Parmed Report Draft: consideration

Ad Hoc Committee on Parliament and Provincial Medical Aid Scheme

26 November 2018
Chairperson: Ms L Maseko (ANC)and Co-Chairperson: Mr M Parkies (ANC)
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Meeting Summary

Parliamentary and Provincial Medical Aid Scheme Amendment Act, 1996 [No. 8 of 1996] - G 17069

The Ad Hoc Joint Committee on Parliament and Provincial Medical Aid Scheme considered its draft report on Parmed, but could not adopt it because the NCOP component was not quorating. During the discussion it became clear that most parties were in favour of submitting to Parliament option 1 which dealt with salary structural adjustments that led to the unaffordability of Parmed. The EFF was the only political party that did not support the idea because it proposed that both options 1 and 2 should be submitted to Parliament.

The unreasonable discrepancy between salary adjustments and medical aid subsidy dated back to year 2008 when the remuneration structure for members of parliament changed from a cost plus benefit to a total cost remuneration package. Following these adjustments, the salaries of the members did not increase in proportion with the increase of Parmed medical aid costs.

It was noted there were no problems with Parmed before these adjustments because it was an affordable medical scheme where members were paying plus minus R1 332 per month, but when the Moseneke Commission made the changes, the medical scheme became very expensive and left members forking out R12 000 per month. That was why members were proposing the submission of option 1 to Parliament to make the scheme affordable and go back to the pre-Moseneke era. Option 1 would see members paying the minimal while the state would be paying two-thirds to the medical scheme.

The members were of the view the medical scheme should be voluntary; hence they proposed that “must” in section 1 of Parmed Act should be changed to “may”. They also reasoned the expansion of the membership to other public representatives like the magistrates, traditional leaders and municipal councillors – officials currently excluded from Parmed - would improve the scheme and lower the cost for membership. The Committee was in agreement that membership would not be increased overnight because it was a long term process and heeded the advice of the National Treasury that this arrangement was not sustainable forever.

The Committee further resolved that critical areas in option 2 should be reinforced in case option 1 does not go through. It agreed that it would further recommend that the Sixth Parliament investigates the implementation of option 2 in order to make the scheme voluntary and widen its membership. The Committee indicated it would put a framework for those coming in the new parliament so that they do not start afresh, and it said it does not want to prescribe what the Sixth Parliament should do. It noted none of this would apply now, but only during the term of the Sixth Parliament.

Meeting report

Ms Maseko informed the Committee that in terms of the Parliamentary and Provincial Medical Aid Scheme Act 28 of 1975 (‘Parmed Act’), Members of Parliament and other office bearers such as judges are members of Parmed due to the fact that section 1 of the Parmed Act legislatively created a restricted scheme with compulsory membership.

She stated the Committee was grateful for the extensive cooperation it received from the stakeholders when it held a workshop on 13 June 2018 where stakeholders made oral and written submissions to the Committee on various matters related to the terms of reference. The stakeholders included the judges, magistrates, House of Traditional Leaders, SALGA, and EFF. The following officials were currently excluded from belonging to Parmed:

  • Municipal Councillors
  • Magistrates
  • Traditional Leaders

During the consultations with the representatives, the argument was made that extending the pool of officials that qualify as Parmed members might strengthen Parmed as a sustainable scheme and bring costs down as a larger membership base would allow for more scheme options. This group expressed that their members would be open to the idea of joining Parmed, but there was a concern that the current cost of membership was too expensive.

Ms Maseko indicated there was no problem with Parmed before because it was affordable and members were paying plus minus R1 332 per month, but when the Moseneke Commission made salary adjustments, it became too expensive and members had to pay R12 000 per month from their salaries. She said the main point that brought them together was to go back to the pre-Moseneke era.

Before 2008, two-thirds of the medical aid contribution of MPs were subsidised and not deducted from their salary. Then the Remuneration Commission made a recommendation in favour of the implementation of the total cost remuneration system for senior public office bearers in the executive and legislative branches of government. 2008 saw the remuneration structure of members changed from a cost plus benefit to a total cost remuneration package. This had a great impact on the impact medical aid deduction had on members financially.

Subsequent to that calculation and adjustment, the salaries of MPs did not increase in proportion with the increase of Parmed medical aid costs because between 2008 and 2014 medical aid increased by 75.48% while the salaries of MPs increased by 39.14%. Members had to bear the financial impact of the desperate increases.

Ms Maseko pointed out that the Committee had to identify options because Parmed was a restricted compulsory scheme with exorbitant costs that affected the remuneration of the members. When the Committee designed the options, it was sensitive to the current economic situation and fiscal framework, and it further observed current policy developments such as the proposed national health insurance and the consolidation of the public sector medical schemes. The Committee identified three options.

