1. CMS STRATEGIC PLAN, ANNUAL PERFORMANCE PLAN AND BUDGET Portfolio Committee on Health 15 April 2015

2. INTRODUCTION OF CMS DELEGATION Prof. Yusuf Veriava - Chairperson of Council Mr. Daniel Lehutjo - CFO / Acting Registrar & CEO Mrs. Tebogo Maziya - GM: Financial Supervision Mr. Craig Burton-Durham – GM : Legal Services Unit Mr. Paresh Prema – GM: Benefits Management Unit 2

3. CONTENTS CMS legislative mandate Pillars of the MSA Industry analysis Governance matters Budget 3

4. OVERVIEW OF LEGISLATIVE MANDATE Mr Daniel Lehutjo CFO, 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 provided for by medical schemes, and such other services as the Council may from time to time determine; investigate complaints and settle disputes in relation to the affairs of medical schemes as provided for in this Act; 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. LEGISLATIVE AND OTHER MANDATES Constitution of RSA –Section 9, Section 27 of Chapter 2 of the Bill of Rights, Section 36 National Health Act – key objective is to unite various elements of the national health system - promote spirit of shared co-operation and responsibility amongst public and private health providers, professionals and other role- players 6

7. LEGISLATIVE AND OTHER MANDATES National Development Plan Vision 2030 -Sets out nine priority areas, with several referring to required interventions to achieve a more effective health system NDoH strategic goals 2014 -2019 7

8. 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 8

9. Access to schemes 1 Medical schemes 2 Regulator 3 Strategic review 4 CMS STRATEGIC GOALS 9

10. OVERVIEW OF PILLARS OF MSA Mr Paresh Prema GM: Benefits Management 10

11. GOAL 1: ACCESS TO GOOD QUALITY MEDICAL SCHEME COVER IS MAXIMISED 11

12. PILLARS OFE THE MEDICAL SCHEMES ACT Community Rating: This requires that medical schemes charge the same premiums for the same benefits. This prevents price discrimination against older or less healthy members who in an ordinary insurance market could be subjected to much higher premiums. Open-enrollment: Open medical schemes are required to accept all who wish to join them – regardless of their age or health status. This protects those who are less healthy as medical schemes are not allowed to deny access to them. Prescribed Minimum Benefits (PMBs): PMBs guarantee a minimum level of healthcare cover for certain illnesses and chronic conditions and are in place to prevent medical cover from running out for these conditions. 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. 12

13. WHY PRESCRIBED MINIMUM BENEFITS? To ensure that medical scheme premiums first cover essential, non-discretionary benefits and then only allocate resources to more discretionary services 13

14. PRESCRIBED MINIMUM BENEFITS PMBs are a feature of the Medical Schemes Act, in terms of which medical schemes have to cover the costs related to the diagnosis, treatment and care of: any emergency medical condition Limited set of 270 medical conditions (defined in the Diagnosis Treatment Pairs) 25 chronic conditions (defined in the Chronic Disease List) 14

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

16. ROLE OF MANAGED CARE ORGANISATIONS Key question: value add of managed care interventions? 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 Carve a way forward that will impact on outcomes and quality of care 16

17. REVISION OF THE PMB’s Some schemes challenge the “payment in full provisions” in the regulations and – Cover PMBs (270 +25) only in terms of scheme rules – 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. LOW COST BENEFIT OPTIONS (LCBO) Council has approved a framework for schemes to consider LCBO Intention to expend coverage to those that are currently uncovered Provide a benefit that: – Meets healthcare needs i.t.o Section 27, NHA and MSA – Defined benefits that is affordable Protects the market due to principles enshrined in the MSA CMS is going to present guidelines to industry to implement these options 19

20. GOAL 2: MEDICAL SCHEMES ARE PROPERLY GOVERNED, ARE RESPONSIVE TO THE ENVIRONMENT, AND BENEFICIARIES ARE INFORMED AND PROTECTED 20

21. OVERVIEW OF INDUSTRY PERFORMANCE Ms Tebogo Maziya GM: Financial Supervision 21

22. NUMBER OF SCHEMES AND BENEFICIARIES 22

23. AVERAGE AGE OF BENEFICIARIES 23

24. MONIES SPENT BY SCHEMES (RISK POOL) 24

25. TOTAL HEALTHCARE EXPENDITURE 25 Hospitals + Medical Specialists + Medicines = 75.8%

26. TOTAL HEALTHCARE CLAIMS PAID pbpa (2013 prices) 26

27. TOTAL HEALTHCARE BENEFITS PAID (2013) Discipline pbpa General practitioners 894.5 Medical specialists 3 146.8 Dentists 336.5 Dental specialists 92.2 Support and allied health professionals 1 084.7 Private hospitals 4 503.9 Provincial hospitals 39.2 Medicines 2 061.8 Ex gratia payments 6.9 Other benefits 502.8 Total managed care arrangements (out-of-hospital benefits) 189.3 27

28. NON HEALTHCARE EXPENDITURE : 2013 PRICES 28

29. SOLVENCY 29

30. GOVERNANCE MATTERS Mr Craig Burton-Durham GM: Legal Services 30

31. 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 31

32. 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 32

33. 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 33

34. GOVERNANCE STRUCTURE OF CMS -Registrar of Medical Schemes -Council -Appeals Committee -Appeals Board -Courts of South Africa 34

35. ALTERNATIVE DISPUTES RESOLUTION (ADR) Alternative disputes resolution process Pro Bono legal process 35

36. 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 36

37. 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

38. 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 38

39. RESPONSES TO STRATEGIC CHALLENGES Improved systems for better data collection – measuring value of managed care using process indicators Low cost benefit framework proposal – increasing coverage 39

40. IMPORTANT LEGAL CASES Regulation 8 – Genesis vs. Minister of Health Bonitas vs. Registrar of Medical Schemes More details from legal 40

41. OVERVIEW OF REGULATORY ACTIVITIES AND BUDGET Mr Daniel Lehutjo CFO, Acting CEO & Registrar 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 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 2015/2016 48

49. ASSUMPTIONS :BUDGET 2015/2016 Inflationary increase...........................5.6% General salary increase.......................6.6% New permanent positions: – Human Resources: Administrator – Information and Communication Technology: Helpdesk Technician – Information and Communication Technology: Senior Software Developer – Strategy Office : Clinical Analyst 49

50. UNDERLYING ASSUMPTIONS OF SUPPLEMENTARY BUDGET Building capacity for the Demarcation Regulations Taking up last wing in the office New permanent positions: – Benefits Management : Senior Benefit Analyst – Compliance & Investigation : Compliance Officer – Complaints Adjudication: Legal Adjudication Officer – Information and Communication Technology: Senior Programmer – Stakeholders Relations : Customer Care Consultant – Strategy Office : Junior Medical Advisor 50

51. BUDGET : PROPOSED 15/16 51

52. LEVY TREND 52

53. ECONOMIC DESCRIPTION 53

54. EXPENDITURE PER UNIT 54

55. TOTAL EMPLOYEES PER UNIT 55

56. EXPENDITURE PER UNIT 56

57. MAJOR EXPENSE ITEMS 57

58. QUESTIONS 58