Council for Medical Schemes & National Health Laboratory Services on their 2016 Strategic & Annual Performance plan

Meeting report

Council for Medical Schemes (CMS)

Mr Daniel Lehutjo, Acting Chief Executive Officer (CEO): Council for Medical Schemes (CMS) said that the trend was for consolidation of the medical schemes industry. Membership of medical aid schemes stood at approximately eight million people, which was about 17% of the total population of South Africa. This situation resulted in an over burden on the public health sector. The CMS had encountered resistance from some medical aid schemes in carrying out inspections. It had also faced challenges in resolving complex clinical complaints because it did not have the necessary expertise to do this.

Some of the CMS’s strategic goals for the period under review were highlighted. The first was the promotion of access to good quality medical cover. This goal would be achieved by creating a conducive environment for growth of membership of medical aid schemes in South Africa. It was highlighted that only 17% of the population belonged to a medical aid scheme. The CMS would also carry out a project for the registration of the rules of medical aid scheme rules to cover the required health care benefits and contribution increases, and were reviewed to ensure affordability.

The CMS’s second goal was to ensure the proper governance of medical schemes and that their beneficiaries were well informed and protected. The CMS planned to amend the Medical Schemes Act to strengthen governance in terms of enforcement powers and its complaints resolution processes. It also intended to introduce electronic submission of schemes rules but additional resources were needed to implement this innovation. The CMS would also collaborate with the Department of Health on a single exit price. It was also aiming to form strategic relations regionally and internationally to keep up with best practices.

The alignment of CMS’s goals with those of the Department of Health (DOH) and the National Development Plan (NDP) was outlined. This included the CMS initiating a process to revise the prescribed minimum benefits (PMB) package to include more primary health benefits and the treatment of TB. This was in line with the Department of Health’s goal to reduce the burden of disease and with the NDP’s goal to increase average life expectancy at birth to 70 years.

Another way in which the CMS planned to have alignment with the Department of Health’s goals and the NDP was by participating in the Competition Commission’s health market inquiry. This tallied with the NDP’s goal to reform the health system and with the Department of Health’s goal to reduce the costs of health care in South Africa. . The CMS also aimed to further the goal of universal health coverage that would be implemented by the National Health Insurance (NHI) scheme. Its intended contribution was to advise the Minister of Health on the future role of private medical health schemes after the NHI was implemented.

The first programme discussed was administration. It consisted of the offices of the CEO and the Chief Financial Officer (CFO), human resources management and the legal services unit. A number of cases that the legal unit had been involved in were discussed, the bulk of which involved the governance of medical aid schemes. There had been a case involving the Bonitas medical scheme in which Bonitas had made an appeal to the high court over the CMS’s acting registrar’s decision to inspect. The high court had found in CMS’s favour, but Bonitas had appealed to the Supreme Court of Appeal. In another case involving the Genesis medical aid scheme; the Supreme Court of Appeal had found in the CMS’s favour that medical aid schemes were obliged to cover specific conditions in full where they had failed to designate a medical provider in the insurance contract. Genesis had argued that a medical aid beneficiary who was entitled to prescribed minimum benefits had to use only public health facilities. This decision was important, because it ensured that the public health sector was not made the default healthcare provider and unduly burdened. A third case involving Genesis that was currently pending before the Supreme Court of Appeal was discussed. The case was about whether monies contributed by medical aid members could be used as an asset of the scheme upon its liquidation.

The work of the Complaints Adjudication Unit under programme 9 was discussed. The unit had nine staff members to adjudicate claims, and this affected its capacity to resolve complaints received within the target time of 120 days. Its objective was to adjudicate 76% of complaints received in the 2016/17 year within 120 days. Complaints were mostly about medical aid schemes not fully paying out PMB claims. Another common complaint was the failure by medical aid schemes to pay out benefits within prescribed times. There was also the problem of the manner in which schemes communicated with members — written documents from medical aid schemes were often couched in jargon and legalese that obscured the nature and extent of coverage that a beneficiary had contracted with a medical aid scheme for. The CMS was therefore encouraging medical aid schemes to communicate in plain language with clients. 

