1. CMS STRATEGIC PLAN, ANNUAL PERFORMANCE PLAN AND BUDGET Portfolio Committee on Health 30 July 2014

2. INTRODUCTION OF CMS DELEGATION Trevor Bailey (Deputy Chairperson of Council) Kariem Hoosain (Chairperson of Finance Committee) Daniel Lehutjo (CFO / Acting Registrar & CEO) Tebogo Maziya (Head: Financial Supervision) Anton De Villiers (Head: Research & Monitoring) Craig Burton-Durham(Head: Legal Services) 2

3. CONTENTS CMS legislative mandate Industry analysis Budget 3

4. Mr Daniel Lehutjo Acting CEO & Registrar 4

5. CMS LEGISLATED MANDATE CMS is established in terms of Medical schemes Act 131 of 1998 – Section 7 of the Act confers the following functions on Council protect the interests of the beneficiaries at all times; control and co-ordinate the functioning of medical schemes in a manner that is complementary with the national health policy; make recommendations to the Minister on criteria for the measurement of quality and outcomes of the relevant health services; investigate complaints and settle; collect and disseminate information about private health care; make rules, not inconsistent with the provisions of the Act for the purpose of the performance of its functions and the exercise of its powers; advise the Minister on any matter concerning medical schemes; and perform any other functions conferred on the Council by the Minister or by the Act. 5

6. 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

7. Access to schemes 1 Medical schemes 2 Regulator 3 Strategic review 4 CMS STRATEGIC GOALS 7

8. Dr Anton de Villiers Head: Research and Monitoring 8

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

10. Pillars of the Medical Schemes Act 131 of 1998 10

11. Section 29(3)(a) of the Medical Schemes Act (“the Act”) states that schemes may not provide in its rules for the exclusion of any applicant or a dependant of an applicant, subject to the conditions as may be prescribed, from membership except for a restricted membership scheme as provided for in the Act. Section 29(1)(n) provides that schemes may not discriminate against any member on any ground, for example age, sex and past or present state of health. Schemes are protected against scheme hopping and anti-selection through the imposition of Waiting periods and Late Joiner Penalties. Challenges: Transfer of Transmed members to open medical schemes Refusal by schemes to re-enrol members following the termination of membership due to non- disclosure.

12. Section 29(1)(n): Contributions may not be based on any discriminatory grounds, past or present state of health or on the frequency of rendering of relevant health services. Section 29(1) (o) &(p) and Regulation 8: PMB’s must be funded in full, i.e. the invoiced amount Schemes have a number of ways to manage these costs: DSP’s, formularies, protocols etc. Challenges BHF v CMS and the Registrar

13. PILLARS OF THE MEDICAL SCHEMES ACT (cont) Medical schemes are non-profit in nature. The reporting requirements for medical schemes are comprehensive and allow for examination of changes in benefits and contributions, governance structures, and amounts spent on non-healthcare costs such as administration. If medical schemes are not protected, the public health system could be flooded with patients who usually make use of the private health system. The right to healthcare needs to be protected. Ensuring the soundness of the medical schemes regulatory framework is an essential part of protecting the right of access to health care. 13

14. COST OF THE PMB’s Estimated cost: R508,20 per beneficiary per month Proportionally 53% of all risk benefits paid out are for the PMB’s 14

15. PRINCIPLES TO MANAGE FINANCIAL RISK Designated Service Providers (Regulation 7) Managed Care Principles (Regulation 8) – Managed Care Protocols – Formularies

16. ROLE OF MANAGED CARE ORGANISATIONS 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? 16

17. REVISION OF THE PMB’s Some schemes challenge the “payment in full provisions” in the regulations – Managed care interventions – Preventative care 17

18. AFFORDABILITY OF HEALTHCARE 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 The problem of affordability of medical schemes is considered to be the greatest obstacle to growth in the industry. 18

19. Schemes do not compete at the same level... 19

20. Ms Tebogo Maziya Head: Financial Supervision 20

21. GOAL 2: MEDICAL SCHEMES ARE PROPERLY GOVERNED, ARE RESPONSIVE TO THE ENVIRONMENT, AND BENEFICIARIES ARE INFORMED AND PROTECTED 21

