Restructuring of Public Service and Medical Assistance: briefing

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Meeting report

PUBLIC SERVICE AND ADMINISTRATION PORTFOLIO COMMITTEE

PUBLIC SERVICE AND ADMINISTRATION PORTFOLIO COMMITTEE
27 January 2004
RESTRUCTURING OF PUBLIC SERVICE AND MEDICAL ASSISTANCE: BRIEFING

Chairperson: Mr P Gomomo (ANC)

Documents handed out
Presentation on Restructuring of Public Service (document awaited)
Presentation on Medical Assistance Restructuring (document awaited)

SUMMARY
The presentation on the Restructuring of the Public Service outlined the background to Resolution 7, the challenges experienced and the corrective initiatives taken, the Department's achievements to date, the implementation of the Resolution, the figures on excess personnel and vacancies as well as the way forward.

Members sought clarity on the Department's measures to ensure public servants performed the jobs they were qualified to perform, whether the Department would address the problem with Department of Correctional Services officials who were not placed in new posts even though they had received the necessary training, the Department's plans to address its job vacancies and excess staff and its plans to stem the tide of nurses leaving for foreign countries.

The presentation on Medical Assistance Restructuring outlined the findings of the research into the medical schemes fraternity, the impact assessment of the medical scheme environment, the concerns highlighted by the research and the way forward in the restructuring process.

The Committee sought clarity on its plans to deal with Department of Correctional Services officials who have not contributed to medical aid schemes but who enjoyed benefits, why 400 000 public servants did not belong to a medical aid scheme, the implications of amalgamating medical aid schemes for existing members and the industry as a whole, how the public service medical aid scheme would benefit lower level employees, and whether the imposition of a single public service medical aid scheme had been met with resistance from public servants.

MINUTES
Briefing by Department on Restructuring of the Public Service
Mr K Govender, Department Senior Manager: Remuneration and Conditions of Service, conducted the presentation (see document) which outlined the background to Resolution 7, the challenges experienced and the corrective initiatives taken, the Department's achievements to date, the implementation of the Resolution, the figures on excess personnel and vacancies as well as the way forward.

Discussion
Mr M Sikakane (ANC) asked the Department to explain its measures to ensure that public servants did not perform 'lesser jobs' than what they were properly qualified for, especially professional nurses in the medical sector.

Mr Govender responded that in the past the Department of Health was governed by the rank and leg system of promotion which consisted of various ranks for nursing staff. Those ranks were not linked to any qualifications or the acquiring of further qualifications, but was instead linked to the number of years served in the public service together with an assessment based on satisfactory performance. Once these two requirements of number of years of service together with the performance assessment were met, the nurse was rank-leg promoted to the next level. The promotion system thus had nothing to do with the improvement of the nurse's qualifications.

The proposed system was thus aimed at those public servants who were rank promoted, but who have not improved their qualifications at all. Such officials remained at the skills level of a ward nurse but attained the title of Chief Nurse or professional nurse. Once the Department commenced the process of assessing the requirements of the nurses needed, nurses were selected based on the skills they possessed. This thus marked a divergence from the previous practice as nurses were then appointed based on their qualifications. The result was that the nurses who were rank and legislature promoted to Chief Nurse or Professional nurse for example were placed at a lower level.

He stated that this did not impact on those nurses in any way, save for the fact that it changed their title to accurately reflect the work they performed. They continued to do the same work they had always performed.

Mr A Van Jaarsveld (ANC) stated that the public servants in the Department of Correctional Services especially had been assessed three years ago, but have still not received any salary adjustments or new posts. He asked the Department to explain whether it envisaged intervening to address this matter.

Mr Govender replied that in this context individuals were placed at a lower level than the work they were doing, and were therefore granted a personal notch. The policy put in place by the Minister of Public Service and Administration stipulated that individuals placed on personal notches qualified for salary adjustments, but did not qualify for the one percent pay progression on an annual basis. The issue with the Department of Correctional Services related to the old process. The Department acknowledges that there was a degree of a backlog in certain government departments in addressing that, but a number of government departments have put mechanisms in place to address it. The Department itself would follow up on this matter as well.

Mr Van Jaarsveld asked the Department to explain its plans to address the 79% occupancy rate [that is, its 21% staff vacancy rate] within the Department.

Mr Govender responded that the presentation on the Department's Annual Report received by the Committee yesterday referred to the vacancy rate within the Department only, and did not refer to the public service generally. In accommodating the 14 000 employees that were in excess the Department plans to look very carefully at identifying exactly where the vacancies lie and how the Department could reskill and retrain people to be absorbed into those vacancies. The Department aimed to seriously discourage government departments from filling those vacancies with people falling outside the public service, because that would deprive the employees that were regarded as being in excess of gaining those positions. This was the process the Department was currently engaged in.