Option 1

The Committee suggested structural adjustments. The two-thirds state subsidised contribution that was calculated into the total cost remuneration package in 2008 has not been sufficiently adjusted over time. The Committee has then highlighted the urgent need for Parliament to submit a formal request to the Independent Commission for the Remuneration of Public Office Bearers to re-evaluate the status quo and consider re-instituting the pre-2008 position of a cost plus benefit remuneration structure instead of the current total cost remuneration. This request to the Commission should highlight the need for discussions between the Commission and National Treasury with regard to the impact of any change in remuneration structure to the fiscus, including tax implications. The implementation of this option would not require the current Parmed Act to be repealed nor would it require any substantive legislative amendments.

The Committee further proposed technical amendments. Because the Parmed Act was outdated, the Committee proposed the deletion of ‘’Senate’’ and be replaced with ‘’National Council of Provinces’’. In addition, section1 of the Parmed Act refers to the Medical Schemes Act of 1967 which has been replaced by the Medical Schemes Act, 1998.

Option 2

The Committee indicated if membership was made voluntary without the membership pool expanding, the viability of the scheme could be negatively affected. It proposed that “must” in section 1 of Parmed should be replaced with “may”.  To address this risk, transitional provisions would need to be put in place in consultation with the Leader of Government Business, National Treasury and Department of Health. Such a provision would have to look at safeguarding the interests of members who choose to remain with Parmed. These interests would not only be financial in nature, but also in the maintenance of the common benefit advantage they currently get from the scheme.

The Legislature has consistently indicated there is a need to expand the membership scope to ensure that Parmed remains viable as a medical scheme and keeps costs down. This could be achieved by extending the scope of section 1 of Parmed Act membership list to include magistrates, municipal councilors, and traditional leaders. The expansion of membership would have an impact on the fiscus and would require policy discussions with the Leader of Government Business, National Treasury, Department of Health, and Independent Commission for Remuneration of Public Office Bearers.

In the event that the membership pool is expanded, Parmed could introduce additional benefit options to the scheme making provision for compulsory members to have the option to structure their medical aid benefit in line with their personal needs. This was likely to increase Parmed membership to 6000 instead of remaining at 2000.

Option 3

If it was the will of the Legislature to dissolve Parmed completely and repeal the Act, the impact of such a step would have reaching consequences for continuation members and staff employed by Parmed. Extensive transitional safeguards would have to be put in place with the Leader of Government Business, National Treasury and Department of Health; and would trigger labour relations considerations relating to retrenchments because Parmed is an employer.

Discussion
Dr S Thembekwayo (EFF) remarked the Committee had seen the first and second draft. She said the third draft was crafted in such a manner that was so obvious that members would just accept the structural adjustments as they were, and this was not acceptable at all.

The Chairperson replied that the options were not stated in a favourable manner because they could be merged or amended, and additions or subtractions could be made on them.

The Co-Chairperson suggested it was better to allow Dr Thembekwayo to work on the formulation and craft what she wanted in the document.

Dr Thembekwayo stated that according to the submissions, Parliament has to amend some sections of Parmed to make it voluntary. The amendments need to change ‘’must’’ and replace it with ‘’may’’.

Mr S Tleane (ANC) stated the final product they needed to produce had to be acceptable to all of them, and not make other people feel like their views had not been entertained. They needed to work on a formula that would work towards recommendations. The presented options and scenarios provided a discussion to determine the recommendations to ensure the document has been written in a way that satisfied everybody. The options were there to facilitate a discussion that would come up with recommendations.

Mr S Marais (DA) said he was under the impression the report would be considered to come up with resolutions. He reminded the Committee the report has to be submitted at the end of November 2018 and there was no reason why it should be re-written. All that they needed to do was to come up with resolutions.

Ms B Dambuza (ANC) remarked what they needed to do as a Committee was to clarify their observations that Parmed was a closed scheme with low membership, and reflect on the salary packages of public bearers in relation to the increased tariffs of Parmed and not focus on those of the MPs only. She said the report needed to be formalised before the end of November 2018.

The Chairperson suggested the definition of the office bearers should include magistrates, judges, councillors and members of the House of Traditional Leaders.

Dr P Mulder (FF+) commented that the report was good and should be supported. The three options it provided could be adopted. He indicated that option 1 was proposing to go back to the pre-Moseneke era. Parmed was a financial challenge, not a constitutional challenge. He supported the EFF’s suggestion that ‘’must’’ be deleted and replaced with ‘‘may’’ to make the scheme optional. He further noted that the current packages were not based on total cost to company. He suggested the Committee should recommend option 1 to the House and motivate, and if then that does not work, the Committee would have to suggest options 2 and 3.

Ms C Dudley (ACDP) supported the views of the FF+.

