PRESENTATION TO HPC 12 OCTOBER 2012

CAPE TOWN

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

DR MONWABISI GANTSHOCE & REGISTRAR OF MEDICAL

SCHEMES

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

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

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

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

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

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

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

Comparative spend on legal fees

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)

2. Highlights of Council in 2011-2012 cont.

OVERVIEW OF CMS FINANCIAL RESULTS

DAN LEHUTJOCFO

Overview of the financial results of CMS 2011 -12

• Audit report• Statement of financial position• Statement of financial performance

Audit Report

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

Statement of financial position

Statement of financial position

Statement of financial position

Statement of financial position

Statement of financial performance

Revenue from exchange transactions

Other income

Statement of financial performance

Statement of financial performance

Statement of financial performance

Statement of financial performance

NON FINANCIAL INFORMATION

MICHAEL WILLIEACTING SENIOR MANAGER

Strategic goal 1Strategic goal 1

• Access to good quality medical scheme cover maximized

– Improve risk pools– Enhance community rating– Open enrollment– Prescribe minimum benefits

Trends in schemesTrends in schemes2002 2005 2011

Number of schemes

143 131 97

Ave number of option

2.9 3.1 4.2

Ave no. of Mergers per

year3.0

Strategic goal 2Strategic 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

BeneficiariesBeneficiaries2010 2011 % change

Open schemes

4.79 4.76 -0.8

Restricted schemes

3.52 3.77 7.1

All 8.32 8.53 2.5

(Million) (Million)

Beneficiaries cont.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)

Age of beneficiariesAge 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

Age of beneficiaries cont.Age of beneficiaries cont.

Utilisation of healthcare servicesUtilisation 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

Utilisation of healthcare servicesUtilisation of healthcare services

Benefits paid (% of all) Benefits paid (% of all)

TH:36.6 %TH:36.6 %

MS:22.8%MS:22.8%

Meds:16.3%Meds:16.3%

GPs:7.3%GPs:7.3%

Other: 17.3%Other: 17.3%

R93.2 Billion R93.2 Billion

Total healthcare benefits paid 2000-Total healthcare benefits paid 2000-20112011

2011 data PH: R330.7 PH: R330.7 MS: 208.1MS: 208.1

Meds: 148.2Meds: 148.2Dentists: R25.2Dentists: R25.2Dental S: R24.7Dental S: R24.7

S&AP: R71.8S&AP: R71.8

Strategic goal 3 -4 Strategic goal 3 -4

• Council is responsive to the needs of the environment

• Provide influential strategic advice and support to health policy

FINANCIAL INFORMATION

TEBOGO MAZIYAHEAD: FINANCIAL SUPERVISION

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

Contributions and claims

2011R ’ billion

2010R ’ billion

%difference

Gross contributions 107.4 96.5 11.3%

Gross relevant healthcare expenditure 93.6 84.9 10.3%

Risk contributions 97.6 87.7 11.2%

Net relevant healthcare expenditure 84.4 76.6 10.1%

Medical savings plan contributions 9.8 8.7 12.3%

Medical savings plan claims 9.2 8.3 11.0%

Contributions and claims(pabpm)

pabpm = per average beneficiary per month

2011pabpm

R

2010pabpm

R

%difference

Gross contributions 1 063.9 975.3 9.1%

Gross relevant healthcare expenditure 927.7 858.4 8.1%

Risk contributions 966.6 886.9 9.0%

Net relevant healthcare expenditure 836.3 774.6 8.0%

Medical savings plan contributions 116.2 110.8 4.8%

Medical savings plan claims 109.1 105.0 4.0%

Risk claims ratio all schemes

Claims and non-healthcare expenditure

pabpa = per average beneficiary per annum

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

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 figurespabpm = per average beneficiary per month

Non-healthcare expenditure

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 figurespabpm = per average beneficiary per month

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

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 figurespampm = per average member per month

Broker fees and membership

Net healthcare results

Solvency: all schemes

Solvency below 25%

Overall trends

THANK YOU!