CMS STRATEGIC PLAN, ANNUAL PERFORMANCE PLAN AND BUDGET Portfolio Committee on Health 20 March 2013

INTRODUCTION OF THE CMS CHAIRPERSON, PROF Y VERIAVA AND DELEGATION BY THE REGISTRAR & CEO, DR MONWABISI GANTSHO 2

FEEDBACK FROM PREVIOUS INTERACTIONS WITH THE HPC 3

In the past, we have responded to formal questions from HPC in relation to tenders, the asset register, payment of creditors, annual report costs, private hospital costs, market consolidation, non-healthcare expenditure and other policy related questions MoH has indicated his full support for our 2013/14 plans, and has requested the MoF to concur The medical aid industry in SA has experienced increase in contributions alone from R30.6bil in year 2000 to about R110bil in 2012/13. 4

Contents Discuss challenges to our strategic goals and present the actions we undertake to protect the goals Discuss the proposed budget required to ensure that we continue to discharge our mandate – Strategist will present strategic challenges and our responses, including proposed amendments to the Act – CFO will present the budget 5

CMS strategic goals Goal 1 – Access to good quality medical scheme cover is maximized Goal 2 – Medical schemes are properly governed, are responsive to the environment, and beneficiaries are informed and protected Goal 3 – CMS is responsive to the needs of the environment by being an effective and efficient organisation Goal 4 – CMS provides influential strategic advice and support for the development and implementation of strategic health policy, including support to the NHI development process 6

SITUATION ANALYSIS AND STRATEGIC RESPONSE IN RELATION TO STRATEGIC GOALS STRATEGIST 7

Access to schemes 1 Medical schemes 2 Regulator 3 Strategic review 4 CMS strategic goals 8

GOAL 1: ACCESS TO GOOD QUALITY MEDICAL SCHEME COVER IS MAXIMISED 9

…membership growth is faster than employment growth… 10

…to benefit, access is required… 11

Income Cost Affordability...access to medical schemes must be fair, and non-discriminatory Risk Pooling Mandatory cover Risk adjustment Community rating Benefit coverage Open enrollment 12

THREATS TO FAIR AND NON- DISCRIMINATORY ACCESS 13

…the difference in scheme risk profiles have worsened over the past two years, leaving more than a million beneficiaries vulnerable… 14

…unfettered growth in short-term, for- profit, risk rated and restricted access insurance products undermine risk pools… Through risk rating, restricted enrolment, and no minimum benefits, GAP cover, and other short term insurance products erode the cross subsidisation from young & healthy to sick & old 15

…continued opposition to the “payment in full” provisions in the PMB regulations could leave members vulnerable… Some schemes challenge the “payment in full provisions” in the regulations and – Cover PMBs ( ) only in terms of scheme rules – Managed care interventions 16

…enrollment provisions are challenged more and more… Discovery has refused to accept Transmed members, in spite of a ruling by the Registrar and Council, matter will be heard by the appeal board soon. GEMS has appealed the decisions by the Registrar, Council and the appeal board, and has taken the decision to the High court for revision 17

…increases in utilisation, tariffs and technology use presents affordability challenges… Cost: Absent health price determination framework – Increasingly larger portion of benefits go towards PMBs – GAP cover drives up professional fees Income – Tax credit system in place 18

Council’s response to access challenges (Goal 1) A research project is underway in order to advise the DoH on possible interventions to contain the increasingly disparate risk distribution between schemes Continued interaction with the DoH and Treasury to get consensus on the demarcation regulations Draft amendments to the PMB regulations were submitted to the MoH in March 2010 Excited about the Competition Commission’s market enquiry Met with the MoH and GEMS to avoid the court action by GEMS 19

GOAL 2: MEDICAL SCHEMES ARE PROPERLY GOVERNED, ARE RESPONSIVE TO THE ENVIRONMENT, AND BENEFICIARIES ARE INFORMED AND PROTECTED The performance of medical schemes Governance matters in medical schemes Functioning of the appeals committee Managed care ADR 20

THE PERFORMANCE OF MEDICAL SCHEMES 21

…claims costs pbpm continue to rise at rates much higher than inflation, with hospitals and specialists in the lead… 22

…non healthcare expenditure declining since 2005… 23

…increase in costs largely due to an increase in health benefits… 24

Council’s response to the performance of medical schemes Continued engagement with schemes on non- health costs Amendment to MSA required to strengthen regulatory powers Research the level of out-of pocket expenditure 25