Mr Lehutjo said the CMS had a very limited budget compared to the entities it regulated, and this negatively affected its ability to regulate medical aid schemes effectively, although best efforts had been made with the available resources. There had been a 6.2% increase in the budget as per medium term expenditure framework (MTEF) guidelines, but the budget had not been approved yet. The CMS’s proposed budget was about R143 million for 2016/17. The budget proposed a levy increase to R32.53 per principal member for the year. It was proposed that R75.3 million of the budget would be directed at programme 1 (administration). This was because the nature of its mandate entailed significant personnel costs .

The CMS’s employment equity statistics were presented in conclusion. Out of a staff complement of 100, 93 were black. It employed one disabled person.

Discussion
Dr H Chewane (EFF) said he was happy that the CMS was aligning its goals with the proposed NHI, especially with regard to primary health care and saving resources in public healthcare facilities. There was a trend whereby medical aid schemes provided minimal funding for primary healthcare by limiting, for instance, the number of consultations that a beneficiary could have with a general practitioner (GP). GPs worked around this by treating uncomplicated medical cases in hospitals so that they could get payment from medical aid schemes. Would there be a shift in medical aid schemes providing resources to primary healthcare providers? He also asked whether healthcare service providers brought complaints to the CMS. He gave the example of Polmed, which had recently changed administrators and as a result, healthcare service providers who treated Polmed beneficiaries had been unable to get their claims processed.

Mr Lehutjo replied that the CMS was revising the PMB package to include primary healthcare.

Ms Thembi Phaswane, Senior Claims Manager: CMS, said service providers did lodge complaints, but tended to lodge them on behalf of patients. The Act did not preclude any person, even a person acting on another’s behalf, to lodge a complaint. The complaints adjudication unit had received complaints from doctors, non-members of medical aid schemes acting for members, lawyers and pharmacies.

Ms L James (DA) asked how long the Registrar and CEO positions had been vacant and how the filling of these vacancies would be fast-tracked. How many members of medical aid schemes were exiting the schemes, and what were the reasons for this exodus? She was concerned about medical aid schemes that refused to cooperate with inspectors from the CMS, and asked how the CMS could ensure that it could do its work. She was frustrated by the fact that medical aid members were not educated on their rights and as such were often abused by medical aid schemes. How did the CMS protect members of medical aid schemes?

Mr Lehutjo answered that the registrar position had been vacant since 1 July last year. There had initially been a legal dispute which had delayed the recruitment process, but this had been resolved. The recruitment process had started in 2015 and about two months ago, the process had been referred to the Health Department because the Act stated that the Minister must appoint the CMS’s CEO and registrar. The Minister’s office had requested to look at the process that had led to a candidate being recommended and the entire process had had to be reviewed. Some anomalies had been found that had to be corrected. Following this, the recruitment process had been started again.

Medical aid contributions were trust funds. Medical aid schemes worked by pooling contributions -- they did not function like conventional companies, although they could invest the contributions in a highly regulated way.

The issue of refusals of inspections was being addressed via litigation. The North Gauteng high court had held on one such case that the CMS registrar’s decision to inspect a medical aid scheme could not be appealed. Another way to address this problem would be by way of a legislative amendment to ensure that the CMS could carry out its work properly.

It was true that membership of medical aid schemes was going down. Affordability was a big issue in this regard. There was no price regulation, which the CMS had recommended be reinstated especially in the current environment that included PMBs.

Dr W James (DA) said he was concerned that the CMS was exceeding its legal authority. Health finance was complicated. The CMS’s job was to regulate medical aid schemes, and these schemes were not involved in the distribution of healthcare. The CMS’s role was to ensure that members’ contributions to medical aid schemes, and funds held by the CMS from medical aid schemes, were managed properly. The CMS had to make sure that members’ interests were served and protected. The CMS was not an extension of the executive, and the organogram in the presentation was therefore misleading. It was being too much of a supplicant of the Minister of Health, and it should stick to its governing statutes. The CMS had no business in formulating national policy. It was not the CMS’s function to worry about tuberculosis (TB), for example.

