflected in the family structure of Parmed scheme in which you belong. By the time Judge Moseneke was debating the issues, it came up in the form that if you have four members and were getting a contribution, then your salary is worth the members’ contribution for four people or depending on their numbers. But if it was more people, the more people are contributed, the more your salary is. It was felt this was inequitable that people should get different pays depending on the number of dependents. This was how this was perceived at the time. There was no intention to define the number of dependents by reference to 2, 4 or more. He further pointed out it was true that the benefits offered by Parmed were expensive. People have to decide if they want to reduce the benefits in order to reduce the costs. There was no problem with that. The only problem was that there were vested interests against that happening. One must be realistic in the modern day we come from different environments and that we have different expectations than previously. He said Parmed was not costly, except that it’s expensive because you pay for lots of benefits.

Ms Davids added that assumptions were made for two dependents. She said they could provide data on one, two, four or more dependents, but Parmed was open to all and has relaxed its rules to be inclusive of extended families. What shone through the conversation was affordability.

Ms Maseko indicated the problem was not about Parmed, but the employer’s salary structure. That was what needed to be addressed. She said before 2007 there was no consultation, and Judge Moseneke was obstinate during the presentations to them. That was why they brought up the problem with Parmed. She also pointed out that some members do not finish the 5-year term and they could not go back to Parmed. She stated when the committee was done with its recommendations; it should make a presentation to Judge Lamont. She wondered if Parmed would make provisions for the other people and if it would be accommodating.

Judge Lamont remarked that the main point to the compulsion it seemed to be the common cause that Parmed would not survive unless MPs had to become members. If members were allowed to leave as they wish, there would not be enough members to maintain Parmed. The critical problem was if you remove compulsion, you remove the ability for Parmed to survive. The result would be fatal for the medical aid because if it does not have a forced membership, which is called the ‘closed membership scheme’, it would not survive. A closed membership scheme was a common thing. It was not unusual for schemes to say only certain people could join. It was not unusual in a commercial environment to find compulsion. What was unusual was that the agreement between the parties regarding the salary structure was found in the statute.

Deliberations with SALGA and magistrates

Ms Mokwele commented that this matter brought them to the issue she alluded to earlier that the legislation they were currently dealing with had its own objectives of the then time. The reality now was that in terms of office bearers they have put another arm of the state. They did not look at magistrates though they were considered as public office bearers who were seen as public servants. Councillors were also seen as office bearers, but in terms of the sphere of governance, they were also independent with their own unique legislation that prohibits them to access the benefits of other public office bearers. As part of the NCOP, SALGA must have benefits because it has a special seat in Parliament. The committee needed to sit with the technocrats and align legislation properly because there were so many discrepancies. She stated each time they had to deal with a particular matter, many loopholes were opened up. When she listened to the presentations of magistrates and SALGA, she asked herself where the people were as a country. She suggested the matter should be processed properly so that when the committee takes a decision, members take a decision that is well informed – a decision that would not make Parliament be seen by other stakeholders as exclusionary and be taken to court as a result of that. She agreed with the frustrations shared by SALGA. She reminded the committee that service delivery and non-performance of municipalities were taking place at the local sphere of governance. For instance, 12 of the 19 municipalities in North West were not functioning and 18 of them were involved in fruitless and wasteful expenditure. The root cause was that councillors were dying as paupers because they did not have access to benefits. They were unable to do their work. They must form part of the provincial medical scheme. But because of the manner of grading in municipalities, some municipalities do not have a source of income, but were relying on grants. So it was clear how the councillors were operating. She suggested the 5th Parliament should look at the proper realignment of governance structures. The framework needed to be drafted before the start of the 5th Parliament. Legislation that was used during apartheid should be scrapped, if it was not working for the people.

Mr Tleane remarked that the presentations were neither antagonistic nor combative. It was clear they were dealing with a monster that was created in the past. Unfortunately, it has to be unbundled in such a way that they create a new baby from the whole situation. He said both presentations contributed to finding a solution, and members needed to think radically because they were not going to modify what was there, but to reconstruct something that has to stand the test of time. The manner in which the whole system was planned in the past was strange. As they consider finding possible solutions, the first step was to say all public office bearers should belong together. He agreed with the sentiments shared by SALGA that some benefits must be upgraded to a reasonable level. SALGA reflected on stumbling blocks due to the current legislation. SALGA did not say it does not want to join Parmed. This meant the sub-committee has to be bold, put proposals together to be discussed in the plenaries of the ad hoc committee and Parliament when it has reached an agreement. The fact that magistrates and judges belong to the judiciary must not dissuade them and make them narrow in their approach and do what has been done in other foreign countries. He stated members should look at the current political environment in our country and take the kind of decisions that would take us forward without undermining the strategic objectives of government in ensuring transformation in the country. This could be done for future generations. He said they must not be intimidated by challenges facing them and that they needed to indicate to parliament what needs to happen.

Mr Parkies remarked the presentations indicated some of the perspectives articulated informally. The existing inconsistencies were deepening inequalities in our society. He said it was ridiculous that state apparatus were distinguishing between judges and magistrates in relation to Parmed. These matters should be addressed by the committee, and policymakers have the responsibility to assess the impact of policies they make. He said if a policy was not working, it should be tampered with. The committee needed to make recommendations that would trigger discussion on this piece of legislation. The report should capture the fundamentals of the presentation because Parmed had a transformative mandate, but they needed to know as members how that power could be used effectively and provide quality changes to people. He indicated the presentations have empowered them to reach particular conclusions. He agreed with the idea that Parmed would be sustainable with the coming in of new members. He further stated some of Judge Lamont’s statements were conclusive. The mandate of the committee was not to kill Parmed, but to make it sustainable. The main thing was not to change benefits, but what needed to be addressed were salary packages. He said the committee needed to be holistic in its approach when addressing the matter.

(Due to time constraints SALGA could not engage with the committee because of having another session in Pretoria which they had to attend)

The meeting was adjourned.