Medical Research Council & Council for Medical Schemes 2017/18 Annual Reports

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16 October 2018
Chairperson: Ms M Dunjwa (ANC)
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Meeting Summary

Annual Reports 2017/18

The South African Medical Research Council presented its Annual Report for the 2017/18 financial year. The Council confirmed that its work was guided by the burden of diseases and presented to Members data on the leading causes of death in South Africa as at 2012. The Council received an unqualified audit with findings.  It also reported that only 19% of its total budget was spent on salaries and corporate administrative functions.

A key achievement for the Council was the investment in intramural and extramural research units which are designed to help address the burden of diseases. 48 Masters and Doctoral students were enrolled and given funding by the South African Medical Research Council. The National Health Scholars Programme 2018/2021 was also relaunched to address different disciplines. The SAMRC reported that in 2013/14, the Self-Initiated Research grants were skewed with most grants being awarded to white researchers (73%) and African Researchers only securing 11% of the grants. These figures have drastically changed with allocations for Africans increasing by nearly three-fold from 11 % in 2013/14 to 31% in 2017/18. It was reported that for the first time the revenue of the Medical Research Council hit the billion Rand mark.

The Council reported that it had entered into a Memorandum of Understanding with the Beijing Genomics Institute and developed a proposal to establish a genomics sequencing facility to localize completely human genome sequencing capacity in South Africa. The 2017/18 reporting period was also characterized by significant partnerships and collaborations between SAMRC and world-renowned organizations from Africa and beyond with a focus on influencing and impacting the area of health.

Committee Members expressed concerned that the plan for transformation at Medical Research Council was taking too long to implement. Members also wanted to know why the Council was not collaborating more with African countries and why it had not considered collaborating with Cuba.

The Committee expressed concern that the Council was not updating its data on the leading causes of death in South Africa and that it is was basing its report on data from 2012. Members pointed out that the StatsSA mortality and health data 2016 was not the same as that provided by the Council. StatsSA said that the leading cause of death was Tuberculosis whereas The Council was reporting that HIV/Aids was the leading cause of death in the country.

The Council for Medical Schemes presented its Annual Report to the Committee and reported that its regulatory scope comprised 8.8m beneficiaries, 80 medical schemes, 15 Administrators, 8 400 brokers, R 170bn in annual contributions and reserves of R 59bn. Its budgetary structure had nine Programmes. In the 2017/18 financial year, The Council for Medical Schemes had 39 indicators, of which 79 % were achieved, 18 % of the indicators were partially achieved and 3% of the indicators were not achieved. The area of non-achievement was in the ICT unit. Partial achievement was seen in the HR unit, Strategist unit, accreditation unit and the complaints unit. A backlog was created in the complaint unit because of staff resignations.

The Council had received an unqualified audit with some emphasis of matters on restatement of figures. On liability, the Council reported that it was renting a building and although it had plans for purchasing the building it could not afford to. The building had been evaluated at between R 86m and R 96m whereas the landlady was requesting R160m. The Council reported that it had a budget of R 150m, the biggest expenditure being staff costs at about 57%.

On Healthcare expenditure, it was reported that medical schemes spent R160.6bn on healthcare benefits in 2017, an increase of 6.04% from R151.2 bn in 2016. Members of medical schemes paid R31.8 bn out of pocket in 2017. on the share of pay by Members paid 33 % was for medicines, 15% for allied health,14% for specialists and 10 % to general practitioners in out of pocket expenses. The bulk of medical schemes expenditure went to hospitals, medicines and specialists. General practitioners and dentists received the lowest percentage of the benefits. The Council reported that it received 4 667 complaints against regulated entities and had resolved 3 579.There was an increase in complaints relating to governance, followed by protocols.

Members wanted more details on a complaint made against Parmed relating to incorrect contributions where a complainant not joined Parmed but contributions had been deducted from his salary and the scheme had refused to refund him.  Members were unhappy that despite passing a resolution in May directing that the Minister should appoint a CEO for the Council; the Minister was yet to do so. The Committee wanted indications of when the post of the CEO would be filled. The Committee questioned why the Council, which was supposed to protect the interests of beneficiaries, was giving support to the yearly increment of contributions by the medical schemes.

Meeting report

Opening remarks
The Chairperson apologized for the delay in starting the meeting. She welcomed the South African Medical Research Council (SAMRC) and stated that the Committee was reflecting on issues that were a challenge to the country and to the health sector. She added that the process empowered the Committee as it carried out its oversight role and that the scientists and academics could also learn from Members of the Committee.

Briefing by the Medical Research Council on its Annual Report for 2017/18
Dr Zilungile Kwitshana, Board Member of SAMRC conveyed the apologies of the Chairperson and the CEO of SAMRC. She stated that the Medical Research Council (MRC) noted that transformation at senior level remained a challenge. She reported that SAMRC’s researchers had been received many awards and that for the first time two black scientists had received awards.