The alignment of the CMS’s objectives with the NHI was premature since NHI was not law yet and was yet to come before Parliament. A problematic aspect of NHI was establishing a single purchaser model and stripping provinces of their powers. This was potentially unconstitutional and would be subject to litigation as to its constitutionality. Why was the CMS associating itself with a policy direction for a law that had not yet been passed?

Mr Craig Burton-Durham, General Manager: Legal Services, CMS, replied that it was correct that the CMS was a creature of statute. Section 7 of the Act defined the CMS’s functions. These functions included controlling and coordinating medical aid schemes in a manner complementary to national health policy, making recommendations to the Minister of Health on matters relating to medical aid schemes and such other services as determined by the CMS, to advise the Minister on any matter and to perform any other function conferred by the Minister. There was scope for the aspects that the CMS was engaging the Department of Health on.

Dr H Volmink (DA) asked for clarity on programme 2, which dealt with the adjudication of complaints. He commented that the target of adjudicating 73% of complaints received in 120 days seemed low. Was this the practice followed in other countries? The human resources constraints facing the CMS and the challenges created by this in fulfilling its mandate concerned him. No additional permanent posts had been created this year -- the input was static but the CMS wanted to improve its outcomes.

Ms Phaswane replied that the statistics on the 30-day period for resolution of clinical opinions related to the office of strategy, not to the complaints adjudication unit. It was clinicians who dealt with this issue. On the issue of 73% being a low target, this target had been exceeded in the previous year as 76% of claims had been resolved in the maximum time allowed. However, the claims adjudication unit faced a challenge with the volume of complaints relative to the number of officers available to deal with complaints. Some complaints were complex in nature and took time to resolve. The unit would rather give good service rather than focusing on sticking to strict deadlines. Medical aid members also sometimes delayed the process by taking time to provide the requested further information and documents. In light of this, the target was realistic.

Mr D Khosa (ANC) asked what the impact of having an acting CEO on service delivery was, and what timeframe was anticipated for recruiting a new CEO. He questioned what factors informed levy increases. Medical aid schemes covered only a very small portion of the population -- did the CMS have a strategy to improve access to medical aid? He asked whether the high cost of medical aid membership was a prohibiting factor.

Mr Lehutjo answered that despite the absence of a substantive CEO, the CMS was able to produce strategic plans and an annual performance plan. It had a solid management team that was working well even in the absence of a CEO, so service delivery had not been compromised.

Levy increases were informed by determining the objectives of the CMS in any given year. They were also guided by the Treasury, which gave parameters within which to operate financially. The CMS also gets approval from the Department of Health in this regard.

Coverage by medical aid schemes was a function of employment and affordability. Maybe the NHI was a good solution since it would ensure all South Africans were covered, hence the CMS was contributing to the NHI.

Ms D Senokoanyane (ANC), referring to the benefits management unit part of the presentation that mentioned access to appropriate and affordable benefits as a goal, said that this needed an element of community education. In reality, people did not understand the issues and medical aid schemes did not put effort into this. There were issues of over prescribing by doctors and unnecessary procedures being performed on patients. Medical aid schemes had no mechanism to warn beneficiaries that their benefits were about to become exhausted, which resulted in unanticipated out of pocket expenses for the beneficiary. There were also problems around the choice of healthcare facilities, with medical aid members having their claims rejected because they used the wrong facility. The pre-authorisation process did not function well -- medical aid schemes were not responsive to customers in the appropriate time, which made it difficult for them to access healthcare. The ‘pay now and claim later’ issue was also problematic, and common with some medical procedures. Although the medical aid would pay after some time, the sums required upfront were not affordable for many people. Organisations that refused to comply with inspections showed that they were hiding something.

