CMS STRATEGIC PLAN, ANNUAL PERFORMANCE PLAN AND BUDGET

Portfolio Committee on Health30 July 2014

INTRODUCTION OF CMS DELEGATION

• Trevor Bailey (Deputy Chairperson of Council)• Kariem Hoosain (Chairperson of Finance

Committee)• Daniel Lehutjo (CFO / Acting Registrar & CEO)• Tebogo Maziya (Head: Financial Supervision)• Anton De Villiers (Head: Research &

Monitoring)• Craig Burton-Durham(Head: Legal Services)

2

CONTENTS

• CMS legislative mandate• Industry analysis• Budget

3

Mr Daniel LehutjoActing CEO & Registrar

4

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;• investigate complaints and settle;• 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

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

6

Access to schemes

1

Medical schemes

2

Regulator

3

Strategic review

4

CMS STRATEGIC GOALS

7

Dr Anton de VilliersHead: Research and

Monitoring

8

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

9

Pillars of the Medical Schemes Act 131 of 1998

10

Section 29(3)(a) of the Medical Schemes Act (“the Act”) states that schemes may not provide in its rules for the exclusion of any applicant or a dependant of an applicant, subject to the conditions as may be prescribed, from membership except for a restricted membership scheme as provided for in the Act.

Section 29(1)(n) provides that schemes may not discriminate against any member on any ground, for example age, sex and past or present state of health.

Schemes are protected against scheme hopping and anti-selection through the imposition of Waiting periods and Late Joiner Penalties.

Challenges:•Transfer of Transmed members to open medical schemes

•Refusal by schemes to re-enrol members following the termination of membership due to non-disclosure.

Section 29(1)(n): Contributions may not be based on any discriminatory grounds, past or present state of health or on the frequency of rendering of relevant health services.

Section 29(1) (o) &(p) and Regulation 8: PMB’s must be funded in full, i.e. the invoiced amount

Schemes have a number of ways to manage these costs: DSP’s, formularies, protocols etc.

Challenges•BHF v CMS and the Registrar

PILLARS OF THE MEDICAL SCHEMES ACT (cont)

• 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.

13

COST OF THE PMB’s

• Estimated cost: R508,20 per beneficiary per month

• Proportionally 53% of all risk benefits paid out are for the PMB’s

14

PRINCIPLES TO MANAGE FINANCIAL RISK

• Designated Service Providers (Regulation 7)•Managed Care Principles (Regulation 8)– Managed Care Protocols– Formularies

ROLE OF MANAGED CARE ORGANISATIONS

• Continue work to determine the exact role and the value added by managed care organisations

• 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

• What action is required to address potential problems?

16

REVISION OF THE PMB’s

• Some schemes challenge the “payment in full provisions” in the regulations – Managed care interventions – Preventative care

17

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

Schemes do not compete at the same level...

19

Ms Tebogo MaziyaHead: Financial Supervision

20

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

21

Trend analysis of the performance of medical schemes

22

NUMBER OF SCHEMES AND BENEFICIARIES

AVERAGE AGE OF BENEFICIARIES

24

MONIES SPENT BY SCHEMES (RISK POOL)

TOTAL HEALTHCARE EXPENDITURE TOTAL HEALTHCARE EXPENDITURE

26Hospitals + Medical Specialists + Medicines = 75.8%

TOTAL HELATHCARE CLAIMS PAID pbpa

(2012 prices)

NON HEALTHCARE EXPENDITURE : 2012 PRICES

SOLVENCY

Mr Craig Burton-DurhamHead: Legal Services

30

Governance matters

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

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

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

34

GOVERNANCE STRUCTURE OF CMS

- Registrar of Medical Schemes- Council- Appeals Committee- Appeals Board- Courts of South Africa

ALTERNATIVE DISPUTES RESOLUTION (ADR)

• Alternative disputes resolution process• Pro Bono legal process

ADR

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

38

Medical Schemes Amendment Bill

39

Proposed changes with a large impact on the functioning of the

office and the industry• Improved information

management– Health service provider

register– Beneficiary register– Contracts with providers– Health service utilisation

• New chapters relating to membership and contributions– Transparency– Open enrolment

• PMB’s/MMB’s• Complaints procedures

– ADR at scheme level• Appeals procedure

– Single tribunal– Alternative dispute resolution

at scheme and tribunal level

• Governance provisions– Elections

• Range of incidental changes – legislation is 15 years old

40

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• Research the level of out-of pocket

expenditure• Encourage medical schemes to enter into

managed care arrangements that add value

41

GOAL 3: CMS IS RESPONSIVE TO THE NEEDS OF THE ENVIRONMENT BY BEING AN EFFECTIVE AND EFFICIENT ORGANISATION 42

IT IFRANSTRUCTURE

• Proper IT Infrastructure for improved efficiency and effectiveness

• Outdated IT infrastructure• Software Development• SEP

43

HUMAN RESOURCES

• Valued employees• Employer of Choice – benefits, competitive

salaries• Recruitment and retention• Succession planning • Performance management

44

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

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

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

CMS BUDGET 2014/2015

48

BUDGET CONSIDERATIONS 2014/2015

• Inflationary increase - 6%• Utilisation of in-house venue for conferences

=reduction in expenditure• New permanent positions:– Accreditation : Clinical Analyst– Compliance : Senior Investigator– Internal Finance: Supply Chain Officer

49

BUDGET : 14/15 Funding Proposal 2014/15 2013/14 2012/13Operational expenditure A 123,076,886 108,951,804 98,402,778Capital expenditure B 2,422,000 2,672,000 2,609,000Total expenditure C A + B 125,498,886 111,623,804 101,011,778Less: Depreciation and Amortisation E 2,411,178 2,411,178 2,039,373Total cash requirement F C + D - E 123,087,708 109,212,626 98,972,405Surplus funds G 2,989,202 2,164,305 - Accreditation fees H 5,500,000 5,700,000 4,700,000Registration Fees I 380,000 370,000 400,000Interest Received J 900,000 840,000 1,200,000Goverment grant K 4751,000 - - Total income excluding levies L G + H + I + J + K 14,520,202 9,074,305 6,300,000Income from levies M F - L 108,567,506 100,138,321 92,672,405Total membership N 3,905,939 3,852,956 3,800,000

Levy amount O M / N 27.80 25.99 24.396.95% 6.57% 14.93%

50

LEVY TREND

51

ECONOMIC DESCRIPTION

52

Expenditure per unitUnit % Amount

Financial Supervision 8.11 10,173,115

Information Systems and Knowledge Management

9.41 11,809,074

Stakeholder Relations 7.60 9,533,411

Accreditation 6.04 7,579,391

CFO’s Office 18.79 23,584,199

Complaints and adjudication 3.94 4,943,103

Benefit Management 4.29 5,381,852

Research and Monitoring 5.40 6,777,253

Compliance 5.50 6,908,463

Strategy Office 4.61 5,781,600

Human Resources 4.76 5,973,208

Legal Services 10.68 13,409,539

Office of the CEO/Registrar 8.94 11,222,678

Capital expenditure 1.93 2,422,000

TOTAL 125,498,886

53

MAJOR BUDGET ITEMS

54

EMPLOYEES PER UNITUNIT NUMBER

Financial Supervision 11

Information Systems and Knowledge Management 11

Stakeholder Relations 11

Accreditation 10

CFO’s Office 10

Complaints and adjudication 10

Benefit Management 8

Research and Monitoring 8

Compliance 7

Strategy Office 7

Human Resources 5

Legal Services 4

Office of the CEO/Registrar 4

TOTAL 10555

QUESTIONS

56