Professor Jeffrey Mphahlele, the Vice President Research, SAMRC, stated that the key highlights for the 2017/18 financial year included the fruitful engagement that SAMRC had had with the Committee on diverse dates. He reiterated that SAMRC was guided by the burden of diseases in the country and that the top ten causes of diseases were classified in four areas:

  • Maternal new-born and child health
  • HIV AIDS and Tuberculosis (TB)
  • Non-communicable diseases
  • Violence and injury.

Professor Mphahlele reported that the increasing trend in maternal mortality had been reversed in 2010 and maternal mortality rate reached 152 per 100 000 live births in 2015. The under-5 mortality rate had declined from 80 per 1000 live births in 2003 to 34 per 1000 livebirths in 2016. HIV Aids remained the leading cause of death. However, marked changes in mortality have been experienced with declines corresponding with the roll out of ART and the earlier Prevention of mother to child transmission intervention.153 000 people died from HIV/AIDS in 2012 compared to 300 000 in 2006. Cardiovascular conditions were the leading category of non-communicable disease (NCD) deaths in South Africa, accounting for 19% of deaths in 2013. There was a reduction in interpersonal violence between 1997-2012, although homicide rates in SA remained much higher than the global average.

He reported on the Top 10 causes of death which contribute to 70% of the deaths in SA. At the top of the list was HIV/Aids, cerebrovascular disease and lower respiratory infections. Professor Mphahlele added that SAMRC did exceedingly well in all areas. The performance of the Council was gauged from four Programmes: Administration of health research; Generation of new knowledge; Investment in terms of innovation and technology; Building capacity for the long-term sustainability of country’s health research.

The Council had received an unqualified audit with findings. In 2017/18, SAMRC set the target for the total budget spent on salaries and operations of all corporate administrative functions at 20%. SAMRC achieved the target since only 19 % of the budget was spent on salaries and corporate administrative functions.
The Second Programme deals with generation of new knowledge and facilitating its translation into policies and practices to improve health. The target was for the number of articles to be published which was set at 700. SAMRC surpassed the target since 865 articles were published.

The third Programme related to supporting innovation and technology development to improve health. SAMRC had a target of 40 for the number of innovation and technology projects funded by the SAMRC. This target was surpassed since the actual achievement was 92. A new indicator was set relating to the number of new diagnostics, devices, vaccines and therapeutics progressed to the next stage of development. The target set was 2, a figure that was achieved. The fourth Programme on building capacity was measured by the number of bursaries SAMRC was able to provide. SAMRC exceeded the target. More bursaries, scholarships and fellowships were provided for postgraduate studies than anticipated.

Professor Mphahlele reported on the key highlights in the areas of investing in responsive health research and innovation. One key achievement was the investment in intramural (IRU) and extramural research units (ERU) which were designed to help address the burden of diseases. IRU addressed the burden of disease while ERU complemented the IRU and had more potential for innovation. The ERUs were autonomous and are based in the Universities. R 8m had been invested in eight previously constrained institutions. 48 masters and doctoral students were enrolled and had been given funding by the SAMRC. The National Health Scholars Programme (NHSP) 2018-2021 was relaunched to address different disciplines. 90 scholarships have been awarded since 2013 and 35 students had graduated. He added that the Self-Initiated Research grants (SIR) was given to researchers in the Universities if the research was compelling. In 2013/14, the SIR grant was skewed with most grants being awarded to white researchers (73%) and African Researchers only securing 11% of the grants. Those figures had drastically reduced with allocations for Africans increasing by nearly three -fold from 11% in 2013/14 to 31% in 2017/18. The Investment in Innovation Programme had a unit dealing with grants innovation and product development. Most of the money came from collaborations. The SAMRC had research initiative collaboration with the United States and various other countries. Almost R250m was invested in research in 2017/18.

Mr Nick Buick, CFO, SAMRC, reported on the financial position of SAMRC. He stated that for the first time the revenue of SAMRC hit the billion Rand mark. Revenue for the year showed an increase of 6.7% to R1 000 857 000. There was a decrease in government grants of 6.5% to R539m. That was offset by a substantial increase in contract income of 27.8% to R461 418 000. SAMRC was a going concern with accumulated reserves of R289 755 000.The operating expenses reflected a substantial increase of 15.7%. Collaborative research costs increased by 8.9%, reflecting the continued growth in high impact grant awards. Employee-related costs increased by 18.1%. Revenue increased by 7.2% to R 1bn, and expenses increased by 15.7% to R1 bn. SAMRC had a deficit of R 43m against a deficit budget of R 63m. Reserves decreased by 13.8% to R 289m.

Mr Buick projected that the baseline would continue to be under pressure since it would receive roughly the same amount of R539m from government. The increase in VAT had also decreased the SAMRC annual baseline allocation. He added that the SAMRC had received an unqualified audit outcome. There was one finding on local content relating to the procurement of furniture. SAMRC had interpreted the rules differently. SAMRC had made contact with the suppliers concerned.

Mr Brinton Spies, Executive Director in Human Resources, reported that the SAMRC ensured career progression and advancement for its scientists with a focus on growing black women scientists’ skills. The recruitment turnaround time came in well below the 32-day target. He reported that SAMRC was increasingly appointing more Africans in order to address the demographics. The organization had a good gender profile. However, it was an area of continued work, particularly when it came to the senior management level. SAMRC had a low turn-over, thus limiting opportunities for transformation. He reported that at senior management the males outnumbered females. He added that SAMRC tried to give employees opportunities for advancements and had invested a huge amount in training and developing skills.