22. Trend analysis of the performance of medical schemes 22

23. NUMBER OF SCHEMES AND BENEFICIARIES

24. AVERAGE AGE OF BENEFICIARIES 24

25. MONIES SPENT BY SCHEMES (RISK POOL)

26. TOTAL HEALTHCARE EXPENDITURE 26 Hospitals + Medical Specialists + Medicines = 75.8%

27. TOTAL HELATHCARE CLAIMS PAID pbpa (2012 prices)

28. NON HEALTHCARE EXPENDITURE : 2012 PRICES

29. SOLVENCY

30. Mr Craig Burton-Durham Head: Legal Services 30

31. Governance matters 31

32. GOVERNANCE -Governance framework of a medical scheme : - section 57 of the Act indicates the general provisions on governance that must be catered for by medical schemes -Scheme structure – members, Principal Officer, Board of trustees -Third party service providers -Governance failures - curatorships

33. GOVERNANCE 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 33

34. COUNCIL’S RESPONSE TO GOVERNANCE MATTERS 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 34

35. GOVERNANCE STRUCTURE OF CMS -Registrar of Medical Schemes -Council -Appeals Committee -Appeals Board -Courts of South Africa

36. ALTERNATIVE DISPUTES RESOLUTION (ADR) Alternative disputes resolution process Pro Bono legal process

37. ADR 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 37

38. 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 38

39. Medical Schemes Amendment Bill 39

40. Proposed 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 40

41. 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 Encourage medical schemes to enter into managed care arrangements that add value 41

42. GOAL 3: CMS IS RESPONSIVE TO THE NEEDS OF THE ENVIRONMENT BY BEING AN EFFECTIVE AND EFFICIENT ORGANISATION 42

43. IT IFRANSTRUCTURE Proper IT Infrastructure for improved efficiency and effectiveness Outdated IT infrastructure Software Development SEP 43

44. HUMAN RESOURCES Valued employees Employer of Choice – benefits, competitive salaries Recruitment and retention Succession planning Performance management 44

45. FINANCIAL MANAGEMENT PFMA – Finance managed ito PFMA and Treasury Regulations and Supply Chain Management Internal Controls – Success of good financial management based on sound internal controls – Internal Audit Services in place – Audit and Risk Committee established Budget Management – Limited budget – Undertake limited projects – Legal Fees – Office accommodation 45

46. 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 46

47. STRATEGIC ADVICE – WHAT MUST WE DO DIFFERENTLY? This goal defines our interaction with our Executive Authority – proposed PMB regulations – Amendment to the MSAB – Demarcation regulations – CMS contribution to NHI development 47

48. CMS BUDGET 2014/2015 48

49. BUDGET CONSIDERATIONS 2014/2015 Inflationary increase - 6% Utilisation of in-house venue for conferences =reduction in expenditure New permanent positions: – Accreditation : Clinical Analyst – Compliance : Senior Investigator – Internal Finance: Supply Chain Officer 49

50. BUDGET : 14/15 50

51. LEVY TREND 51

52. ECONOMIC DESCRIPTION 52

53. Expenditure per unit Unit%Amount Financial Supervision8.1110,173,115 Information Systems and Knowledge Management 9.4111,809,074 Stakeholder Relations7.609,533,411 Accreditation6.047,579,391 CFO’s Office18.7923,584,199 Complaints and adjudication3.944,943,103 Benefit Management4.295,381,852 Research and Monitoring5.406,777,253 Compliance5.506,908,463 Strategy Office4.615,781,600 Human Resources4.765,973,208 Legal Services10.6813,409,539 Office of the CEO/Registrar8.9411,222,678 Capital expenditure1.932,422,000 TOTAL125,498,886 53

54. MAJOR BUDGET ITEMS 54

55. EMPLOYEES PER UNIT UNITNUMBER Financial Supervision11 Information Systems and Knowledge Management11 Stakeholder Relations11 Accreditation10 CFO’s Office10 Complaints and adjudication10 Benefit Management8 Research and Monitoring8 Compliance7 Strategy Office7 Human Resources5 Legal Services4 Office of the CEO/Registrar4 TOTAL105 55

56. QUESTIONS 56