Dr P Maesela (ANC) said he thought the CMS was doing its job well. It was working for the people of South Africa and not for the Minister of Health. How did the CMS account for the grant it received from the Department of Health? It was not enough to say that it received the majority of its funding from levies, and this did not mean it should not account for its funding. Most medical aid schemes were Ponzi schemes -- they got richer and the poor got poorer. The CMS must not be intimidated by medical aid schemes. This was why the CMS was there to supervise these schemes. He asked whether targeting 73% of complaints would not disadvantage people who did not fall within this target. All cases were important, so higher targets should be set for this. He asked about the Cape High Court case that the CMS had successfully appealed in the Supreme Court of Appeal. He hoped the appeal court was not in Cape Town and that this was why it had made a different ruling. This was not to say that Cape Town judges were not ruling properly, but when there was a reasonable chance of winning a case, there was a reasonable chance that the judges in the lower court had erred.

Dr Volmink interjected on a point of order, stating that it was inappropriate to cast aspersions on the judiciary in Parliament.

Dr Maesela said that he did not mean to denigrate the judiciary. He asked how the CMS intended to contribute to the NHI. This was a very important programme of the government to increase access to healthcare. As such, the CMS could not wait until NHI was law. Even while it was still in the White Paper stage, stakeholders such as the CMS should be planning their contributions to its success.

Dr James asked the chairperson to make a ruling on the point of order raised by Dr Volmink.

The Chairperson said that she would have to consult the Hansard before making a ruling.

Mr Lehutjo said that the CMS was a public entity and as such, produced financial statements in terms of the Public Finance Management Act. It also had strict internal controls and had obtained unqualified audits. The CMS supported the NHI -- its role was to make recommendations to the Health Department. If the PMB package was not comprehensive, it would be problematic and there would be significant out of pocket payments by beneficiaries of medical aid schemes.

Ms C Ndaba (ANC) said that there was research which showed that medical aid schemes in South Africa were overcharging members. What was the CMS’s opinion on this and how was it working to rectify this situation? The benefits that members were offered by these schemes were not in line with their contributions. She would have liked a full report on all the complaints adjudication cases so that the Committee could be better informed. The CMS needed to publicise its work because people were unaware of its existence and functions. There was also a need for regulation of the amounts contributed by members to medical aid schemes. There was an issue with healthcare facilities charging for services at the rate of a specific medical aid scheme, such as Discovery. The issue of the CMS being refused access to inspect medical aid schemes was critical. The CMS should use the media to publicise such incidents so that members of schemes could be aware of a scheme’s potential malfeasance. The CMS should do its job without fear and should use litigation to its advantage. It was unacceptable that a registrar had not been appointed yet, and the explanation given was not satisfactory. The post had been vacant for over 12 months. Senior management posts could not be vacant as this affected the operation of the departments in the organisation. If the Minister was delaying the appointment process, the CMS should write to the Portfolio Committee on this issue. Why did the CMS not consider buying its own premises instead of leasing? Leasing was expensive and could lead to corruption in the leasing process. She asked for an explanation of why the CMS was using consultants, since it was not filling posts. Medical aid schemes often did not cover mental health patients and the treatments for this were expensive. The CMS needed to find a way to protect these patients in its work.

Mr Lehutjo said that the CMS would submit a full report on complaints adjudication to the Committee, as requested.

The CMS did participate in some outreach activities. It got invitations for events from the Consumer Protection Department in the Department of Trade and Industry and participated in these. It also took part in radio interviews with the SABC and participated in World Consumer Day. Furthermore, more information on its work was published on its website. The CMS had asked medical aid schemes to include its details on the back of medical aid cards and brochures. It also had some billboards advertising its services but it could not have many due to limited funds.

On the issue of buying premises, the lease contract had an option to purchase, and the CMS was doing due diligence on this, for which it had sought its bank’s assistance. The purchase would also have to go through the Department of Public Works and Treasury. The CMS was aware that it must buy premises from which to operate eventually.

The Chairperson said that Members had asked difficult questions because the sector was sensitive and the sector was about to change. She said that unanswered questions would be submitted by Members in writing and responses given to them in writing, because of time constraints.