Professor Mphahlele reported on the strategic collaborations, partnerships and agreements. SAMRC was a strategic partner to the BRICS TB research network. The network looked at the development and innovation of diagnostic vaccines, drugs and regimens, infection control for TB and patient-centred care. SAMRC had hosted a workshop in January 2018 for Members of BRICS. In April 2017, SAMRC entered into a Memorandum of Understanding with the Beijing Genomics Institute (BGI) and had developed a proposal to establish a genomics sequencing facility to localize complete human genome sequencing capacity in South Africa. SAMRC had been approached by the African Union to host the genomics facilities and the collaboration would assist with the research. The SAMRC has signed an MOU with Norvatis and the South African Department of Science and Technology (DST) to formalize ongoing investment from Norvatis in developing SA research capabilities. The Public Private Partnership will look at joint research programmes in selected communicable and non-communicable diseases. Cochrane SA, along with Cochrane African Network, was collaborating to promote and increase the use of evidence-based health care to inform policy making.

Collaborations existed with specific countries including Senegal, Sweden, Sudan and India. The 2017/18 reporting period was also characterized by significant partnerships and collaborations between SAMRC and world-renowned organizations from Africa and beyond.  Most of the articles in the media, relating to SAMRC, were positive.

Professor Mphahlele added that SAMRC would be turning 50 the following year. It will celebrate its 50th anniversary with various events and a key publication was underway. The 5-year strategic plan of the organization was coming to an end in 2019 and the occasion would assist SAMRC to reflect on the current and future vision. The event would also help promote SAMRC as Africa’s premier health research organization.

Ms S Kopane (DA) noted that there were 70 foreign nationals at supervision level at SAMRC and five senior professionals at senior management who were foreigners. She asked how long the foreigners had been employed at SAMRC, which critical skills the foreigners had and details of their home countries. She also noted that the Auditor-General (AG) had declared certain sums of money as irregular expenditure and wanted to know what lesson SAMRC had learnt from the AG’s findings on irregular expenditure. She asked why SAMRC had not followed the local content requirement when procuring furniture.

Mr P Maesela (ANC) stated that the Committee appreciated that a lot had been done. However, he noted that the plan for transformation was taking forever to implement. He asked how much progress SAMRC had made on public health innovation and research. He asked why so few blacks were being awarded the SIR grant. He asked where SAMRC was derived the bulk of its revenue. Other than the collaboration with Nigeria, he noted that the bulk of collaboration by SAMRC was with first world countries. He asked why SAMRC was not collaborating more with African countries. He noted that the collaboration with China on BCI was on vaccines, yet he thought SA was a leader in building vaccines. How far was the molecular medicine and what did SAMRC have to show for the last fifty years?

Dr S Thembekwayo (EFF) asked how many of the graduates who had benefited from the bursaries were employed in the public health sector. She asked SAMRC to provide the demographics of Masters and PhD students who had benefited from bursaries. She asked whether one of the conditions for the bursaries was that the beneficiary worked in the public sector.

She asked for the reason for the termination of the contract of the former Vice-President and the cost of termination of the contract. What was the cost of employment changes, more specifically resignations. She noted that the number of resignations stood at 58 and wanted to know if SAMRC knew the reasons for the resignations and if it was doing anything to cap further resignations. What was employment equity statistics and the total number of employees with disabilities under occupational categories? SAMRC had only two Africans as compared to fifteen whites in senior management. She asked whether there were any plans to increase the number of African females. She also pointed out that under the occupational category, SAMRC did not have any African females in top management whereas it had two white females.

Dr Thembekwayo noted that SAMRC did not have any collaboration with Cuba and asked if there were any plans for collaborating with Cuba.

Mr A Mahlalela (ANC) noted that the data on leading causes of death reads as it had at 2012 and asked why SAMRC was not improving the data on the leading causes of death since it was six years behind. He pointed out that StatsSA mortality and health data 2016 was not the same as that provided by SAMRC. StatsSA named the leading cause of death as TB, and not HIV/Aids. He asked how SAMRC was to guide the Committee on research while it was giving information that was not in tandem with StatsSA. The report given by SAMRC on maternal mortality was data from 2015, but when dealing with under 5’s, the maternal mortality data reported was at 2016. That reflected a lot of inconsistency and did not help to give a proper picture of the current status in SA.

Mr Mahlalela asked if it was lawful to budget for a deficit and which section of the PFMA allowed for budgeting of a deficit. He noted that there was an increase of expenditure on salaries and one of the reasons given was the filling of vacant posts. Which vacant posts had filled and at what level? On the cost of the increase of temporary staff, he asked how many temporary staff had been employed. How temporary and why temporary? He noted that the irregular expenditure was attributed to a failure to follow supply chain rules. He asked what measures had been put in place to ensure the irregular expenditure did not re-occur. To what extent was SAMRC aware that it had been violating the rules. Even though the figures in 2016/16 and 2017/18 for senior management according to race were different, there was stagnation in terms of the numbers. Coloureds had gone down, and Africans remained the same. That meant there was resignations by whites. What was the reason for not filling the vacant posts and what was SAMRC doing to address the issue of transformation?

