Road Accident Fund Amendment Bill: deliberations

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
15 October, 2003
ROAD ACCIDENT FUND BILL: DELIBERATIONS

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Road Accident Fund Amendment Bill [B64-2003]

SUMMARY
The Committee deliberated on the Road Accident Fund Bill with the assistance of representatives from the RAF, the National Department of Transport and the State Law Advisers. Topics raised included undertakings, loss of future earnings, general damages, medical tariffs and collateral benefits, non-residence, emotional shock, mediation and arbitration and the issue of retrospectivity.

DISCUSSION
The Chairperson proposed that the Committee, assisted by representatives from the RAF, the National Department of Transport and the drafters, go through each clause, bearing in mind the input given during the hearings. The Committee should not rush to finalise the Bill that day but rather carefully consider concerns raised previously. There was still time to receive more substantive submissions. Members consented and agreed to consult experts.

Clause 1
a) undertaking
The Chairperson said that the clause intended that the portion of the Fund's claim for medical treatment go directly to the health care provider. That would also ensure that the RAF fulfilled its key purpose: to assist those injured in road accidents. Concern was raised during the hearings that, in practice, the Fund made undertakings but did not pay. In order to access the treatment, the individual involved, family or a lawyer was forced to pay money up front to cover expenses. Much scepticism was shown by health care providers about these undertakings. The system used was faulty - for instance, a road accident casualty could be entitled to an undertaking for "80% of a wheel chair", as the system was based on the proportionality of fault.
The Committee should think of ways to ensure that the victims received the money from the Fund quickly and effectively so that they could cover the necessary medical expenses.

Mr S Swart (ACDP) said that during the hearings, the Coalition submission highlighted a number on concerns posed by the Satchwell Commission referring to the reservations to the undertakings system, that was based on the proportionality or degree of fault and on payment up-front.

Mr D Anderson (RAF) said that many of the undertakings issued to the claimants were not specifically described by their lawyers. For those in need, the RAF could issue pre-authorisations for purchase of the necessary equipment. Problems however arose when a claimant asked for a prosthesis or a wheelchair more luxurious than what the Fund considered appropriate and of reasonable cost. Another source of dispute was when claimants requested more than what was agreed at settlement for the undertakings determined in terms of future costs. Lastly, people were misusing the money from the Fund for other means than prescribed. In order to prevent disputes, the RAF paid for medical expenses already incurred.

Mr A Ainslie (ANC) proposed that the RAF paid directly to the service provider rather than reimbursing the claimant after the fact.

Mr Farrow (ANC) said that the problem with the undertakings was that suppliers were not taking on the responsibility of providing supplies. The other problem was that the RAF did not interact enough with the accident victims and therefore did not have sufficient knowledge of what they needed.

The Chairperson suggested inviting organisations representing accident victims to a future meeting so that the Committee could hear their input.

Mr Swart said that the undertakings, although well-intended, were not working. There had been allegations of the RAF denying compensation.

Mr T Mhambi (RAF) said that perhaps the Committee should ask lawyers how they explained to their clients the meaning of undertakings. On the issue of pre-authorisation, he commented that the RAF did not expect the victims to pay upfont. The Fund took the responsibility of guaranteeing the payment to the service provider and paid beforehand if necessary.

The Chairperson suggested that the Committee considered moving to a no-fault system in cases of immediate medical intervention.

Mr H Kgomongwe (CEO of RAF) supported the idea of a no-fault system and direct payments to the service providers. After all, RAF's main concern was a speedy recovery for the accident victim.

Mr Swart said that the Committee had to rectify the practical difficulties highlighted by the media, including cases of extended waiting periods for undertakings, incomplete files, high turnover of staff, etc.

Adv D Mitchell (RAF) proposed to allow the emergency medical treatment to occur first, either by accepting a claim and waving the fault principle, or by putting the money up front with the Fund able to recover expenses in the event of fault not being proved. The Chairperson endorsed this idea.

b) loss of future earnings
The Chairperson said that the sub-clause proposed to move towards instalment payments as opposed to lump sum payments. The concerns raised were the practicality of such a procedure and the RAF's capacity to deliver instalments at set intervals.

