1. CMS Annual Report 2010-2011 Dr Monwabisi Gantsho Registrar & Chief Executive 26 October 2011 Parliament, Cape Town 1

2. WELCOME 2

3. Outline of presentation 1.Legislated mandate of the Council for Medical Schemes (CMS) 2.Highlights for the CMS in 2010-2011 – Financial year 1 April 2010 to 31 March 2011 – Dr Gantsho joins the CMS on 1 June 2010 3.Overview of medical schemes industry 2010 – Financial year 1 January-31 December 2010 3

4. 1. Our legislated mandate Medical Schemes Act 131 of 1998 Governs us and industry – Medical schemes – Administrators – Managed care organisations (MCOs) – Healthcare brokers and broker organisations Heart of the Act: protecting medical scheme beneficiaries and regulating schemes – CMS is a Statutory Regulator as opposed to self-, co-, and independent regulator – As we become effective we are constantly being accused of “abuse of power” 4

5. How the Act protects members Promote non-discriminatory access to privately funded healthcare through: – Open enrolment – Community rating – Guaranteed benefits (prescribed minimum benefits/PMBs) Promote financial stability and sustainability Encourage member’s active participation in scheme affairs Investigate and resolve complaints as per Act 5

6. Our revised strategic goals Goal 1: Access to good quality medical scheme cover is maximised Goal 2: Medical schemes and other regulated entities 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 with the benefit of regional and international experiences. 6

7. 2. Highlights for CMS in 2010-2011 Revised strategy – Mandate has not changed – NHI Green Paper: schemes will continue to exist side by side NHI although their role may change – Better performance information reporting – 4 strategic goals instead of 7 starting this year Alignment with Consumer Protection Act (MoU with Consumer Commissioner) 11th clean audit in a row (since inception). – We need your support in facilitating concurrence between MoH and MoF to approve 2012/13 budget 7

8. Our Annual Financial Statements Clean audit by AG Robust internal controls Competent Audit & Risk Committee which oversees the role of the internal auditors CMS has passed the readiness test of AG in terms of the Performance Information report Revenue- Levies, Broker Fees,etc Major Expenditure Items Rental Telecommunication Expenses 8

9. Audit Fees Consumer Education HR/Organisational Strategy Investigation Costs Legal Fees Media and Promotion Strategic planning costs Trustee Training Staff Costs Our Annual Financial Statements cont.. 9

10. CMS expenditure 2010 / 11 ItemAmount Staff cost51.6 R m Legal fees9.9 R m Administrative expenses6.1 R m Other operating costs5.5 R m Rental4.3 R m Audit fees1.4 R m Depreciation1.2 R m Consumer education1.1 R m Amortisation0.8 R m Trustee training0.3 R m 10

11. CMS expenditure 2010/100 11

12. 3. Overview of industry 2010 Strategic overview: –National Health Insurance (NHI) system –Governance –Health costs –Prescribed minimum benefits (PMBs) –Complaints resolution Industry overview: –Non-financial information –Financial information 12

13. NHI system Council has always supported and continues to support strategic reform of the entire health system – Sect 7 of the Act: Advise the Minister – Support the DG of DoH – Assistance to HPC researcher: Contribute to health economics and policy research A task team is exploring the NHI Green Paper to formulate a view on it by 31 December Green Paper recognises continued existence of medical schemes although their role may change – There is recognition that medical schemes further advance health systems and access to quality healthcare in SA 13

14. Governance There are provisions in Medical Schemes Act Boards are removed & curators are appointed Schemes can be put under liquidation or deregistered (Section 27) Currently formulating a view on scope of applicability of King III to medical schemes; guidelines will be published in 2011-2012 14

15. Health costs CMS monitors health costs; they are rising Supply-side regulation is required: – CMS assists in curbing possible perverse behavior – Monitoring and reporting on private hosp costs Price negotiations between schemes and providers should take place 15

16. PMBs Prescribed Minimum Benefits: 1 pillar of MSA Guaranteed by the Medical Schemes Act Regulation 8: schemes must pay for PMBs in full (at cost). Awaiting judgment by end Oct. Must be covered from risk pool, not savings Serious & life-threatening diseases/conditions – 270 PMB diseases/conditions; 25 chronic disease list and any emergency condition 16

17. Resolving complaints In 2010-2011 we received 5 617 complaints Almost 1 000 more than in last financial year Of those, 5 351 complaints were resolved Of those, 4 734 were valid complaints and 617 were enquiries 3 480 complaints were resolved within 120 days 17