Mr Mahlalela asked if ordinary people understood the issues that SAMRC dealt with since communication was mainly aimed at the elite. Could SAMRC be specific on what collaboration meant and to relay to Members the activities that it had engaged in as a consequence of the collaboration? Members wanted to know details on the content of the workshops held.

The Chairperson agreed with Mr Mahlalela. She reiterated that ordinary people needed to be involved in the activities of the SAMRC. She added that it was known that TB was the number one killer in South Africa, yet SAMRC was giving different information. She asked whether there was any communication between SAMRC and StatsSA. She noted that a picture of a school was included in the presentation on page 47 and asked where the school was. SAMRC should make the Committee comfortable that it was talking to ordinary people.

Professor Mphahlele responded that the report did not reflect everything happening at SAMRC. He apologised that SAMRC had taken for granted that it had previously engaged with the Committee on some issues and had not repeated the same things during the presentation.

Professor Mphahlele confirmed that the SAMRC was still in the process of addressing transformation. The data on the burden of disease was also still a work-in progress. On the SIR grants being given to different researchers at different institutions, he responded that the grants had a high value of about R 200 000 per annum for three years. The SIR grant catered for upcoming and established researchers. 40% of the grant went to established researchers while 60% went to young researchers, which made the grant highly valuable. The other value in the grant was that it assisted in addressing demographics. In the past years, the profile of the grant had changed.  In response to the question by Dr Thembekwayo on whether the post graduate students were employed in the public health sector, he stated that SAMRC believed that the students were making a difference in the public sector. The bursaries targeted professional health care workers who were employable. Most of them were working and because the Programme replaced their salaries, the postgraduate students were able to leave their work places and concentrate on research. Most postgraduate students were African students.

On the question of partnering with African countries, he stated that SAMRC had a true African footprint. There were specific activities, it engaged in with other African countries. Nigeria had visited SAMRC last year to seek collaboration and had signed an MOU, detailing the areas of collaboration, mainly in the area of capacity development. Nigeria would send researchers to South Africa and SAMRC would send researchers to Nigeria. The collaboration was in areas of infectious diseases. There were diseases unique to Nigeria and SAMRC might assist with its knowledge. By virtue of its location, Nigeria was confronted by Ebola. SAMRC was not operating in that space, so Nigeria had to seek other countries to assist in that field, but in areas to do with TB the two countries collaborate. SAMRC had an animal unit which it used to test new treatments and Nigeria would want access that facility.

Professor Mphahlele added that the collaboration with the Chinese on vaccines was justified since it was part of the collaboration on genomics. That would allow SAMRC to do genomic sequencing of genes, whether in the space of cancer or diabetes. The genomic sequencing would contribute to individualised medicine. What was driving precision medicine was the capacity to do whole genome sequencing. SAMRC had facilities dedicated to vaccine development. In the past South Africa had capacity  to develop TB and polio vaccine, but the capacity had been lost and that was the reason SAMRC was looking at vaccine development. The country did not want to rely on the international market. On the question of why there was no collaboration with Cuba, he responded that SAMRC had not yet identified an area where it could collaborate with Cuba. SAMRC recognized that Cuba was a strategic country for South Africa and that it had potential, especially since it was the country that developed hepatitis B vaccine. At the moment SAMRC did not have an  MOU with Cuba, but it was working on that. SAMRC collaborated with the individual countries in BRICS but it made a difference when the collaboration was with the whole network.

Professor Mphahlele gave examples of what SAMRC had done over the 50 years. He stated that SA had done very well in the rotavirus vaccine. The research by MRC on rotavirus vaccine was instrumental in developing international guidelines. Lately the SAMRC had helped the NDOH with an app which could be used in hospitals to provide information on prescribed medicine. The MRC has transferred the app to the NDOH. SAMRC was also funding an extramural research unit at UCT which had developed a new treatment for malaria. The drug was undergoing clinical trials in humans. Researchers had developed a balloon which could be used to stop bleeding after delivery. Amiflow would used at clinic level to predict whether the baby was at risk of delivery or not and the SAMRC was now sponsoring the clinical trials.

Dr Zilungile Kwitshana, who is on the board at SAMRC, added that SAMRC had funded Ebola diagnostics tools. SAMRC was aware that genomics play a key role in cancer. The Genomic Centre would address and target key treatment. She stated that transformation was previously a glaring issue. It was a challenge because SAMRC discovered that black females meeting the criteria for appointments were well established in different places and  it was not easy to uproot them. She confirmed that the picture in the presentation was one of the projects of SAMRC at a school in a rural area in Mpumalanga.

Professor Mphahlele added that the Witwatersrand University was doing extra mural research in that area and that the picture was of one of the sites. Members of the community are part of the research advisory board and there is an excellent research infrastructure based in that area. The community benefits in terms of employment and the research output. The community is informed of different health risks it is facing and the interventions necessary. One of the Programmes of the research involves encouraging young girls to abstain from sex.