Mr H Chauke (ANC) said members should prepare themselves for the acceptance and rejection of option 1. It was important for members to look at the critical areas in option 2 that need to be reinforced so that the next Parliament could work on them. This would help in case option 1 does not go through. This would not put a burden on the next Parliament Broadening of the membership of the scheme needed to be taken into account in option 1. It must be remembered the funds are for the health of the members so that they could be able to do their work. He said the Committee was amending a law that was old and which represented only a few.

Mr E Mlambo (ANC) also recommended option 1, but indicated a need for a framework for those who would be in the next Parliament so that they do not start from scratch.

Ms S Kaylan (DA) cautioned the Committee about opening the membership of the scheme to some other people at this stage. She said it must not be done now. She reminded the Committee that the National Treasury report stated this kind of arrangement was not sustainable forever. It is a nice-to-have arrangement, but it was important to look at its impact and National Treasury said.

Mr Chauke said it was in the best interest that all public representatives get a medical aid. He said Ms Kaylan’s view was right, but public representatives should also be taken into account because if the Committee missed this opportunity, the whole thing would need to be repealed.

Dr Thembekwayo indicated she was not supporting the idea of taking only Option 1 to the National Assembly. She preferred options 1 and 2.

The Chairperson stated none of these options would apply to the current members now, but only to those of the Sixth Parliament.

Mr Marais commented that if they keep on repealing and replacing thing in the Parmed report, it was going to take years for it to see the light of the day. If option 1 was not accepted, members would need to embark on a process to ensure parliament made Parmed affordable, come up with a provision for retired members, and open up its membership to other public representatives.

Mr Tleane remarked that members were not differing, but it was their understanding that differed here and there. He said there was a new dispensation and there was need to look holistically at the problems facing the Committee. He said the members’ approach must not be self-centred because they were doing this for the next generation. The proposal they would put on the table should explain the nature of the challenge they have got. The proposal should be all-inclusive. Option 1 does not come alone. It should go with option 2 where we need to indicate the need to increase membership so that the monthly contributions could go down. This must be crafted in such a way it covers a broad perspective, so that in years to come they do not have these problems.

Mr Parkies wondered why they should engage with the Department of Health instead of engaging with the Remuneration Commission and National Treasury which provides the fiscus. If they were saying Parmed must have options, then it must be National Treasury which must say it could not afford it. It was painful to hear that some magistrates did not have a medical aid. The members were dealing with the interests of public representatives and Parmed has to have options and increase its membership. In his view, it was better to submit options 1 and 2 and they should be integrated. Options 1 and 2 should not be seen as separate.

Mr Marais pointed out that members should look at what they want now and what they want to achieve in the future. He proposed for the submission of option 1. He could not see how options 1 and 2 could be collapsed into a single option because one option deals with the compulsory nature of the scheme while the other one talks of a voluntary nature of the medical aid. It was not going to help the Committee to go with many contradictory options.

The Chairperson said whatever option the Committee recommends, it would still need to be re-worked and that was not an overnight thing.

Ms Kaylan reminded the members their duty was to go through the draft report, choose an option, and then make a recommendation. The recommendation could say they propose Option1 and then state that the Act could later be reviewed.

The Chairperson agreed with Ms Dambuza’s suggestion that the observations of the Committee should be stated and note the members’ salary packages in relation to Parmed tariff increases. She said it appeared the Committee was agreeing on option 1 and the other options were following sequentially.

Mr Chauke said the route they were taking was clear and they only needed to agree on the observations. He said it should be noted the process of including Parmed in the National Health Insurance Fund.

Dr Thembekwayo suggested the inclusion of both options 1 and 2.

Mr Tleane stated they want to present to Parliament a comprehensive recommendation. The members were in agreement that solutions would come from options 1 and 2 combined.

Mr Mulder said unfortunately it was rare to find a consensus on a proposal. The Committee only needs to submit Option 1 because the scheme was not affordable. In order to improve the scheme in the long run, it should be stated the scheme has to increase its membership. Option 1 was just for now. Membership could not be increased overnight. It would take a long time to do that.

The Chairperson said it was clear that if they went for option 1, then they would have dealt with the main problem. Option 1 would indicate that the member pays the minimal while the state pays two-thirds.

Mr Marais asked the Committee to ensure it does not deviate from the terms of references.

The Chairperson then read the Committee observations which, amongst other things, highlighted that the Committee wished to present option 1 to address the salary structure changes that led to the unaffordability of Parmed.

Ms Dambuza proposed that the Committee should add to the observations that the Committee further recommended Option 2 which the Sixth Parliament has to further investigate the implementation of option 2 to make the scheme voluntary and widen the Parmed membership.

The Chairperson indicated they could not adopt the draft report because the NCOP component was not quorating because it was short of two members.

The Committee agreed that a specific time should be found the following day to convene and adopt the report.

The meeting was adjourned.

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