PRESENTATION TO HPC 12 OCTOBER 2012 CAPE TOWN

Outline of presentation 1.Legislated mandate of the Council for Medical Schemes (CMS) 2.Highlights for the CMS in – Financial year 1 April 2011 to 31 March Overview of the financial results of CMS Overview of medical schemes industry 2011 – Financial year 1 January-31 December 2011 – Non financial information – Financial information

DR MONWABISI GANTSHO CE & REGISTRAR OF MEDICAL SCHEMES

1. Council’s legislated mandate Medical Schemes Act 131 of 1998 Act governs Council & industry – Medical schemes – Administrators of medical schemes – Managed care organisations – Healthcare brokers & broker organisations Heart of the Act: protecting beneficiaries & regulating medical schemes industry Entire health system benefits

How the Act protects you & me Promote non-discriminatory access to privately funded healthcare through: – Open enrolment – Community rating – Guaranteed or prescribed minimum benefits (PMBs) Promote financial stability & sustainability Encourage your active participation in scheme affairs Investigate & resolve complaints

2. Highlights of Council in National Health Insurance (NHI) system Medical Schemes Amendment Bill Demarcation between medical schemes & health insurance products Prescribed minimum benefits (PMBs), a pillar of the Medical Schemes Act Determination of prices in the private health sector

2. Highlights of Council in cont. Duty to speak openly (SCA judgement in Selfmed defamation case) Inspections & investigations (Sizwe & Medshield) How RETAP became ITAP Medical scheme rule amendments for 2012 – Guidance on contribution increases – Observed trends in registered contribution increases

2. Highlights of Council in cont. Improved regulatory effectiveness – Routine inspections of medical schemes – Improved accreditation standards for managed care organisations (MCOs) Real-Time Monitoring (RTM) of the industry Composite Risk Index (CRI), or the “traffic light approach” to regulating

2. Highlights of Council in cont. Auditor-General: 12th unqualified audit in a row (since our establishment in 2000) Our budget comes mainly from: – Levies charged to medical schemes (per member per year) – Accreditation fees (administrators, MCOs, brokers) – Registration fees (medical schemes & their rules) Received R94 million in to regulate an industry worth R107 billion in contributions received in 2011

2. Highlights of Council in cont. Nature & extent of litigation against the Registrar & Council remained unpredictable Council’s expenditure on legal fees amounted to R10.4 million in the financial year under review By comparison, medical schemes spent a total of R50.5 million on legal fees, including litigation, in their 2011 financial year Six schemes who appealed against decisions of the Registrar & Council in spent R27.0 million on legal fees, including litigation

Comparative spend on legal fees

2. Highlights of Council in cont. One of Council’s key responsibilities is to resolve complaints relating to the medical schemes industry Council receives thousands of complaints every financial year, and this number keeps growing Received complaints in Resolved complaints in Most complaints relate to the non- or short- payment of prescribed minimum benefits (PMBs)

2. Highlights of Council in cont.

OVERVIEW OF CMS FINANCIAL RESULTS DAN LEHUTJO CFO

Overview of the financial results of CMS Audit report Statement of financial position Statement of financial performance

Audit Report Report on the financial statement – Clean or Unqualified Opinion – Predetermined objectives – Compliance with laws & regulations – Internal control

Statement of financial position

Statement of financial performance

Revenue from exchange transactions

Other income

Statement of financial performance

NON FINANCIAL INFORMATION MICHAEL WILLIE ACTING SENIOR MANAGER

Strategic goal 1 Access to good quality medical scheme cover maximized – Improve risk pools – Enhance community rating – Open enrollment – Prescribe minimum benefits

Trends in schemes Number of schemes Ave number of option Ave no. of Mergers per year 3.0

Strategic goal 2 Medical schemes are properly governed, responsive to the environment and beneficiaries are informed and protected – Ageing profile of beneficiaries – Membership – Governance failures – Increasing healthcare costs

Beneficiaries % change Open schemes Restricted schemes All (Million)