Prof Rachel Jewkes, Executive Scientist, SAMRC responded to the mortality data. She stated that there were two different types of statistics and that SAMRC and StatsSA have different sources of data. SAMRC has a rapid surveillance mortality project which is why it is able to present 2015/16 data. She stated that the question on what causes mortality comes from death certificates and it is only as accurate as the information contained in the death certificates. The death certificates have flaws as the certificates will report on immediate, and not the underlying, cause of death. SAMRC has to understand the relationship between what is written on the death certificates and the underlying cause of death. SAMRC has to look at hospital records and conduct a massive survey. The 2012 data provided to Members has been analysed and adjusted and SAMRC has confidence in that data. StatsSA data uses the raw data that has not been through analysis. She added that SAMRC knows the trends on mortality rates which trends do not change quickly, thus the overall picture is not that different.

Prof Jewkes added that SAMRC has a Programme for communication involving schools .One of the promotional criteria for staff is that staff members have to participate in community work. SAMRC works with communities on a daily basis. It has been working on gender-based violence (GBV) with communities in informal settlements around issues of GBV prevention. Other than through newspapers, SAMRC does a lot of work in reaching out to ordinary people via community radio stations in order to reach out to people. She added that she is heading a programme of research on GBV, collaborating with 13 other African countries and countries in Asia. SAMRC is funding research and engaging communities about prevention of GBV and building capacity. It is a pan-African and Asian partnership and SAMRC is driving knowledge across generations through workshops, building capacity among stakeholders from NGOs to people in government.

Mr Buick stated that the bulk of revenue, R 514m was a baseline grant from National Treasury (NT) and the rest was from contract grants. He added that it is legal to budget for deficit according to Sec 53 of the PFMA, with approval from NT. On failing to provide for local content in the procurement for furniture, he responded that NT sets certain percentages and the issue was on interpreting what a tender means. SAMRC thought the threshold was R50 000, but AG said it is R30 000. AG was also of the opinion that it must take into account local content. SAMRC had interpreted that as it may provide for local content, but it was not mandatory. SAMRC will apply the AGs findings going forward. He stated that irregular expenditure was not deliberate and that most of it derived from the research side. There are consequences and staff are informed of the  importance of compliance.

Mr Spies responded on the nationalities of the five foreign nationals at senior level. He stated that the project was an Africa-wide initiative and the five were permanent residents of South Africa. The skills possessed by the five were critical. On termination types and why people are resigning, he responded that one of the reasons for resigning was dissatisfaction with management. SAMRC had a strong management development programme to assist in managing people. The second reason for resigning was to seek better salaries. He confirmed that SAMRC regularly did  salary benchmarking and wanted to ensure that the work environment was good. There were opportunities for growth and development. On why there were few African women in senior management, he stated that SAMRC had tried different approaches and was now looking at succession planning.

Professor Mphahlele added that the SAMRC had started transformation by having deputy directors who were people of colour.

The Chairperson stated that SAMRC should have pointed out to Members that it had reflected on the data by StatsSA. She also advised SAMRC to let StatsSA know why it was giving different information. She was concerned that ordinary people did not understand the work of SAMRC. She wanted to know which radio stations were used by SAMRC. In which provinces were the radio stations and which languages were used to reach the ordinary people?

Mr Mahlalela commented that what SAMRC had taken the same position on the data by StatsSA  the previous year. He said StatsSA was reporting a different position and SAMRC could not operate outside the policy framework of government. Six years was a long period and it was not correct for SAMRC to allege that changes did not happen abruptly. He stated that SAMRC was providing guidance based on assumptions and not reality. Non-communicable disease (NCD) was the big problem in SA and SAMRC was playing it down.

Mr Maesela added that the Committee was impressed that in a country like Cuba there was no amputation of diabetic patients, SAMRC could learn by sending people to learn from the institutions in Cuba. The doctors in Cuba had also found ingredients that deal with  cancer. SAMRC should send people to learn. The people could then enhance the knowledge in the country. SAMRC did not have to stick to institutions it had traditionally collaborated with.

The Chairperson stated that the Committee had recently visited Cuba and, unfortunately, SA was lagging behind. She asked SAMRC to send messages to the Committee notifying  Members when it was on radio. She asked that the HR information on foreign officials be sent to the Committee. She added that government was engaged in ensuring jobs were created. Institutions such as SAMRC had to assist. She noted that treatment for cancer by studying genes in Africa was very important, and that the Committee would follow up on the possibilities for collaboration with Cuba.

Council for Medical Schemes Annual Report 2017/18
Dr Clarence Mini, Chairperson, Council for Medical Schemes (CMS) took Members through the functions of the Council as provided in section 7 of the Medical Schemes Act 131(1998). He stated that the regulatory scope of CMS comprises 8.8m beneficiaries, 80 medical schemes,15 Administrators, 8 400 brokers, R 170bn in annual contributions and reserves of R 59bn.