National Health Laboratory Services (NHLS)

Ms Joyce Mogale, CEO: NHLS, said the demand for the NHLS’s services from provinces had increased, and this was mainly driven by viral load tests and GeneXpert volumes. The NHLS intended to support and prepare for the implementation of NHI. They imported over 90% of their inputs so the exchange rate fluctuations had affected them negatively. A tender had been awarded for replacement of redundant technology. The goals of the NHLS after undertaking a SWOT (strengths, weaknesses, opportunities, threats) analysis included providing accessible pathology services in almost all hospitals, following international best practice for services’ compliance, the development of academic excellence for pathologists, medical scientists and technologists, and improved stakeholder relations. All the goals were anchored on sound governance and financial practices.

The first programme presented was administration. Some of the key performance indicators for 2016/17 were to obtain an unqualified audit, to increase the percentage of registered users of the Trak Web system from 25% to 45%, and to reduce the employment vacancy rate to 18%.

Programme 2 was surveillance of communicable disease. The National Institute for Communicable Diseases (NICD) performs this function. It aimed to maintain the number of peer-reviewed journals and the number of field epidemiologists trained. It also intended to respond to 100% of reported disease outbreaks within 24 hours of notification.

Programme 3 was occupational health and safety, and was performed by the National Institute for Occupational Health (NIOH). The percentage of accredited specialised laboratories was intended to be increased by 25% up to the year 2020. It also intended to increase the number of trained occupational health professionals.

Programme 4 was academic affairs, research and quality assurance (AARQA). The aim was to increase the pass rate for medical technicians and technologists, which was quite low. They also aimed to submit a number of research reports to inform policy.

Programme 5 was the core business of the NHLS — laboratory services. They planned to increase accessibility to the NHLS’s services and to improve turnaround times in every laboratory across South Africa. They also aimed to increase the number of laboratories with state of the art facilities.

The CFO of the NHLS presented the budget. The NHLS had a new funding model starting on 1 April 2016, whereby funds needed by the NHLS were sourced from a central source. There was a pilot programme in which two bills were issued by the NHLS to provinces. One bill was a fee for services rendered bill, and the second was a cost-based bill. The total budget for the year was R6.8 billion. 78% of the budget would be spent on programme 5, which was for laboratory services. A surplus of R253 million was expected in the year 2016/17, and this would assist with financing the NHLS’s capital expenditure requirements.

Discussion
Dr James commented that he was impressed by the NHLS’s work, particularly in providing support for disease outbreaks in West Africa with the mobile diagnostic pathology laboratory. Had the legacy issues of debt owed by the Gauteng and KwaZulu-Natal provinces been resolved? It appeared that the NHLS did not have enough resources to scale up services in order to service health infrastructure. In light of the fact that the Committee had the power to make changes to its budget, what would its budget request be in ideal circumstances?

The CFO replied that the total budget from the National Health Department for the year under review had been R5.3 billion. To date, the NHLS had recovered R4.9 billion, which was 93%. If one looked at provinces like KwaZulu-Natal, it had paid 100% of what had been budgeted, but over and above this, it had paid 33% of what had been due from previous financial years. Currently, through the office of National Treasury, the NHLS was in the process of finalising the Accountant General’s queries, which should then clear some of the amounts that had been disputed in the previous financial year. That process would be extended to Gauteng Health. This was why the NHLS was saying it had significantly improved the relationship between themselves and the provinces to ensure the required services were provided.

Dr Volmink said that the high vacancy rate was concerning. From 2013 -2015, it had gone up to 22%, and reduced by only 2% in the last year. Why had there been such a rapid increase in the vacancy rate and how would it be reduced in a sustainable way? He suggested that an area that could be looked at in negotiations around the National Public Health Institute of South Africa (NAPHISA), was that its composition was partially inspired by the Centre for Disease Control (CDC) in the United States. One of the CDC’s biggest divisions was reproductive child and maternal health. Had they looked at what would happen when entities such as the NIDC were transformed into NAPHISA in terms of budgetary implications?