Beneficiaries cont. Trend: from 6.7 million beneficiaries in 2000 (the introduction of the Medical Schemes Act 131 of 1998) to 8.5 million beneficiaries in 2011 – an increase of 26.9% Open schemes trend: from 4.7 million in 2000 to 4.8 million in 2011 (2.1% growth) Restricted schemes trend: from 2.1 million in 2000 to 3.7 million in 2011 (76.2% growth) GEMS (Government Employees Medical Scheme) is responsible for growth in restricted schemes membership (since 2006)

Age of beneficiaries Average age of beneficiaries: 31.6 years (31.5 years in 2010) Average age in open schemes: 33.3 years Average age in restricted schemes: 29.5 years Explained by GEMS (since 2006) – Open schemes have been growing older – Restricted schemes have been growing younger

Age of beneficiaries cont.

Utilisation of healthcare services More beneficiaries used private hospitals in 2011, and they stayed longer than in 2010 – per 1000 average beneficiaries – ALOS days Fewer beneficiaries used general practitioners (GPs), dentists & private nurses in 2011 Beneficiaries in restricted schemes use healthcare services more often & for longer than beneficiaries in open schemes

Utilisation of healthcare services

Benefits paid (% of all) Benefits paid (% of all) TH:36.6 % MS:22.8%Meds:16.3%GPs:7.3% Other: 17.3% R93.2 Billion

Total healthcare benefits paid data PH: R330.7 MS: Meds: Dentists: R25.2 Dental S: R24.7 S&AP: R71.8

Strategic goal 3 -4 Council is responsive to the needs of the environment Provide influential strategic advice and support to health policy

FINANCIAL INFORMATION TEBOGO MAZIYA HEAD: FINANCIAL SUPERVISION

Financial information Claims as a function of contributions Relationship between claims and non-healthcare expenditure Components of non-healthcare expenditure Net healthcare results Solvency Overall trends

Contributions and claims 2011 R ’ billion 2010 R ’ billion % difference Gross contributions % Gross relevant healthcare expenditure % Risk contributions % Net relevant healthcare expenditure % Medical savings plan contributions % Medical savings plan claims %

Contributions and claims (pabpm) pabpm = per average beneficiary per month 2011 pabpm R 2010 pabpm R % difference Gross contributions % Gross relevant healthcare expenditure % Risk contributions % Net relevant healthcare expenditure % Medical savings plan contributions % Medical savings plan claims %

Risk claims ratio all schemes

Claims and non-healthcare expenditure pabpa = per average beneficiary per annum

Non-healthcare expenditure Consists mainly of: Gross administration expenditure (biggest component) – 67.6% Managed healthcare: management services – 20.1% (19.5%) Brokers fees – 11.5% Impaired receivables – 0.9% (1.5%) Figures in brackets depicts 2010 figures

Non-healthcare expenditure Increased by 4.8% to R12.1 billion pabpm figures increased by 2.7% – Open: increased by 4.8% to R154.1 (R147.1) – Restricted: increased by 2.7% to R76.1 (R74.1) Figures in brackets depicts 2010 figures pabpm = per average beneficiary per month

Non-healthcare expenditure

Gross administration expenditure Increased by 4.7% to R8.2 billion – Open schemes: increased 3.0% to R5.6 billion – Restricted schemes: increased 9.1% to R2.4 billion – GAE is main component of NHE: 67.6% Adjusted for membership (pabpm): – Open: R101.4 (R96.6) – Restricted: R54.9 (R54.1) Figures in brackets depicts 2010 figures pabpm = per average beneficiary per month

Managed healthcare: management services Increased by 8.3% to R2.4 billion Number of members covered: 8.4 million (2.5% increase) 98.8% of all beneficiaries covered

Broker costs Broker costs: increased by 5.0% to R1.4 billion On a pampm basis: – Broker fees increased by 5.4% to R46.8 (R44.4) Figures in brackets depicts 2010 figures pampm = per average member per month

Broker fees and membership

Net healthcare results

Solvency: all schemes

Solvency below 25%

Overall trends

THANK YOU!