Dr Sipho Kabane, Acting Registrar, CMS reported that the posts of registrar/CEO and the General Manager for Research and Monitoring were vacant. He reported that CMS had four strategic goals. The budget structure had nine programmes.

On the overview of the annual performance for CMS, he reported that the CMS had 39 indicators, 79 % of the indicators were achieved,18 % of the  indicators were partially achieved and 3% of the indicators were not achieved. The area of non-achievement was in the ICT unit. Partial achievement was seen in the HR unit, strategist unit, accreditation unit and the complaints unit. A backlog had been created in the complaints unit because of staff resignations.

The Office of CFO had a target of achieving an unqualified audit, which was achieved. A new indicator was on the number of strategic risk register reports submitted to Council for monitoring, per year. The target was four and the target had been achieved. On ICT and knowledge management, a new indicator on the percentage of IT security incidents per year was set. There was, however, a deviation due to a single security incident where the proprietary code was shared in violation of policy, leading to disciplinary action and dismissal. In Human Resources management, one of the indicators was to minimize staff turn-over to less than 10%. That target was achieved. The second indicator was the target of 120 days to fill a vacancy. The target was partially achieved since the Senior Development post took more than 120 days to fill. Another indicator related to the achievement of employment equity targets. The planned target was 85% and the actual achievement was 79.82%.This was because attracting and appointing people with disabilities remained a challenge.

Dr Kabane reported that the overall challenges for the CMS for the year were as follows:
-Improving overall regulatory effectiveness
-Navigating through the uncertain policy environment
-Positioning itself as a key player in the implementation of the NHI
-Ensuring that the transition to universal Health coverage is as smooth as possible.

Mr Daniel Lehutjo, CFO reported that CMS had received an unqualified audit with some emphasis of matter on restatement of figures. On liability, he stated that CMS was renting a building and it was almost half way through the lease period. The main source of revenue was the levies that CMS charged. It had a budget of R 150m. The biggest expenditure was staff costs at about  57%. The number of labour relations cases had taken up a large sum of money. Settlements were arrived at in the CCMA. He clarified that the consulting fees paid was for the audit. CMS did not have the capacity to do inspection, so it outsourced that function. CMS inspected the entities but the cost incurred on the forensic and financial audits was deducted from the entities. In the current year CMS had spent about R9.8m on inspection and the money had been recovered from the entities.

Mr Lehutjo stated that CMS was undertaking succession planning and the performance management system had been outsourced. The 13 Board Members were appointed by the Minister but the cost is reported as consulting fees. He added that the review of PMBs should be done every two years but it had been accelerated because of the National Health Insurance (NHI) planning. On the Administrative expenses, he pointed out that the rental lease agreement had been entered into in 2013 for 10 years. Council was to take a strategic discussion on the matter of housing of operations because the CMS did not know what its mandate would be in future, given the implementation of NHI. The mandate could either shrink or expand.

On the irregular expenditure he reported that the panel of inspectors had not gone through the full tender process. The AGSA was of the view that CMS should have gone out on tender. The costs were, however, recovered from the inspected entities. The cost was about R70m. CMS had applied for NT to condone the irregular expenditure. NT had also issued new guidelines and previous irregular expenditure had to be condoned through new guidelines. Going forward, CMS would put the process out to tender.

Mr Mondi Govuzela, Acting General Manager: Research and Monitoring Unit, CMS, gave an update on the state of the industry. Medical schemes spent R160.6bn on healthcare benefits in 2017, an increase of 6.04% from R151.2bn in 2016. Members of medical schemes paid R31.8bn out-of-pocket medical costs in 2017. Out-of-pocket payments by members was divided into 33% for medicines,15% for  allied health, 14% for specialists and 10% for general practitioners. The bulk of medical schemes expenditure went to hospitals, medicines and specialists. General practitioners and dentists received the smallest percentage of the benefits. On the type of
reimbursement methods, he reported that the fee for service payment arrangements amounted to 74.6% of total expenditure or R44.2bn for hospital services in 2017. Alternative reimbursement models included per diem at 9.0%, fixed fees at 3.7%, Uniform Patient Fee Schedule at 0.5 % and global fees at 0.2%.

Payment arrangements had a profound impact on the allocation of health resources. He explained that the Fees for Service arrangement gave an incentive to providers to give more services. Expenditure on PMB was R79.2bn in 2017. 49% of all expenditure was on risk benefits (R144.4).
Ms Tebogo Maziya, General Manager: Financial Supervision, reported on the financial performance. She stated that the Medical schemes Act required schemes to  submit financials four months after year-end, and that was  done in April 2018. 8.8m lives were covered. The solvency for medical schemes was 33 %, which was above the minimum solvency threshold required. The risk claims ratio had reduced. The rate of change in claims was much lower than contributions, which had contributed to the slump in medical schemes in the year.

Ms Maziya added that there should be value on money spent on trustees of medical schemes, which should reflect the level at which trustees are remunerated. She added that the two largest schemes, Discovery and GEMS, drove the performance of the entire market.

