Council for Medical Schemes Annual Report: briefing

Meeting report

HEALTH PORTFOLIO COMMITTEE
26 October 2004
COUNCIL FOR MEDICAL SCHEMES ANNUAL REPORT: BRIEFING

Chairperson: Mr L Ngculu (ANC)

Documents handed out:
Council for Medical Schemes Annual Report: PowerPoint presentation

SUMMARY
Mr P Masobe, Registrar and Chief Financial Officer of the Council for Medical Schemes (CMS), presented a comprehensive overview of their Annual Report. They set out the objectives of the Medical Schemes Act, elaborating on its accountability structures, its vision and strategic objectives, as well as detailing on its regulatory approach and activities for 2003/04. The latter part of the presentation dealt with information on the Council's monitoring of the performance of medical aid schemes, the resolution of complaints by the public, and its activities on consumer education and trustee training.

During the ensuing question time, Members asked a very wide range of questions for clarification, including about the continuing high costs of private health care, unethical practices by medical aid schemes and practitioners, the latest medical pricing regulations, including AIDS treatment in scheme coverage, and improving scheme governance.

MINUTES
Mr P Masobe, Registrar and Chief Financial Officer of the Council for Medical Schemes (CMS), presented a comprehensive overview of their Annual Report. The first part of the presentation entailed setting out the objectives of the Medical Schemes Act, elaborating on its accountability structures, its vision and strategic objectives, as well as detailing on its regulatory approach and activities for 2003/04. The latter part of the presentation dealt with information on the Council's monitoring of the performance of medical aid schemes, the resolution of complaints by the public, and its activities on consumer education and trustee training. Mr Masobe emphasised that the medical aid schemes industry was generally in good shape. The solvency figures of schemes had thus far surpassed expectations, and the ability to pay claims had increased. He however noted that non-healthcare costs were still high, and that private hospital costs had increased. The Council also aimed at reducing increases in contributors' payments to schemes.

Discussion
Ms M Madumise (ANC) asked if government contributed towards the Council's budget. She also asked why there had been a decline in the numbers of dependants of contributors of medical aid schemes. She questioned how members of schemes benefited from scheme surpluses.

Mr Masobe said that the Council had received R1.2 million from government when it had been established. A further R1.2 million had been provided to assist with the development of an equalisation fund. Mr Masobe noted that the decrease in dependants could be due to the fact that fertility figures throughout SA were low. The issue was one of demographics. Mr Masobe said that the benefits of surpluses would trickle down to the contributor. This could be achieved by preventing increases in contributions and allowing greater benefits. Surpluses could also have the effect of boosting the contributor's confidence in the scheme.

Mr B Steyn (DA) asked how many medical aid schemes fell into the high impact band category. He also asked whether Designated Service Providers (DSPs) led to inefficiencies, which in turn caused private hospital costs to be high. It was furthermore asked whether the high administration costs of the Council could be reduced. Concern was also raised that in the year 2000, the industry had suffered losses of R1 billion, even though the solvency of schemes was up by 20%. Mr Steyn felt the figures were contradictory.

Mr Masobe stated that, as of June 2004, 25 high impact band schemes existed. DSPs had only been in existence for a year and improvements should take place over time. The Council had a research team in place to assist with the implementation of DSPs. He believed that DSPs would lead to lower hospital costs.

Measures were in place to bring down the administrative costs of the Council. Many of the costs could be attributed to brokers' fees and bad debt. The figures mentioned were not contradictory. The loss of R1 billion had taken place over a year and had reduced accumulated surpluses. The solvency figures of schemes were nevertheless greater than 10%.

Ms S Rajbally (MF) was concerned over the limited numbers of consultations that schemes had with members. If schemes had surpluses, these could be attributed to the savings from limiting the numbers of consultations and distributions.

Mr Masobe said that consultations would increase, given the addition of 25 new chronic conditions to DSP's. Schemes would therefore have to cover the 25 new conditions.

Dr I Cachalia (ANC) was concerned about the high charges of private hospitals. He believed that a government audit should be done to ensure that contributors' costs were reduced. The Auditor-General's report for 2003/04 had alleged that the Council had no procedure in place for the furnishing of a quarterly report to the Minister, as was required by law.

Mr Masobe believed that intervention was needed as far as private hospitals were concerned. The Council was placing the matter on the desk of the Minister. Mr Masobe responded that the Council and the Auditor-General had different views with regard to the quarterly report. The Council met quarterly and had furnished reports to the Minister as required. The Council would in any event comply with the recommendations made by the Auditor-General.

Dr A Luthuli (ANC) asked for details about the Council employee that had transgressed the law. She also asked what the risk actualisation fund was. She then enquired what actions had been taken against the Council representative, Ms G Machunsa, for only attending one meeting while the requirement was to attend four per year. She furthermore queried the cost to include HIV/AIDS treatments for PMBs. Dr Luthuli additionally questioned why the Council had incurred such expenses on an internal audit, when it had been a specific function of a Council employee.

Mr Masobe said that the employee had been dismissed, and that the matter was being handled by the National Prosecuting Authority. Ms B Khunoane (Council for Medical Schemes) added that the Risk Actualisation Fund had provided for schemes to make contributions towards the funding of PMBs. The amount paid by each scheme depended on its number of members. Mr Masobe pointed out that Ms Machunsa had attended many of the Council's meetings; but had however only attended one of four subcommittee meetings. He emphasised that most Council representatives attended meetings.

Mr Masobe then stated that the inclusion of HIV/AIDS in PMB's would be cost-effective. It was best to treat patients at the outset rather than treating various AIDS-related illnesses in the long term. He felt it better to be proactive. The Council had found it more viable to outsource the internal audit function. The cost had roughly been R230 000.