The Chair asked whether the Department has devised any strategy to deal with those Department of Correctional Services employees who did not qualify for the one percent pay progression.

Mr Govender answered in the affirmative. The Department has established a working group between the national departments of Health, Public Service and Administration, Treasury and the trade unions on the settlement of the dispute. The aim is to identify the best manner to deal with the problems with the nursing components within the Department of Health, so that they were not disadvantaged indefinitely. The Department has set its target at April 2004 to come up with workable solutions to career planning and career incidence and career progression in the nursing profession.

Ms C September (ANC) asked whether the Department's report covered only the service delivery institutions or whether they were restricted to those within a particular section of the public service sector. This was important because it affects whether the decisions taken in relation to those public entities in the particular section of the public service would cut across all the public entities in the entire public service.

Mr Govender replied that the entire public service was covered in the Department's report. The decisions taken by the Department with regard to the implementation were usually directives issued by the Minister of Public Service and Administration, and thus all such decisions would have an impact that covered the entire public service.

Dr U Roopnarain (ANC) stated that the Department has indicated that one the one hand nurses were being demoted, so to speak, yet on the other hand the Department experienced an exodus of nurses to foreign countries, and then the Department of Health says it does not have sufficient nurses. She asked the Department to indicate how it would reconcile these three contrasting positions.

Mr R Mohlala (ANC) stated that there were a number of agencies that were used by provincial hospitals to place nurses, yet the Department of Health was also experiencing an excess of professional staff. He requested the Department to reconcile these two opposing experiences.

Mr Govender responded that these were difficult questions. The Department firstly must acknowledge that the recent research conducted by the Department of Health has indicated an exodus of a number of nurses. But an analysis of the kinds of nurses that were leaving the public sector for countries such as Saudi Arabia and the UK were normally the highly qualified professional nurses. However the Department's report referred to a category of nurses were nurses who were called Chief Nurses or professional nurses simply because they were rank promoted, and they did not necessarily possess the necessary qualifications or skills required by that level of nurse. They were thus not in excess because they continued to perform the same work they were doing, and the Department was now merely correctly defining their status.

There was a shortage of nurses, and the majority of vacancies in Kwazulu-Natal was due to a shortage of nurses and the Department was addressing this via a two-fold process. The first was via the intake at the nursing colleges over the last three years which reported a gradual increase, which was part of the Department's plan to train more nurses to meet those shortages. The second level involved an agreement reached between the Public Health and Welfare Bargaining Council that dealt with scarce skills. This included the nursing staff and sought to recruit them to rural areas, and to grant them a special allowance based on the skills they possessed. These measures were part of a long-term strategy and were aimed at encouraging nurses not to leave the public service and also to recruit them to areas where their services were needed.

He stated that the Department's aim was to correctly place people in line with their skills and this did not impact on their exodus.

Mr Sikakane stated that the recent advertisements in the media seemed to contradict the Department's statements today that it planned to retrain the excess staff. He asked the Department to explain where it planned to relocate the excess staff once it had filled the vacancies.

Mr Govender replied that the number of vacancies advertised during the early part of 2004 and the latter part of 2003 were largely highly professional posts and related to skills that were not contained in the database of excess employees. Secondly, the posts advertised were largely of salary levels 8 and above, whereas the employees that were currently in excess were of levels 2, 3 and 4. Thus those posts advertised were critical vacancies which needed to be filled. The government departments cannot fill a post without looking at the database, and they would thus have considered the skills base within the database before advertising those posts.

Briefing on Medical Assistance Restructuring
Mr Govender conducted the presentation (see document) which outlined the background to the restructuring process, the findings of the research conducted into the medical schemes fraternity, the impact assessment of the medical scheme environment, the concerns highlighted by the research conducted and the way forward in the restructuring process.

Discussion
The Chair asked the Department to explain whether it has researched why as many as 400 000 non-members have not joined the medical aid scheme.

Mr Govender responded that there were currently approximately 1,1m public servants and the Department's research has clearly indicated that not all public servants belong to its medical aid scheme. The chief reason for this was that many employees had spouses that belong to other medical aid schemes, and after these were removed from the equation the research indicated that about 350 000 public servants were not registered with the public service medical aid. The main reason for the 350 000 not belonging to the medical aid scheme was one of cost, and these were largely the low income employees of salary level 4 and below.

Mr Mohlala stated that he was informed that there were officials within the Department of Correctional Services who did not contribute to any medical aid scheme, yet they were benefiting from services it rendered. He asked the Department to explain the measures it has taken to take these non-contributors in hand by ensuring that they contribute.

Mr Govender replied that currently all Department of Correctional Services employees do contribute that department's own medical aid scheme called MEDCO. It was true that until April 2003 all Department of Correctional Services employees did not contribute a cent because it was a free provision, and they were now required to contribute a minimum amount because it was still highly subsidised by the State.

