Annual Report 2012-2013 of the Council for Medical Schemes

Dr Monwabisi GantshoChief Executive & Registrar

Presentation to the Health Portfolio CommitteeCape Town, 11 October 2013

Introduction of delegation

- CE & Registrar- Council member: Prof. Bonke Dumisa- CFO: Mr Daniel Lehutjo- Head Financial Supervision: Ms Tebogo

Maziya

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Contents

1. Legislated mandate2. Strategic goals3. Challenges to strategic goals4. Performance of medical schemes5. CMS Annual Financial Statements

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Legislated mandate• Medical Schemes Act 131 of 1998• Act governs Council and industry- Medical schemes- Administrators of medical schemes- Managed care organisations- Brokers• Heart of the Act: protection of beneficiaries

and regulating medical schemes industry• Entire health system benefits

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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

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Challenges to achieving strategic goals

• Demarcation: medical schemes vs health insurance• Medical Schemes Act is a unique piece of legislation that serves the

public interest through social security provisions & the protection of human rights

• Medical Schemes Act & the protection it offers is currently under threat from unregulated health insurance products (such as gap, cash back schemes & top-up cover)

• Health insurance products discriminate against the most vulnerable groups in society (the sick & the elderly); they also threaten the National Health Insurance (NHI) system

• Only medical schemes offer adequate protection • If you do the business of a medical scheme, you must be

registered & regulated by the CMS through the Medical Schemes Act.

• The CMS remains a national asset in the changing environment.

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Challenges to achieving strategic goals

• Gap cover – Through risk rating, restricted enrolment, and no minimum benefits, GAP

cover, and other short term insurance products erode the cross subsidisation from young & healthy to sick & old.

• High healthcare and non health costs– Competition Commissioners enquiry. Price determination body

• Complaints– High volume of complaints are still received, especially arising from

Clinical resolution. Limited capacity in this area.

• Legal fees– Regulatory environment is highly litigious. Limited resources.

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Challenges to achieving strategic goals

• Governance in Schemes– Lack of skills and expertise in some boards– No arms length relationships between trustees and third parties– No fit and proper standards established

As a result of these governance issues schemes are normally placed under curatorship.

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Challenges to achieving strategic goals

• Payment in full provision challenged– 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

• Increase in utilisation, tariffs and technology present affordability challenges– Cost: Absent health price determination framework

• Increasingly larger portion of benefits go towards PMBs• GAP cover drives up professional fees

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Consolidation

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Consolidation cont.Projections based on a median of 3 mergers per year

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Performance of the medical schemes industry 2012-13

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Trends in number of schemes and beneficiaries

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Trends in age of beneficiaries

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Monies spent by schemes (risk pool)

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Total benefits paid

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Claims costs papa: 2012 prices

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Non healthcare expenditure : 2012 prices

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Net healthcare results

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Solvency

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CMS Annual Financial Statements

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Audit Report• Report on the financial statement

– Unqualified Opinion • Emphasis of matter • Restatement of corresponding figures

–Useful life re-estimation (note 10.2)–Reclassification of expenditure from

function to nature (note 10.1)– Procurement and contract management

• The preference point system was not applied (above R30,000 and below R500,000)

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Statement of financial position

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Statement of financial position

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Statement of financial position

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Statement of financial position

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Statement of financial performance

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Revenue from exchange transactions

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Other income

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Statement of financial performance

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Statement of financial performance

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Statement of financial performance

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Statement of financial performance

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Tenders

• CMS adjudicated two (2) tenders in the period– Internal audit services– Lease of office accommodation

• Over R10 mil• Followed National Treasury guidelines• Internal audit issued a certificate

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THANK YOU

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