Ms Thembi Phaswane, Senior Manager Complaints Adjudication, CMS, gave a report on the complaints trends. CMS had received 4 667 complaints against regulated entities and had resolved 3 579, which was a reduction of 1 %. There was an increase in complaints relating to governance, followed by complaints about protocols. On the trends noted in open schemes, she gave the example of Spectramed which had a reduced number of complaints. However, most complaints against Spectramed were by members defaulted into the highest income bracket and surgeons incorrectly advising members that their back conditions fell within PMBs. Most rulings had been in favour of  the scheme. There was a significant increase in volumes of complaints about Genesis compared to all top 10 schemes. Genesis was also found to be in contravention of regulation 8(1) and (2) of the Act by insisting that its Members should receive treatment at state facilities. The dispute was currently in court.

She stated that there are worrying trends noted on GEMS complaints. The complaints raised concerned governance issues and the performance of Metropolitan Health Administrator. There were serious administrative inefficiencies by the Metropolitan Health Administrator, but no corrective action had been taken. There had also been a delay in paying of accounts without valid reasons, and reprocessing was done only after receipt of complaints. For Parmed there were four complaints and one enquiry. One complaint related to incorrect contributions where a complainant had not joined Parmed, but contributions were deducted from his salary and the scheme refused to refund him.

Ms Thembekwayo stated that the Committee needed an indication of when the post of the CEO would be filled. She noted that there was an outcry against the high cost of medical aid and wanted to know why CMS, which was supposed to protect the interests of beneficiaries, was giving support to the yearly increment.

She pointed out that the slight decrease in medical schemes could be because of lack of affordability. She asked why there was a challenge in attracting disabled people to the organization. Why was CMS still renting the building and did it intend to buy the building? Why was there a recurrence of irregular expenditure when the board had to ensure that the procurement process was followed? She sought clarification on savings scheme exhaustion vis a vis continued contribution by members. She added that the CMS should report on the potential impact of NHI and the role it was playing in the development of NHI.

Ms Ndaba added that the explanation about the office space was not satisfactory and that the answers CMS was giving were the same answers it had given the previous time, She asked why CMS was not worried that it was spending a lot of money on rent. Why did CMS not have a budget breakdown for each of the Programmes? Why had the AGs finding on Programme 3 state that the information provided by CMS was unreliable?

Ms Kopane noted that there were about 60 industrial experts and asked what criteria was used to select members to serve on the committee. She noted that there were people in SA who afford medical aid but did not want to be in any scheme. She asked whether there had been any progress on mandatory inclusion. How long would it take to realign benefit options to NHI? She asked if the insurance companies with Insurance policies relating to providing primary health care were reporting to the CMS. There were 29 medical schemes with lower numbers of members. What was the plan for such schemes going forward? Had a study been done to verify the value of the medical schemes?

Mr Maesela wanted to know why 50% of the budget was being spent on rent and why the CMS also had building expenses. He was concerned that something was wrong and Members complaints were being ignored. He asked for clarification on the difference between Schedule Fees and Global Fees. How was CMS positioning itself  for the NHI?

Mr Mahlalela welcomed the presentations and expressed concern that the appointment of the CEO was taking too long. He stated that the resolution which the house had adopted in May had not been taken further and that the Minister should account for why he was ignoring resolutions of the House. He pointed out that the Auditor General had found that the reason for irregular expenditure was the lack and effective steps being taken.  He said that did not correspond to the explanation CMS was giving. The AG report stated that key officials lacked competencies. What measures had CMS put in place to prevent irregular expenses? He noted that on material adjustment, the AG report stated that inadequate controls and record-keeping had led to a problem of inconsistencies between the Annual Performance Plan and the financial report. He asked how CMS was going to address the finding by the AG so that, going forward, there was consistency.

Mr Mahlalela noted that the CMS vision talked about affordability and wanted to know how far the CMS was in fulfilling that vision. How many people were unable to join schemes because of affordability? Was it possible for CMS to quantify its milestones? On the decrease of staff members, he noted that one staff member had died which could not be a major contributor. The highest contributor was resignation and dismissal. A review of remuneration would assist in preventing resignations. What was being done to address the dismissals that were attributed to misconduct? He asked how CMS was going to change its approach to attract disabled people to work in the organization.

The Chairperson wanted to know what had finally happened on the matter relating to the pharmacist. On the compliant on Parmed, she was concerned and asked where that person was working since Parmed comprises Members of Parliament and the judiciary. She wanted to know why the scheme was refusing to refund the member. She asked what CMS did to ensure it was visible, especially in rural areas.

Dr Mini responded that it was the second year CMS had not had a Medical Schemes Registrar/CEO. The Medical Schemes Act says it was the Minister that appointed, after consultation with council. The Minister understood the weight of resolutions passed by Parliament and failure to appoint the CEO was not defiance on the part of the CMS. On the building, he confirmed that there was nothing untoward. The building was evaluated between R 86m and R 96m but the landlady was demanding R 160m. The CFO had tabled the issue at council and the council was looking at options, even if it meant moving out or asking for permission to subdivide the building. On the question of the Schemes that had under 6 000 Members, the CMS had done an outreach to talk to each scheme, including Parmed and had noted that the schemes were so different and varied that it would not be easy to consolidate the schemes. If CMS asked all the schemes to pay PMBs, the small schemes would go under. Some members of those schemes had jobs for only six months and the schemes did not receive contributions during the time the members were not in employment. CMS had so far looked into 30 schemes and would be looking into all 80 schemes.

