Council for Medical Schemes:

An overview

Prof Yosuf Veriava Chairperson: Council for Medical Schemes

Contents1. Developments of CMS2. Role of CMS3. Industry overview Membership trends Benefits paid

4. Competition Commission “Market Inquiry “5. Complaints6. Board of Trustees7. CMS training8. CMS indabas and forums 9. Future projects10. RWOPS11. Managed care programmes12. Conclusion

Developments of CMS

Developments of CMS

Roles of CMS

• Key Roles:• Adherence of schemes to the Medical

Schemes Act (MSA)• Improved management and

governance of schemes• Advises the Minister of Health on

regulatory interventions

Membership trends

• Reduction of medical schemes is noted in both sectors

• On average the industry is losing 5 schemes per year

• This translate to a reduction of up to 32 schemes in 2025

Membership by province – Inequity

Benefits paid

**Data to be interpreted with caution due to underreporting by schemes and members**Data to be interpreted with caution due to underreporting by schemes and members

Benefits paid for health services by, (%)Benefits paid for health services by, (%) Medical schemeMedical scheme Member**Member**Private Hospitals 36.3 5.5Medical specialists 22.9 35.5Medicines 16.3 30.4Support and allied professionals 7.9 10.1General practitioners 7.3 6.8Other 9.3 11.7

… the healthcare market does not meet the requirements for normal

competition…• No barriers to enter or exit the market• Perfect information• Zero transaction costs• Homogenous products• Others:• Non-increasing returns to scale; infinite buyers

and sellers; perfect factor mobility; profit maximisation

…imperfect information in healthcare renders the normal considerations in achieving a

balance ineffective…

• Consumer sovereignty is challenged• Ascertaining costs and benefits of treatment is not simple• Third party payer

The private hospital market in metropolitan areas (50%+ of medical scheme population) was

concentrated by 1999…

Only 12.3% of private hospital beds were outside three main hospital groups by 2006…

Non-price competition results in a very high level of high-tech equipment in private

hospitals

Terms of reference “Market inquiry”

• To explore in-depth factors causing escalation of costs.

• To unpack contractual relationships and interactions between and within the segments of the market

• To inquire into the nature of price determination

“Market inquiry” on healthcare costs in the private sector

• Inquiry launch: end September 2013; aim completion June 2015.

• Probe various segments of private healthcare market

• This is “…a general investigation into the state, nature and form of competition in a market, rather than a narrow investigation of specific conduct by any particular firm”.

Complaints

Complaints categories

• Technical/clinical complaints: highest of all categories

• Payment of PMB’s at scheme tariff: highest number of complaints

• Doctors frequently charge higher rates when providing PMB

Board of Trustees (BOT): Governance issues

• Distribution of different types of trustees: Governance structure consists of 50% members vs. 50% employer groups

Major role of Trustees

• Keep records of operations• Control systems• Communication• Payment of premiums• Professional Indemnity and Fidelity Guarantee cover• Expert Advice• Compliance with laws and rules• Confidentiality• Protect the interests of the members• Act with care, diligence, skill and good faith• Act impartially

Board of Trustees: compliance

• Voluntary compliance not yet attained.

• Schemes place too much reliance on advice from consultants and services providers.

• Attendance rate of BOT training problematic.

CMS Training

• Induction: Board of Trustees• In-depth: Board of Trustees• Broker training• Employer groups• Various consumer groups

CMS Indabas

• Indaba means "business" or "matter" • Medical schemes industry challenges • Various opinions and interpretations of

the Medical Schemes Act • Engage with stakeholders• Find common ground on pertinent

issues• Optimal benefit for medical scheme

members.

CMS Forums

• Exchange information• 3 CMS stakeholder forums

- Trustees and Principal Officers - Medical scheme administrators - Regulatory bodies

CMS Indabas and Forums

• Next Indaba: Johannesburg 23 October 2013

• Next forums: Cape Town & Johannesburgend September

• Regulators Forum:September

Future projects

• Remunerative Work Outside the Public Sector (RWOPS)

• National Health Insurance (NHI)

• Health quality outcomes

RWOPS PCNS: Data Inputs, Information Processing & Reports

Managed care

• As the medical schemes population continues to grow older, the incidence of chronic disease will likely increase

• The rising cost of private healthcare necessitate a consideration of the “value” of managed care programmes

Managed care

• Effective way of controlling health care costs is to:–Manage the scope of benefits

provided–The associated costs –Appropriateness of utilisation

Managed care

• Within this regulatory obligation, CMS is currently finalising the health quality outcomes framework, which will include:– A trend analysis of health quality

outcomes– Quantitative and qualitative data

analysis of the value of managed care programmes

Conclusion

• Industry encouraged to work together with CMS in making private healthcare affordable and sustainable.

• Membership growth is a critical area of concern.

• Member education about their rights and responsibilities is important.

• Complying with provisions of Medical Schemes Act is crucial.