The research findings as recommended that the Department, in order to get the maximum benefit, must ensure that all public servants including those in the Department of Correctional Services and SAPS, belonged to the public service medical aid scheme to derive the maximum benefit. The Department must explore this recommendation further.

Mr Sikakane asked whether political office bearers were also included in the research conducted by the Department in preparing the presentation.

Mr Govender answered in the negative. He stated that the research focused only on public servants and did not take into account political office-bearers, as their remuneration and conditions of service was dealt with by the Office of the Presidency and not by the Department.

Mr Sikakane asked whether it would be an option to retain 100% of the contribution paid from the government.

Mr Govender responded that the research has been conducted and the Department would now have to engage with the Department of Labour and Treasury on this, and he would not be able to provide an answer at the moment.

Mr Sikakane asked the Department to explain what would sustain the other medical schemes when you remove the public servants from them and when they are amalgamated with other medical schemes.

Mr Govender responded that one of the principle positions the report was putting in place was that the Department did not want to leave those employees worse off than they were before. The suggestion was thus made that medical aid schemes of which public servants comprised more than 90% of its members would be considered for amalgamation with the public service medical aid scheme. Those medical aid schemes with 50% or more public servants would possibly have those members transferred to the public service medical aid, and also transferring a percentage of the reserve to the public service scheme. The percentage of the reserve would however be less than what should be the actual reserve within that scheme, and the Department would thus prefer moving less funds rather than more so that those schemes can continue functioning.

Mr L Kgwele (ANC) welcomed the entry of Black Economic Empowerment (BEE) but questioned legality of transfer reserves to private medical aid schemes via the amalgamation.

Mr Govender replied that the Medical Schemes Act allowed for the amalgamation of schemes as well as for the transfer of resolves. Some ambiguity remained with regard to the 50% category, and the Department was thus still exploring medical aid schemes with the registrar. Either legislation or regulation from the Registrar's office might have to be pursued to deal with that category.

Mr Kgwele asked the Department to explain whether its plans for a single public service and medical aid scheme would benefit the poorest employees as well.

Mr Govender responded that the recommendation made by the research findings was the amount of R220 as the average bare minimum contribution for a member of a medical aid scheme. He stated that research indicated that the cheapest medical aid scheme available in the market was approximately R1200 of which government would then subsidise two thirds for the public servant, with the result that the person would still have to pay about R400. The result was that the lower income earning employees were definitely not buying into medical aid because it was not affordable for them. Government did not budget to accommodate all possible liabilities and, because it could not predict beforehand how many public servants would take up medical aid, it does not have the funds to subsidise a sudden uptake.

Mr Kgwele questioned whether the planned accreditation requirement would not increase the cost of providing public health to poor people.

Mr Govender replied that the research indicated that it would not push up the cost for the poor because it did not impact on the payment to the public hospital system. The Department was of the view that the accreditation process would provide a better service to the poor without pushing up costs. The Department would also be looking into the provision of these benefits to rural communities as well.

Mr T Abrahams (ANC) asked the Department to indicate how soon the Committee would be provided with a copy of the research findings.

Secondly, Mr Abrahams sought clarity on the term 'multiple administrators' of medical aid schemes. This was problematic because medical aid schemes were currently plagued by very poor administration, and it must be ensured that the administration of the public service medical aid scheme runs efficiently.

Mr Govender replied that a the chief responsibility of any administrator of a scheme as large as the public service medical aid scheme would be to ensure that all claims received were processed, and settled and would also have to deal with all queries raised by members. The research findings indicated that if all the members were placed with a single administrator, there would not be an administrator large enough to accommodate them. The proposal was thus made that the public service medical aid scheme should ideally be spread amongst four or five administrators.

There were currently four or five administrators in the market that were large enough to manage these, and it translated to roughly 150 000 - 200 000 members per administrator. They did have sufficient IT infrastructure as well as administrative and personnel infrastructure in place to manage that large a number. The Department was thus confident that this could work between the four or five administrators. The Department would have to go through a very strict tender process with very clearly-defined service level agreements that those administrators would have to meet, and a very clear governance and management structure would have to be put in place. It would be incumbent upon the Department to ensure these systems are in place.

He stated that the research findings indicated that membership could either be distributed on a regional or provincial base, which would be the most effective way of distributing membership into the various administrators simply because it would be easier to manage within a locality than using departments.

Mr Abrahams stated that, in order for a public service medical aid scheme to provide the best possible benefit to the lower income earner, the interests of the upper income contributors must be ensured to guarantee the viability of the scheme. He questioned whether the imposition of the compulsory public service medical aid scheme on the upper income contributors that offer less benefits than their private sector medical aid scheme would not be met with resistance from them, or even litigation.