Dr Kabane responded to the question of the unaffordability of schemes. He stated that the annual contribution increase was a function of inflation and utilisation of the schemes by members. The demand factors affecting utilisation included the increase on burden of disease and chronic diseases where people got sick more often, and claimed more. The scheme had to increase to anticipate what would be claims for the following year. The supply factor involved fraud, waste and abuse. It was estimated that 15% of all claims had an element of fraud, waste and abuse. That happened with the collusion of members and led to an increase in number of claims. On the question of uncertainty around the coding system, he stated that out of the pie of claims paid, 36% were paid to private hospitals that were largely unregulated. Single exit price had been able to bring the price of medicine down. However, the challenge had been what the specialists charged as there was a regulatory gap. That contributed to people dropping out of schemes or reducing the number of beneficiaries.

On recruitment of people with disability, Dr Kabane confirmed that CMS was still working out the plan and, although the advertisements sent out advocate for all people to apply, CMS did not get disabled people applying.

On deductions being made after the fees had been exhausted, he stated that Schemes had rules which became the contract between the member and the scheme. If the rules provided that there had to be a network that the member had to belong to and the member went outside the network, the scheme would penalise the member through core payments, resulting in the savings  being exhausted. Schemes also had a formula for medicines. If one buys another drug, then he/she had to make core payments. Scheme rules were complex and few people understood the rules. An effort was being made to try to simplify scheme rules and empower members to understand.

On the role of CMS in relation to NHI, Dr Kabane stated that CMS provided support to the Ministry in complementing national policy.  CMS was to carry out certain tasks, including supporting the legislative changes seen in the Medical Schemes Amendment Bill . The NHI Bill also said that CMS was to play a supportive role. In preparation for the NHI, CMS was standardising the options of schemes, making health market enquiries and consolidating schemes. It had published guidelines and was waiting for all key players. CMS had given them until 30 November 2018. On the capital solvency framework, he stated that a great majority of the schemes had surpassed solvency requirement and CMS wanted to individualize the risk so that schemes were properly assessed. On products of demarcation, he explained that there was a piece of legislation that allowed CMS to do that and CMS had been receiving and giving exemptions.

Mr Lehutjo added that the intention was to purchase the building but the building was not affordable. He clarified that the rent was 50% of the administrative budget and not the total budget. He confirmed that the breakdown of budget per Programme had been included in the Annual report. On taking steps to prevent Irregular expenditure, he reported that four positions dealing with supply chain management had been proposed so that the challenges could be dealt with. The CMS had also received another guideline on irregular expenditure. There were challenges in the Supply Chain Management and the board had approved two positions. In the previous financial unit, irregular expenditure was in regard to the forensic audit done relating to the previous registrar. The CMS had proposed that the audit was urgent but the AG had not agreed.

Mr Paresh Prema, General Manager: Benefits Management, CMS, stated that slight drop in contributions by membership was from the 20-29 age group, which meant it was an affordability challenge. He stated that all medical schemes needed to provide for PMBs which formed the basis on which to determine whether it was affordable or not. He added that the CMS reviewed medical scheme increases. It was a rigorous process where CMS gave guidelines on inflation, utilisation and higher pension ratios. The average increase had been about 7%. CMS tried to make sure that the increases were not excessive. CMS had allowed for efficiency discount options which relied on one going to a particular network of medical providers and the schemes were trying to register for those options. Contributions were determined and paid throughout the year. Expenses were chronic and should not come from savings. It was at the discretion of each member how to use the savings. On restricted versus open schemes, he stated that restricted schemes provided more value because the membership was mandatory, making it more cost effective. The legislation did not require mandatory membership but that had come up in the health review.

Ms Phaswane added that GEMS was under close monitoring for ignoring complaints by members. On the complaint relating to Parmed, she confirmed that it related to a Member of Parliament who did not want to terminate his previous membership. It was the employer who had made the deductions and not Parmed. The MP had advised Parmed and challenged his membership. Parmed had refused to refund him. Section 28 of the Medical Schemes Act provided that no person could belong to two medical schemes. The matter had been taken to court. CMS had engaged the board of trustees at Parmed and had taken a decision against Parmed.

Mr Govuzela clarified the reimbursement methods. He stated that in the Fee for Service method, the risk was with scheme since the provider could apply for as many services as he saw fit. Under Global Fees, the risk was with provider and the provider coordinated care so that costs were reduced and quality was achieved.

Ms Pulane Molefe, Head of Communications, added that part of the incentive was to reach ordinary members of the schemes. CMS needed to empower members to know their rights. Plans were underway for the CMS toll free call centre number to be included on membership cards. CMS was also targeting the rural areas.

Closing remarks
The Chairperson stated that the toll free number was welcomed and advised CMS to also use print and electronic media. She advised that where the Committee required further information, CMS should share that information with Members.
The meeting was adjourned.

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