cms strategic plan, annual performance plan and budget portfolio committee on health 20 march 2013

CMS STRATEGIC PLAN, ANNUAL PERFORMANCE PLAN AND BUDGET

Portfolio Committee on Health20 March 2013

INTRODUCTION OF THE CMS CHAIRPERSON, PROF Y VERIAVA AND DELEGATION BY THE REGISTRAR & CEO, DR MONWABISI GANTSHO

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FEEDBACK FROM PREVIOUS INTERACTIONS WITH THE HPC

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• In the past, we have responded to formal questions from HPC in relation to tenders , the asset register, payment of creditors, annual report costs, private hospital costs, market consolidation, non-healthcare expenditure and other policy related questions

• MoH has indicated his full support for our 2013/14 plans, and has requested the MoF to concur

• The medical aid industry in SA has experienced increase in contributions alone from R30.6bil in year 2000 to about R110bil in 2012/13.

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Contents

• Discuss challenges to our strategic goals and present the actions we undertake to protect the goals

• Discuss the proposed budget required to ensure that we continue to discharge our mandate– Strategist will present strategic challenges and our

responses, including proposed amendments to the Act

– CFO will present the budget

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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

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SITUATION ANALYSIS AND STRATEGIC RESPONSE IN RELATION TO STRATEGIC GOALS

STRATEGIST

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Access to schemes

1

Medical schemes

2

Regulator

3

Strategic review

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CMS strategic goals

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

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…membership growth is faster than employment

growth…

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Restrictedschemes 1,983 1,953 1,907 1,930 2,077 2,527 2,986 3,253 3,516 3,766 3,924

Openschemes 4,731 4,719 4,755 4,906 5,050 4,951 4,889 4,815 4,800 4,760 4,759

Total 6,714 6,672 6,663 6,836 7,127 7,478 7,875 8,069 8,316 8,526 8,684

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

Beneficiaries(Thousands)

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…to benefit, access is required…

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IncomeCost

Affordability

...access to medical schemes must be fair, and

non-discriminatory

Risk Pooling

Mandatory cover

Risk adjustment

Community rating

Benefit coverage

Open enrollment

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THREATS TO FAIR AND NON-DISCRIMINATORY ACCESS

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…the difference in scheme risk profiles have worsened over the

past two years, leaving more than a million beneficiaries

vulnerable…

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…unfettered growth in short-term, for-profit, risk rated and

restricted access insurance products undermine risk pools…

• 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

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…continued opposition to the “payment in full” provisions in

the PMB regulations could leave members vulnerable…

• 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

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…enrollment provisions are challenged more and

more…• Discovery has refused to accept Transmed

members, in spite of a ruling by the Registrar and Council, matter will be heard by the appeal board soon.

• GEMS has appealed the decisions by the Registrar, Council and the appeal board, and has taken the decision to the High court for revision

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…increases in utilisation, tariffs and technology

use presents affordability challenges…• 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

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Council’s response to access challenges (Goal 1)

• A research project is underway in order to advise the DoH on possible interventions to contain the increasingly disparate risk distribution between schemes

• Continued interaction with the DoH and Treasury to get consensus on the demarcation regulations

• Draft amendments to the PMB regulations were submitted to the MoH in March 2010

• Excited about the Competition Commission’s market enquiry

• Met with the MoH and GEMS to avoid the court action by GEMS

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

The performance of medical schemesGovernance matters in medical schemes

Functioning of the appeals committeeManaged care

ADR

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THE PERFORMANCE OF MEDICAL SCHEMES

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…claims costs pbpm continue to rise at rates much higher than inflation, with hospitals and specialists in the lead…

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…non healthcare expenditure declining since 2005…

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…increase in costs largely due to an increase in health benefits…

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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

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GOVERNANCE MATTERS IN MEDICAL SCHEMES

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Interaction of regulatory functions

Prospective regulation

Concurrent regulation

Retrospective regulation

Industry

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…there is a large increase in retrospective workload…

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…with many more complaints requiring a clinical opinion…

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..the balance between retrospective and prospective

regulation is threatened..

Prospective regulation

Concurrent regulation

Retrospective regulation

Industry

Retrospective regulation

Retrospective regulation

Retrospective regulation

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…governance failures, although not pervasive,

persists in some schemes…• 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

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Council response

• 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

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THE ROLE OF MANAGED CARE ORGANISATIONS

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Council response on managed care

• 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?

