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Parliamentary Submission on theMedical Schemes Bill [B116-98]Presented to the Portfolio Committee on Health by Connie September, 1st Vice President,
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Contents
- Introduction
- COSATU’s Approach to the Bill
- The goals of South African health care policy
a unified national health services system
which provides health services for all
with core health services provided by the public sector
at a level of total national expenditure that is sustainable.
provides services to all
in free public facilities
funded by general taxation, augmented by a levy on workers and employers, and
supplemented, at the individual option, by medical aid schemes which are not tax-subsidised.
- Interim steps toward realising the goal
operating without adequate financial controls
failing to deliver promised benefits
adopting service delivery controls that undermine good health outcomes
serving only the young and healthy
dumping the seriously ill on the public hospital system when members of the schemes have exhausted their benefit packages, and
terminating coverage of members when they become ill or old.
- COSATU Supports the Bill
The community rating system which, by prohibiting schemes from charging different rates based on age and health status, ensure that there is cross-subsidisation by the young and healthy of the older and ill.
The requirement that medical aid schemes accept persons to membership that are able to pay this community rate, regardless of age, health status, and the like.
The Minister’s authority to regulate personal savings account programmes, to the extent that they are inconsistent with the insurance pooling (or cross-subsidisation) feature of desirable medical aid schemes or discourage appropriate use of preventive and primary care services (1).
Ensuring that all medical schemes provide a core set of services to their members by authorising the Minister to prescribe a minimum package of benefits (2), and
Expanding the functions of the Council for Medical Schemes to include examination of health outcomes.
The strengthening of the process for appealing decisions of the medical aid scheme to the Council for Medical Schemes and the creation of the Appeal Board
The inclusion of a requirement for schemes to pay claims promptly, and
The measures to protect the financial stability of schemes.
- Shortcomings of the Bill
- Protection for workers who lose their jobs is inadequate.
- The amendment to the Labour Relations Act should be crafted so that it does not prevent a bargaining council from establishing a medical aid scheme.
- The bill should provide funding for the Appeal Board through the levy.
- It is not clear to us that the Registrar, rather than the Minister, should have the authority to designate undesirable business practices.
- The bill fails to define the term "personal savings account."
- The Minister, with the assistance of the Council, should be required to evaluate and report to Parliament.
- There is insufficient oversight of the process of developing regulations.
- Conclusion
- Summary of Proposed Amendments
Provide for continued membership for workers who have lost their jobs, regardless of the reason for the job loss. [Amend section 30(1) of the bill.]
Preserve the authority of bargaining councils to establish medical aid schemes by making no change in the LRA; and amend the main bill to ensure that bargaining council schemes must register in terms of the Act. [Omit Schedule 3 and amend section 21 of the bill.]
Fund the Appeal Board with the levy. [Amend sections 8 and 13 of the bill.]
- Authorise the Minister, rather than the Registrar, to declare undesirable business practices. [Amend section 62 of the bill.]
Define personal savings accounts. [Amend section 1 of the bill.]
Require the Minister to conduct an evaluation and make a progress report to Parliament. [Add a new section.]
Provide for consultation after a rule is promulgated if a rule is promulgated without advance consultation. [Amend section 68.]
- Medical aid schemes that include personal savings account features and other systems that reward members for minimising use of services are attractive to some people because such schemes allow members to protect themselves in the event of serious accident or illness yet to retain a claim on their contributions in the event that they do not use all of the level of service available through the scheme. Such programmes are implemented on the basis that they discourage the use of unnecessary services. Unfortunately, they may also discourage members from getting the basic care that will prevent or forestall more serious health problems. Therefore, the Minister should consider regulations that forbid schemes from penalising members for seeking primary care services.
- The bill requires the Minister to include, in the prescribed minimum benefit package, the services that are provided in public hospitals. We support this requirement, as it will help to protect the public hospital system from "dumping" of medical schemes members whose benefit limits have been exhausted. However, the Minister should exercise this authority more aggressively to design a core benefit package that includes all cost effective services that are necessary to protect good health, with an emphasis on preventive care and early detection and treatment. Core benefits should include the basic primary health care services identified in the White Paper for the Transformation of the Health system of South Africa. If the minimum benefit package is a comprehensive package of services necessary for good health, it will, in addition to protecting the financial integrity of the public sector, ensure that the private sector complements the public sector system, protect the health of scheme members, and further the process of identifying the services that should be provided by the national social health insurance system.
- This approach has a long history in the United States at both the national government and the state level and seems to allow government to act quickly while ensuring that public input will be considered in all cases.
COSATU applauds the continuing efforts of government, under the leadership of the Minister of Health, to implement a programme of reconstruction and development in the health services sector. Recognising the enormous pressure upon them from much of the health care industry and the skill with which those vested interests prey upon the fear of change that is endemic among people who were reasonably well-served in the past, we encourage government to redouble its efforts in this sphere. We pledge ourselves to co-operate in the Minister's educational efforts concerning the changes that must take place in the health care system.
The South African health care system has historically been characterised by a high per capita health care expenditure and nonetheless by a failure to deliver basic services and consequently good health outcomes to many South Africans. This is because more than 60% of health care spending occurs in the private sector although private facilities serve less than 20% of South Africans. The country does not have the fiscal resources to extend to everyone the same level of health care expenditure now extended to the privileged. Nevertheless, as a society we are committed to providing high quality health care for all. Therefore, the system of health care service delivery must change.