GOVERNANCE MATTERS IN MEDICAL SCHEMES 26

Interaction of regulatory functions Prospective regulation Concurrent regulation Retrospective regulation Industry 27

…there is a large increase in retrospective workload… 28

…with many more complaints requiring a clinical opinion… 29

..the balance between retrospective and prospective regulation is threatened.. Prospective regulation Concurrent regulation Retrospective regulation Industry Retrospective regulation 30

…governance failures, although not pervasive, persists in some schemes… Strong administrator influence on the affairs of some schemes Instances where there is not an arms-length relationships between trustees and third party contractors Some boards lack in expertise and skills mix Clear fit & proper standards not established 31

Council response Governance provisions in the MSA must be strengthened, a later slide on the draft MSAB will address this Continued enforcement of existing provisions in the MSA Some schemes are under curatorship 32

THE ROLE OF MANAGED CARE ORGANISATIONS 33

Council response on managed care Continue work to determine the exact role and the value added by managed care organisations Fundamental question: Do MCO’s contribute to the healthcare environment by reducing cost and improving quality? Develop a process, TOR, consult council, do research, and report back What action is required to address potential problems? 34

ALTERNATIVE DISPUTE RESOLUTION TO RESOLVE COMPLAINTS FASTER AND CHEAPER 35

…alternate dispute resolution may be more cost effective and result in a shortened turnaround…. Dispute Resolution ADR Private decision making by parties themselves -Negotiation and Mediation Decisions of schemes/PO’s Private adjudication by third parties -Arbitration Decisions of scheme’s Dispute Committee Adjudication by a public authority -Formal litigation -Administrative decision- making Registrar’s rulings, Appeal rulings and Court judgments 36

Council’s response to ADR Propose amendments to the MSA to require ADR at scheme level, and to allow for ADR prior to referral to a Tribunal Pilot the process on a voluntary basis to reduce the backlog of appeals to Council 37

GOAL 3: CMS IS RESPONSIVE TO THE NEEDS OF THE ENVIRONMENT BY BEING AN EFFECTIVE AND EFFICIENT ORGANISATION 38

…the existing office accommodation is inadequate… Currently occupying two separate buildings in an office park, which is filled to capacity Other space in the same office park are too far from existing offices 39

…matters before Council are sometimes challenged on procedural grounds… MSA is not clear on many of the processes to be followed in making a determination on certain matters No rules on appeals committee proceedings 40

Council response A tender was awarded for new office accommodation in Centurion, the office will start using these premises in May 2013 Section 7 (f): “Make rules, not inconsistent with the provisions of this Act for the purpose of the performance of its functions and the exercise of its powers” Council rules: Rules to govern Council process and Appeals committee proceedings are being made currently MSAB contains further provisions to govern Council affairs 41

GOAL 4: CMS PROVIDES INFLUENTIAL STRATEGIC ADVICE AND SUPPORT FOR THE DEVELOPMENT AND IMPLEMENTATION OF STRATEGIC HEALTH POLICY, INCLUDING SUPPORT TO THE NHI DEVELOPMENT PROCESS 42

Strategic advice – what must we do differently? There has been slow progress in the publication of the proposed PMB regulations Demarcation regulations Statutory fees Price determination 43

Council response A Council delegation met with the Minister PMB and Statutory fee regulations: Still with the DoH’s legal unit Demarcation regulations, the MoH supports strong regulation to protect sicker and older members of the public Price determination: Collaborate with the Competition commission market enquiry NHI: Continue regulating the medical schemes environment 44

KEY AMENDMENTS IN PROPOSED MSAB 45

Changes with a large impact on the functioning of the office and the industry Improved information management – Health service provider register – Beneficiary register – Contracts with providers – Health service utilisation New chapters relating to membership and contributions – Transparency – Open enrolment PMB’s/MMB’s Complaints procedures – ADR at scheme level Appeals procedure – Single tribunal – Alternative dispute resolution at scheme and tribunal level Governance provisions – Elections Range of incidental changes – legislation is 15 years old 46

CMS Income budget

48

Budgeted expenditure by Strategic Goal 49

Budgeted expenditure by regulatory activity 50

CONCLUSION 51

Access to schemes 1 Medical schemes 2 Regulator 3 Strategic review 4 CMS strategic goals 52

DISCUSSION 53