Ms P Tshwete (ANC) asked for timeframes for the inclusion of bipolar mood disorders into the list of diseases to be covered by medical aids.

Mr Masobe said that the Minister had added 25 new diseases to that list. The Minister had however prescribed treatment guidelines to be set before the new diseases were covered. Some of the medicines used for the treatment of bipolar disorders had not been approved for use in South Africa. The result was that the guidelines for bipolar disorders could not be set. He was therefore unable to provide timeframes for the inclusion of such disorders.

Mr S Njikelana (ANC) asked how the introduction of the medicines pricing regulations would impact on medical aid schemes. He also asked what caused medical aid schemes to become insolvent. He questioned if the Medical Aid Schemes Act had shown any shortcomings since its introduction. He lastly asked if the Council had strategic linkages with other statutory bodies.

Mr Masobe said that the medicines pricing regulations would, in the medium- to long-term, bring costs down. The implementation of the regulations however remained a challenge. No schemes had gone insolvent in the last year. The Council had continually been engaged in assisting schemes to prevent insolvency. The cause of insolvencies in the past was mainly due to improperly designed benefits. Mr Masobe felt that the provisions in the Act relating to dispute and conflict resolution, could be revised as the process was too tedious and cumbersome. The Council worked with the Health Professions Council of SA, the Competitions Commission and the Department on a regular basis.

Ms B Ngobo (ANC) asked how the Council could encourage schemes to move from the utilisation of private hospitals, to state hospitals. It would cut down costs greatly and many state hospitals had been revitalised. She also asked what penalties were in place for scheme non-compliance. She was further asked why certain schemes had been refused accreditation by the Council.

Ms Khunoane said the Council was encouraging the use of state hospitals by medical aid schemes. A pilot project had been run for a year and the Council would explore possibilities further. The Act had made provision for penalties or fines. He however felt that penalties would eventually be borne by the contributor, and not the administrator of the scheme. The shortcomings of the Act needed to be rectified in order to hold the administrator accountable for non-compliance. Where requirements were not met, schemes were refused accreditation by the Council.

Ms R Mashigo (ANC) asked what steps had the Council taken to better train trustees of schemes. She commented that health insurance was seemingly becoming more popular.

Mr Masobe noted that the Council had been involved in the training of trustees. Whether trustees were the most effective model for good governance, needed to be reconsidered.

Mr S Nxumalo (ANC) asked what was being done about the high contributions being paid by members of schemes at pharmacies.

Ms Madumise asked what the Council had done about the unfair 'dumping' of clients by medical aid schemes after their benefits had been exhausted.

Mr Masobe said that the objectives of the Act dealt with the issue. Benefits would no longer be constrained by a monetary limit. Medical aid schemes were now required to manage care better.

Mr Njikelana asked whether the Council had made submissions on the Consumer Credit Bill. He asked for comment on the 'manipulation tactics' of medical aid schemes.

Mr Masobe said that the Department of Trade and Industry (DTI) had invited the Council to make submissions. One Council employee had a seat on a DTI subcommittee. It had come to light that trustees often struggled to assert their power because of opposition by scheme administrators.

Dr Luthuli asked how the financial advantage of the positive solvency of schemes was passed on to members. She asked how would the public could know which schemes were doing better financially.

Mr Masobe said that schemes would have to submit their contribution charges by the end of October 2004. The Council would give its approval by January 2005. The passing on of benefits of high solvency schemes was a policy decision to be considered by the Council. Mr Masobe noted that the Council had a newsletter that provided information but stated that the Council could not propose one medical aid scheme over another.

The Chairperson asked for greater elaboration on the impact of the medicines pricing regulations on the medical aid industry, as well as the fact that price increases in hospital medicine were considered a 'policy issue'. He also asked when the risk equalisation fund would be completed. He then queried why services rendered by General Practitioners (GP) only accounted for 7% of the total expenditure of medical aids.

Mr Masobe said a great deal of controversy had emerged over the regulations, and the Minister and the Pharmacy Council had engaged in lengthy discussions on the issue. The regulations were not directly part of the legislation that governed the functioning of the Council. The problem was that schemes had little power with which to negotiate with private hospitals on prices. Schemes needed to be empowered in this regard.

Ms Khunoane noted that MinMEC had approved a proposal on the risk equalisation fund. It however had not yet received Cabinet approval. There was a 'minimum scale of benefits' paid by schemes to GPs. He felt that over time, the scale had under-provided for GPs and that there had been an undermining of their services. With the addition of the 25 new illnesses by the Minister, the services rendered by GPs would increase. A new reference price list for GPs would be available by 1 January 2005. It was projected that consumer care by GPs would increase by 17%.

Ms Madumise asked whether members of schemes were still trying to abuse their medical aids. Mr Masobe noted that the abuse was ongoing. He would welcome it if the Committee could make proposals to the Council on ways of combating such abuse.

Ms Ngobo asked whether the Council was representative of women at its highest levels. Mr Masobe said that 65% of the Council was comprised of women. The Deputy Chairperson was also a woman.

Dr Cachalia stated that fraud, abuse and unethical behaviour, as well as costs, were on the increase. However, benefits were on the decline. Maybe more anti-fraud legislation was needed for health care.

Ms M Manana (ANC) asked whether the Council's magazine alluded to in the past, had been published yet.

Mr Njikelana said that the public profile of the Council needed to be expanded. There might be a proportionate increase in their complaints load if more persons were aware of the existence of the Council.

Mr Masobe pointed out that the Council had a quarterly publication and that the next edition was due to be published within the next week or so. Many complaints had been received in those areas where the Council had visited.

The meeting was adjourned.