Ms Mogale replied that the three units that would be transformed into NAPHISA currently used infrastructure that mainly belonged to the NHLS, such as financial systems and administrative support. The NICD was doing an analysis to see what would be required if it were to stand alone.

The NHLS did not anticipate any impact, positive or negative, on its budget as they had already been prepared by the Department of Health through the budgets they had been given.

The fairly high vacancy rate was a challenge. The background to this challenge was that the NHLS had struggled without an HR executive for a long time and the result was as presented. They had finally appointed an HR executive last month. However, the CEO discouraged posts to be filled simply because vacancies existed. Posts should rather be filled because of need, since the financial environment was not optimal.

Ms Ndaba commended the CEO on the improvements made in the entity. The Committee had been worried by the outstanding payments from KwaZulu-Natal and Gauteng provinces but this seemed to have been fixed. She asked what informed the percentages presented under the academic programme. She thought that more ambitious targets should be set.

Dr Maesela asked whether the NHLS had a relationship with the Department of Science and Technology (DST) for research and development. How did the NHLS fill vacancies at institutions, having said three months was the turnaround time to fill vacancies in the presentation? The Academic Affairs, Research and Quality Assurance (AARQA) programme had an aim of 65%, yet there was a shortage of registrars and pathologists in all spheres. Was the NHLS trying to produce these skilled people as quickly as possible? If they raised the budget allocation for this issue, it could help. Where did they see themselves in relation to public health and the NHI? They had to produce skilled staff that ensured the NHI was completely functional.

Ms Mogale replied that the NHLS did collaborate with the DST. One of the NHLS’s scientists had been awarded a grant from DST to study nanotechnology, as an example of the collaboration. The low key performance indicators, especially under the AARQA programme, were based on the current year. They wanted to be realistic and plan in line with current realities. This was why they were staggering the AARQA programme.

Ms Senokoanyane commented on the turnaround time for filling vacancies within three months. She commended the NHLS for this. Why had there been a decline in meeting employment equity targets? She asked for clarity on what the part of the presentation referring to “specimen requests turnaround” meant. The presentation showed that people were performing badly in the exams for medical technicians and scientists. Some of the figures were under 20%. What was this poor performance associated with?

Ms Mogale acknowledged that the pass rates were low. There was a need for the NHLS and the HPCSA (Health Professions Council of South Africa) to engage on this because the NHLS did not understand the reason for the low pass rates. People were failing board examinations set by the HPCSA after passing university level examinations. The role of the NHLS in the NHI was being compromised by these low pass rates as they affected the number of skilled personnel for essential positions in health sciences. This was a reason for the NHLS to aim for international standards for laboratory services. If technology was enhanced to improve services, there could be automation of some processes since skilled people were not available in the required numbers.

On the employment equity figures, she was not sure if it was a typographical error or not, because there was no reason for it to be reduced.

What “specimen turnaround time” meant was the time it took from the time that blood was taken from a patient to the time the patient got the results. Before, this was being measured from the door of the laboratory reception, back to reception. This was not a helpful measure of the time it took.

Ms Ndaba was concerned about the board issue, in terms of academic affairs. This had been raised at the last meeting. This should be taken very seriously by the board, as it could not keep doing what it had been doing.

The Chairperson said that the NHLS should take the responsibility to try to assist with the issue of students failing board exams. It was the same story with engineering students. This affected transformation. The issue must be taken up with the Department of Health and an audit of race and gender and class of the students writing these examinations was necessary. She asked the NHLS to furnish the Committee with that information before presenting to the Committee again.

She found the CEO’s statements on filling vacancies based on need rather than vacancy interesting, and said that the Committee would monitor whether this was a useful paradigm. She reminded the NHLS about chapter 10 of the NDP on the challenges within the health sector. Leadership and management was specifically mentioned there as a challenge facing the health sector. The NHLS was the first entity in the health sector so far to take this approach to human resources. She commended the NHLS for coming up with a view that the Committee, as part of the legislative arm of government, could look at.

The meeting was adjourned.