18. Top 10 types of complaints Types of complaintsFinancial year 2010-2011 PMBs / formularies / DSPs1 749 Unpaid accounts1 230 Scheme refuses to issue authorisation272 Administrative inefficiencies261 Reversal & short-payment of accounts228 Termination of membership163 Misunderstanding with scheme131 Non-payment of refund127 Unauthorised deductions92 Exclusion of condition and/or benefits87 New CMS Sharecall hotline 0861 123 267 18

19. How to complain Speak with your scheme first Contact the CMS if no resolution complaints@medicalschemes.com 0861 123 267 (Sharecall hotline / consultants) 19

20. NON-FINANCIAL INFORMATION Thulani Matsebula Head: Research & Monitoring 20

21. Schemes and beneficiaries 21

22. Schemes and beneficiaries cont. Fewer medical schemes No negative effect on number of beneficiaries Consolidation through amalgamations (mergers) and liquidations Number of smaller schemes declining faster – Restricted schemes folding into larger schemes Consolidation trend continues – 99 medical schemes currently 22

23. Benefit options 23

24. Age of beneficiaries 24

25. Age of beneficiaries cont. Open schemes are getting older Restricted schemes are getting younger (impact of GEMS) Implications for beneficiaries in other schemes Implications for industry 25

26. % of total benefits paid ( 09 vs. 10 FY) 26

27. Total healthcare benefits paid pbpm 27

28. Utilisation of services 28

29. Utilisation of private hospitals 29

30. Benefits paid Amount (R) % changes GPs6,2 (5,7)9,0 (8,4) Meds specialists18,8 (16,7)12,2 (19,1) Medicines14,0 (13,3)5,6 (18,6) Hospitals31,1 (28,3)10,0 (18,1) Figures in parenthesis are prior year figures 30

31. FINANCIAL INFORMATION Tebogo Maziya Head: Financial Supervision 31

32. Contributions and claims Total Contributions increased by 13.7% to R96.5 billion (R84.9 billion) Relevant healthcare expenditure increased by 11.0% to R84.7 billion (R76.3 billion) Risk Contributions increased by 13.7% to R87.7 billion (R77.1 billion) Relevant healthcare expenditure incurred increased by 11.2% to R76.6 billion (R68.9 billion) Savings Medical savings accounts contributions increased by 13.2% to R8.7 billion (R7.7 billion) Medical savings accounts claims increased by 12.0% to R8.3 billion (R7.4 billion) Figures in brackets depicts 2009 figures 32

33. Contributions and claims (pabpm) Total Contributions increased by 9.6% to R975.3 (R890.0) Relevant healthcare expenditure increased by 7.3% to R858.4 (R800.2) Risk Contributions increased by 9.6% to R886.9 (R808.9) Relevant healthcare expenditure incurred increased by 7.2% to R774.6 (R722.5) Savings Medical savings accounts contributions increased by 4.9% to R110.8 (R105.7) Medical savings accounts claims decreased by 3.7% to R105.0 (R101.2) Figures in brackets depicts 2009 figures PABPM=per average beneficiary per month pabpm = per average beneficiary per month 33

34. Risk claims ratio all schemes 2010 prices 34

35. Cost trends pbpa: 2010 prices 35

36. Non-healthcare expenditure Consists mainly of: Gross administration expenditure (biggest component) – 67.6% Managed healthcare: management services – 19.5% Brokers fees – 11.4% Impaired receivables – 1.5% 36

37. Non-healthcare expenditure Increased by 6.9% to R11.6 billion pabpm figures increased by 3.1% – Open: increased by 4.8% to R147.1 (R140.4) – Restricted: increased by 3.5% to R74.1 (R71.6) Figures in brackets depicts 2009 figures 37

38. Gross administration expenditure Increased by 4.4% to R7.8 billion – Open schemes: increased 1.4% to R5.6 billion – Restricted schemes: increased 13.1% to R2.2 billion – GAE is main component of NHE: 67.6% Adjusted for membership (pabpm): – Open: R96.6 (R95.5) – Restricted: R54.2 (R52.3) Figures in brackets depicts 2009 figures pabpm = per average beneficiary per month 38

39. Managed healthcare: management services Increased by 16.2% to R2.3 billion Number of members covered: 8.2 million (3.3% increase) 98.8% of all beneficiaries covered 39

40. Broker costs Broker costs: increased by 8.9% to R1.3 billion On a pampm basis: – Broker fees increased by 7.7% to R44.4 (R41.2) Figures in brackets depicts 2009 figures pampm = per average member per month 40

41. Broker fees and membership 41

42. Net healthcare results 42

43. Solvency: all schemes 43

44. Overall trends 44