Mr Farrow said that the Committee members should not miss sight of other issues like the income tax limitations that needed to be raised prior to the discussion.

Mr S Mphahlele (Department) said that practicality was an administrative concern of the Fund. On the income tax issue, the victims looked for a substitute for future loss of income. Hence some might argue that that this should be taxed like any other source of income. The Department did not hold a strong view on this.

c) general damages
The Chairperson said the clause made the commitment to make the payment of general damages subject to instalment rather than to lump sum payment. Concerns were raised around the principle of lump sum payments vs. instalments. The Satchwell Commission had suggested introducing a lump sum payment to help suffering people cope with life-altering conditions. The Fund's concerns, on the other hand, was that about 80% of money dispensed on general damages were poorly defined and consisted of a large number of small claims. The Coalition's proposed solution was to introduce a lower ceiling of R20 000 on all claims.

Mr Mphahlele said that lump sum payments put a serious burden of the Fund. The option of making payments in instalments was a better alternative as it allowed the RAF to use capital for investments and to reduce financial risks.

Mr T Tsholetsane (Department) said that instalments guaranteed continuous medical attention and continuous income and therefore brought substantial benefits to claimants.

The Chairperson suggested criteria to determine which cases would fall under the category of instalments and which would fall under the category of lump sum payments, as both methods ways were useful. He advised the members not to simply vote for or against, but to rather look at a variety of choices available.

Adv D Anderson (RAF) objected to the assertion presented during the hearings by Mr Monroe that "RAF was after the savings". He explained that the money was not lost to the Fund but rather invested elsewhere. The only possible savings came from service provider charges. Paying damages on an annuity bases would to some extent eliminate the number of fraudulent claims.

Clause 2
medical tariffs and collateral benefits

The Chairperson said that there were previously no serious objections to the idea of medical tariffs. However there were some concerns raised about the way the tariffs would operate.

Mr S Mphahlele (Department) was concerned about the use of "prescribed" associated with medical tariffs as it presupposed "prescribed by the regulation". That would in turn mean there would be consultation involved in the process.

Mr Farrow (DA) suggested making a cross-reference to the COIB Act (Section 73(1); 76(1) and (2); 97(1)(a)) which laid down criteria on the medical services and the supply of goods. He proposed that the consultation process with service providers to determine and formulise the regulation, be spelled out more clearly.

Mr A Ainslie (ANC) raised whether the RAF or the Department had already begun the process of consultation on the issue of medical tariffs.

Mr S Swart (ACDP) referred to a submission by Alexander Forbes Accident Compensation Technologies, and proposed to consider their suggestion of adding a clause that the determination of a medical tariff should be made in consultation with supplier or medical provider associations.

Mr H Kgomongwe (CEO of RAF) said that the consultation process had begun with controlling bodies in the medical profession. The RAF Medical Department had had a few interactions with private hospital groups and health care funders. The Fund still needed to determine which tariff would be adopted. The matter should be further discussed.

The Chairperson said that the Committee should consider formulating that consultation process into the Bill by stating who was responsible for prescribing (i.e. the Minister) and add "in consultation with" instead of "after consultation", in order to avoid any veto from the second party.

On the issue of collateral benefits, the Chairperson said that the statutory payments were already deducted so that the State did not have to pay twice. As for people who had private insurance, any payments from their insurers would also be deducted from the liabilities of the Fund. He acknowledged that there were concerns around the constitutionality of such a decision.

Mr Mphahlele explained that the rationale was that the RAF was a social insurer within the context of a broader security system. The principle behind any insurance was that the victim be dignified for the incurred loss but not double compensated. Insurance should not be mistaken for a profit or savings mechanism.

The Chairperson asked the State Law Advisers and the drafters to advise the Committee at the next meeting so that Members could make a more informed judgement.

Clause 3: Non-residence issue
The Chairperson said that the clause intended to put a reasonable ceiling on non-resident claims and prevent abuse of the system. It should be remembered that non-residents were not all individuals from wealthy countries and many came from poor areas of Africa.

Mr Farrow stressed that if a decision to introduce a ceiling was made, foreign embassies would have to be notified that all foreign citizens needed to buy the necessary insurance, just as South African citizens did when they went abroad.