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ALTERNATIVE DISPUTE RESOLUTION TO RESOLVE COMPLAINTS FASTER AND CHEAPER

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…alternate dispute resolution may be more cost effective and result in a

shortened turnaround….

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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

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GOAL 3: CMS IS RESPONSIVE TO THE NEEDS OF THE ENVIRONMENT BY BEING AN EFFECTIVE AND EFFICIENT ORGANISATION 38

…the existing office accommodation is inadequate…

• Currently occupying two separate buildings in an office park, which is filled to capacity

• Other space in the same office park are too far from existing offices

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…matters before Council are sometimes challenged on procedural grounds…

• MSA is not clear on many of the processes to be followed in making a determination on certain matters

• No rules on appeals committee proceedings

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Council response• A tender was awarded for new office accommodation

in Centurion, the office will start using these premises in May 2013

• Section 7 (f):“Make rules, not inconsistent with the provisions of this

Act for the purpose of the performance of its functions and the exercise of its powers”

• Council rules: Rules to govern Council process and Appeals committee proceedings are being made currently

• MSAB contains further provisions to govern Council affairs

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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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Strategic advice – what must we do differently?

• There has been slow progress in the publication of the proposed PMB regulations

• Demarcation regulations• Statutory fees• Price determination

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Council response• A Council delegation met with the Minister• PMB and Statutory fee regulations: Still with the

DoH’s legal unit• Demarcation regulations, the MoH supports

strong regulation to protect sicker and older members of the public

• Price determination: Collaborate with the Competition commission market enquiry

• NHI: Continue regulating the medical schemes environment

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KEY AMENDMENTS IN PROPOSED MSAB

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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

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CMS Income budget 2013 14Funding Proposal 2013/14 2012/13 2011/12Operational expenditure A 110,130,989 98,402,778 90,483,837Capital expenditure B - 2,609,000 2,312,000Total expenditure C A + B 110,130,989 101,011,778 92,795,837Less: Depreciation and Amortisation E - 2,039,373 2,520,000Total cash requirement F C + D - E 110,130,989 98,972,405 90,275,837Surplus funds G - - 6,900,000Accreditation fees H 5,700,000 4,700,000 5,500,000Registration Fees I 370,000 400,000 400,000Interest Received J 840,000 1,200,000 900,000Total income excluding levies K G + H + I + J 6,910,000 6,300,000 13,700,000Income from levies L F - K 103,220,989 92,672,405 76,575,837Total membership M 0 3,852,956 3,800,000 3,608,727Levy amount N L / M 26.79 24.39 21.22

9.85% 14.93% 16.00%

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Legal fees 6,000,000 Total cash requirement 110,130,989 106,527,821 (3,603,168)

Performance bonus 2,192,454 Levy income 103,220,989 99,617,821 (3,603,168) Performance factor ( 1/3 *1.2) 40.0% Levy amount R 26.79 R 25.85 -R 0.94Add performance increase factor ( 30 % * 1% ) 0.3% Levy increase 9.8% 6.0% -3.8%Head: Research and monitoring 1 64%Deputy Registrar 1New permanent positions 5 P C R Access Entities CMS Review

Accreditation: Clinical analyst 1 0 1 0 0Compliance : Senior investigator 1 0 1 0 0Snr financial analyst 1 0 1 0 0Supply chain officer 1 0 0 1 0Clinical research analyst 1 0.8 0.2 0 0

New temporary positions 3 P C R Access Entities CMS ReviewComplaints : Legal adjudication officer 1 0 1 0 0Switchboard operator 1 0 0 1 0Customer Care Intern 1 0.1 0.6 0.2 0.1

General salary increase 7.0%Inflationary increases 6.0%

Assumptions Impact Target

Budget assumptions

HR costs as % of budget

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Access Entities CMS Review2011/12 5.8% 44.5% 44.4% 5.4%2012/13 5.7% 40.1% 48.5% 5.8%2013/14 5.6% 41.0% 47.8% 5.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Budgeted expenditure by Strategic Goal

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Prospective Concurrent Retrospective2011/12 39.4% 21.5% 39.2%2012/13 40.7% 22.8% 36.5%2013/14 40.3% 22.8% 36.9%

0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%

Budgeted expenditure by regulatory activity

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CONCLUSION

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Access to schemes

1

Medical schemes

2

Regulator

3

Strategic review

4

CMS strategic goals

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DISCUSSION

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