1. PRESENTATION TO HPC 12 OCTOBER 2012 CAPE TOWN

2. Outline of presentation 1.Legislated mandate of the Council for Medical Schemes (CMS) 2.Highlights for the CMS in 2011- 2012 – Financial year 1 April 2011 to 31 March 2012 3.Overview of the financial results of CMS 2011 -12 4. Overview of medical schemes industry 2011 – Financial year 1 January-31 December 2011 – Non financial information – Financial information

3. DR MONWABISI GANTSHO CE & REGISTRAR OF MEDICAL SCHEMES

4. 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

5. 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

6. 2. Highlights of Council in 2011-2012 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

7. 2. Highlights of Council in 2011-2012 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

8. 2. Highlights of Council in 2011-2012 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

9. 2. Highlights of Council in 2011-2012 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 2011-2012 to regulate an industry worth R107 billion in contributions received in 2011

10. 2. Highlights of Council in 2011-2012 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 2011-2012 spent R27.0 million on legal fees, including litigation

11. Comparative spend on legal fees

12. 2. Highlights of Council in 2011-2012 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 6 138 complaints in 2011-2012 Resolved 5 963 complaints in 2011-2012 Most complaints relate to the non- or short- payment of prescribed minimum benefits (PMBs)

13. 2. Highlights of Council in 2011-2012 cont.

14. OVERVIEW OF CMS FINANCIAL RESULTS DAN LEHUTJO CFO

15. Overview of the financial results of CMS 2011 -12 Audit report Statement of financial position Statement of financial performance

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

17. Statement of financial position

21. Statement of financial performance

22. Revenue from exchange transactions

23. Other income

24. Statement of financial performance

28. NON FINANCIAL INFORMATION MICHAEL WILLIE ACTING SENIOR MANAGER

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

30. Trends in schemes 200220052011 Number of schemes 14313197 Ave number of option 2.93.14.2 Ave no. of Mergers per year 3.0

31. 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

32. Beneficiaries 20102011% change Open schemes 4.794.76-0.8 Restricted schemes 3.523.777.1 All8.328.532.5 (Million)

33. 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)

34. 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

35. Age of beneficiaries cont.

36. Utilisation of healthcare services More beneficiaries used private hospitals in 2011, and they stayed longer than in 2010 – 167.7-178.81 per 1000 average beneficiaries – ALOS 3.0-3.2 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

37. Utilisation of healthcare services

38. 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

39. Total healthcare benefits paid 2000- 2011 2011 data PH: R330.7 MS: 208.1 Meds: 148.2 Dentists: R25.2 Dental S: R24.7 S&AP: R71.8

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

41. FINANCIAL INFORMATION TEBOGO MAZIYA HEAD: FINANCIAL SUPERVISION

42. 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

43. Contributions and claims 2011 R ’ billion 2010 R ’ billion % difference Gross contributions107.496.511.3% Gross relevant healthcare expenditure93.684.910.3% Risk contributions97.687.711.2% Net relevant healthcare expenditure84.476.610.1% Medical savings plan contributions9.88.712.3% Medical savings plan claims9.28.311.0%

44. Contributions and claims (pabpm) pabpm = per average beneficiary per month 2011 pabpm R 2010 pabpm R % difference Gross contributions1 063.9975.39.1% Gross relevant healthcare expenditure927.7858.48.1% Risk contributions966.6886.99.0% Net relevant healthcare expenditure836.3774.68.0% Medical savings plan contributions116.2110.84.8% Medical savings plan claims109.1105.04.0%

45. Risk claims ratio all schemes

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

47. 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

48. 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

49. Non-healthcare expenditure

50. 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

51. 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

52. 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

53. Broker fees and membership

54. Net healthcare results

55. Solvency: all schemes

56. Solvency below 25%

57. Overall trends

58. THANK YOU!