The Chairperson said that that responsibility could be left to the Department of Tourism.

Mr Farrow pointed out that there could be a conflict between the RAF Act and the recently passed National Health Bill, as chapter 2 of this specifically stated that emergency medical treatment could not be refused to any resident or non-resident.

The Chairperson said that the intent of the clause was to limit the expense on claims from foreigners, and not to refuse anybody treatment. He then turned to the drafters and asked them to clarify the matter of claim capping for non-residents.

Clause 4: Emotional shock
The Chairperson pointed out that the clause did not exclude the emotional shock of the injured but of others who witnessed the accident.

Mr A Ainslie (ANC) asked about the extent of the damages and the permanence of emotional shock.

Mr S Swart (ACDP) inquired on the number of claims for emotional shock that were being submitted.

Mr Farrow said that the Mental Health Care Act defined the unfair discrimination that might be in conflict with the principles of the RAF Bill.

The Chairperson said that Members should concentrate on the parameters of liabilities and not broader constitutional human rights.

Mr T Mambi (RAF) said the Committee should realise that close to 60% of the claims settled were whiplash related. He also gave an example of five current emotional shock claims that totalled at R800 000. The RAF was worried that a whole industry might start out of the emotional shock cases, just like it had out of the whiplash claims. It was very difficult for doctors to precisely determine whether emotional shock occurred. There was much potential for corruption and policy abuse.

Mr S Mphahlele (Department) stressed that the RAF Bill was drafted for victims of road accidents and not for bystanders.

The Chairperson said that the problem needed to be examined in light of the Constitution.

Clause 5: Mediation and arbitration
The Chairperson said that the system of voluntary mediation and arbitration had been working well in the Western Cape. The Bill would, as it stood, make that process mandatory. Another concern raised during the hearings was the question of choosing arbitrators and mediators.

Mr Swart said that the clause restricted access to the court by making it obligatory, and could be argued to be unconstitutional.

Mr H Kgomongwe said that arbitrators were accredited, independent and their appointment would be mutually agreed upon. There would also be a mediation stage prior to the arbitration. The mediators were trained employees of the Fund whose job was to remain neutral and listen to both parties and produce their own opinion of the case. In case the mediation and arbitration process failed, the victim could then appeal in court. Matters taken to court were often postponed, hence the previously described methods were cheaper, faster and more efficient.

Mr Swart said that that process could be unfair as there was often no legal representation present at that stage to assist the victim of an accident. He urged to check the constitutionality of making mediation and arbitration a mandatory process.

The Chairperson suggested they indicate in the Bill who the mediators and arbitrators would be and briefly describe their roles. He also questioned why the RAF had not implemented the Western Cape's successful mechanism of using voluntary arbitration on a national scale.

Mr Kgomongwe said that the process of appointing administrators of the mechanism had been finalised but then the selection criteria and terms of reference were challenged. The RAF then revised the criteria and the process was revisited. The selection of arbitrators across the country had now been completed. The intention was to have all those processes in place countrywide by the new financial year.

The Chairperson suggested giving the voluntary process a chance to prove itself nationally.

Clause 6: Transitional arrangements
retrospectivity
The Chairperson said that retrospectivity was a complicated matter. There could be cases where strategic tactical decisions or advice had been given by lawyers so that the claims were processed in variety of ways but not finalised. That raised questions of constitutionality. The Committee could accept or reject the clause, or alternatively, find some kind of intermediary arrangement to prevent prejudice towards clients by creating space for representation. It could for instance be dealt with retrospectively by a Minister.

Mr Swart said that the retrospectivity issue and its implications presented a huge constitutional argument and that the matter, if not dealt with properly, could end up in the Constitutional Court.

Mr Farrow asked why was retrospectivity introduced when it was not used before. He proposed that the clause be rejected.

Mr Mphahlele disagreed and said that retrospectivity was present in all previous versions of the Bill. The intention of that particular provision was to make a serious and immediate impact on the Fund's cash flow.

The Chairperson said that he understood the concerns of sustainability raised by the RAF. The Committee would take that into consideration when asking lawyers for advice on the constitutionality of retrospectivity and when drafting an appeal mechanism for unfinalised claims.

The meeting was adjourned.