Ms September asked the Department to explain its plans to deal with the resistance

Mr Govender responded to these two questions by stating that the four benefit options listed in the presentation took into account the low income earner, the medium income earner and the traditional Bonitas-type of package. The Department also had a comprehensive top notch package, which was comparable to the package offered by private sector medical aid schemes such as Discovery but they did not include the 'freebies' offered by the private sector medical aid schemes. The Department's aim was to provide medical cover, and its packages thus focused on that although such 'freebies' could be developed in future.

He stated that the Department was of the view that its plans to accommodate all would assist in reducing the resistance. The resistance currently exhibited was due primarily to a lack of understanding, which was the largest problem. The Department should ensure that it could either match or provide a slightly better benefit than those public servants were currently enjoying but at the same cost or at a slightly lower cost, then those public servants would move across to the public service medical aid scheme.

With regard to the prospects of litigation Mr Govender stated that this was a term and condition of employment which obliged a public servant to belong to a public service medical aid scheme. This was in place in a number of industries. The freedom of association debates were also relevant here and the public servant would then be allowed to belong to any other medical aid scheme he wished to belong to, but the State as employer would not subsidise it. This was thus the negative incentive to belonging to any medical aid scheme other than the public service medical aid scheme.

Resistance was also being experienced from different quarters because they were being influenced by brokers, because the new system proposed by the Department removes brokers from the structure. Brokers were now spreading different information across the market in an effort to persuade members not to accept the public service medical aid scheme because it did not accommodate the brokers. Mr Govender stated that administrators who believed that they would not be allocated a share of the new administration system to be employed by the public service medical aid scheme were also spreading such rumours, and all this impacted on the market and resulted in the resistance being experienced. This will be addressed through a comprehensive strategy.

Ms September asked the Department to explain why the trade unions have not bought into the idea of the public service medical aid scheme to date.

Mr Govender replied that the Department could not say at this stage that there was no buy-in from Labour. The Department has not yet made a formal proposal to Labour because it was still busy researching the matter. Organised labour was aware of the Department's work and it has not clearly opposed them. The COSATU unions and especially National Health and Allied Workers Union (NEHAWU) has come out particularly strongly in favour of ensuring that all these benefits were extended to all public servants as a principled position.

Ms September stated that the costing of the contribution needed from the poorest employees in the new public service medical aid scheme was a major factor and could also be viewed by those public servants as an imposition, despite the fact that they do want medical cover.

Mr Govender responded that the Department had no intention of disadvantaging any current employee with the public service medical aid scheme. It was aware that its plans would have to advantage the current group of employees if a total buy-in were to be successful. The Department would be better able to control the overall cost increases in a medical scheme over which it would be able to exercise greater control, such as the public service medical aid scheme. The Department had absolutely no control over the current 61 medical aid schemes in the private sector, and it could not thus control the prices.

Ms September stated that the ideal and the goal was to make the public service the primary service provider of medical coverage for citizens, yet the proposal made by the Department suggests that medical aid schemes in the private sector will be reinforced rather than investing the money in the public service and thereby strengthening it.

Mr Govender replied that the research available clearly indicated that the Department was not in the process of strengthening the private sector, and the clear indication was that in fact the opposite was going to happen. Over the next 5 years the Department would definitely strengthen the public health care system by improving the services in the various hospitals, providing that those medical aid schemes were in place to ensure that cost recovery was in place, ensure differentiated amenities as a vehicle to ensure better services, and to plough those funds back into the public health care system to improve those services so that they are accredited. This would strengthen the public health care system in a way that would enable it to become a viable competitor to the private health care system, which would ultimately benefit the poor.

Ms September asked the Department to indicate the impact that the public service medical aid scheme would have on national health insurance

Mr Govender responded that it was very difficult for him to comment at this stage because they were two separate processes. The Department was dealing with public servants and with trying to find a benefit that it could extend to cover all public servants, and it was not looking at the national health insurance industry. That was a separate process that was undertaken by the Department of Health. He stated that he was aware of a paragraph inserted into the Report on the national health insurance industry which aimed to use the public service medical aid scheme as a forerunner for national health insurance. This was the long-term goal.

Dr Roopnarain asked whether the Department had conducted any research into the Bonitas medical aid scheme referred to in the presentation. She stated that although it was the most widely used medical aid scheme it was also the most widely refused by medical practitioners.

Mr Govender replied that Bonitas was one of the key medical aid schemes the Department looked at in compiling its research, because the majority of public servants subscribed to that scheme. The Department based its medium package on the benefits offered by the Bonitas scheme. He stated that Dr Roopnarain was correct that Bonitas did experience major administrative problems, and thus the problems were caused by the administration of the scheme rather than by the scheme itself. It's administration has seriously improved over the last year.

The meeting was adjourned.

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