According to DBSA statistics, in 1994 medical aids served only 17% of the population; there seems to be a consensus that they serve even fewer people now. The schemes have become increasingly costly both in absolute terms and as a percentage of wages. Nevertheless, coverage limits mean that the schemes do not always protect members against the risks of catastrophic illness. Likewise, underwriting rules and risk rating exclude the people from open schemes who most need coverage. As South Africa faces the AIDS crisis, this picture is very troubling.
Finally, the trends we now see in the relatively unregulated world of medical aid schemes mean that these private schemes increasingly fail to effectively supplement the system of public clinics and hospitals. Private schemes that cherry pick the most desirable business and yet fail to provide comprehensive coverage, actually weaken the public sector component of the health care system. They do so by diverting resources of those most able to pay into the private sector while relying on the public sector to care for those of their members whose needs exceed the schemes’ coverages. This problem, if it remains unaddressed, will undermine the capacity of the public sector to serve the poor.
The Committee has heard from a number of industry participants who claim that they support universal access to health care but argue that medical aid schemes will be destroyed by the combination of community rating and open enrolment. Their business interest in making money by making smart decisions about who to admit to membership (and who to exclude from membership) rather than by delivering quality services efficiently is justified in terms of elaborate economic models.
It is clear that the predictions of doom are based on unprovable and self-serving assumptions rather than on unbiased scientific principles. The Committee must recognise these arguments for what they are, despite the technically sophisticated language in which they are clothed and should give the Minister the statutory power to move forward toward the goal of universal access.
The Committee has also heard complaints from business interests that urge you to delay the bill on the ground that there was insufficient consultation before the bill was tabled. In fact, the bill was tabled after lengthy consultation with the industry. The bill contains the same elements that were set out in a widely circulated November 1997 policy paper, which business had ample time to analyse and debate. Indeed, various business interests were attacking the bill in the press several months before it was tabled. The contention that the bill was not adequately discussed before it was tabled in Parliament is a transparent stalling tactic and should be rejected.
The goal of South African health care policy should be to create
To achieve this goal, we must work toward putting in place a system of social health insurance that
The Department of Health has begun the process of transforming the health care system by focussing resources on expanding the availability of public primary health care facilities throughout the country.
It has committed itself to strengthening the public hospitals by giving them the capacity to better use resources and to collect fees from those who have the ability to pay.
It is also necessary, in the short-term, to implement a system of regulation of medical aid schemes so that medical aid schemes do not unfairly take advantage of South Africans and undermine the on-going effort to strengthen the system of public primary care and public hospitals by
COSATU has endorsed the general principles underlying this bill as a short-term expedient as we move toward a more comprehensive, unitary system of health care.
COSATU strongly supports the bill. It is a part of program to move South Africa away from a segmented system of health care in which vast resources are spent on those who medical aid schemes choose to admit to membership and who can pay the required premiums and the rest of our people must rely on an under-financed public health system.
In particular, we support provisions to make medical aid coverage available to all who can pay a single pooled rate, including:
COSATU also supports the features of the bill that encourage practices that will produce good health outcomes for those who are members of medical schemes. Those include:
COSATU supports the consumer protection features of the bill, which should help ensure that medical aid schemes deliver on the promises they make to members, in particular:
COSATU also supports the funding of the Council and the Registrar from a levy on schemes, rather than from the state fiscus. The current system of state funding, whilst it is inadequate to ensure appropriate oversight of medical aid schemes, also inappropriately burdens the state with the costs of regulating schemes.
Some restricted medical aid schemes are available only to employees of particular employers. When a worker loses his or her job, the worker and his or her dependants also loses membership in the scheme. Current law requires medical aid schemes to give workers who lose their jobs the option to continue in the schemes only if they retire or lose their jobs due to age, disability, or ill-health. It does not protect workers who are retrenched, who give up their jobs in order to move with their families, or who leave their jobs for any other reason.
The bill does ameliorate the situation of the worker who loses his or her job by forbidding his or her exclusion from open medical aid schemes due to age or health risk and, in some cases, forbidding the imposition of waiting periods. Nevertheless, a worker should not be required to become a member of a different medical scheme simply to provide coverage during a period in which he or she is seeking new work, which may offer the opportunity to join another employment-sponsored medical scheme.
The bill should be amended to allow workers who lose their jobs, for whatever reason, the option to continue in the medical aid scheme until they find new employment that makes a medical aid scheme available to them or until they enrol in an open scheme, whichever occurs first. (Such a provision might include a time limit on this continuation coverage.)
Section 28 of the LRA provides that a bargaining council may "establish and administer pension, provident, medical aid, sick pay, holiday, unemployment and training schemes or funds or any similar schemes or funds for the benefit of one or more of the parties to the bargaining council or their members." In Schedule 3, the LRA is amended to delete "medical aid." After discussions with the Department, we understand that the purpose of this change is to ensure that medical aid schemes established by bargaining councils must register and are subject to regulation by the Minister of Health, just like all other medical aid schemes. COSATU endorses that objective. However, the change to the LRA could be interpreted to mean that bargaining councils may no longer establish medical aid schemes. Therefore, in the interest of clarity, we suggest that, rather than deleting the words "medical aids" in section 28 of the LRA, language be added to section 21 of the main body of the bill to clarify that medical schemes sponsored by bargaining councils are subject to the same rules as any other medical scheme.
The new language would read as follows:
"(3) Notwithstanding subsection 28(g) of the Labour Relations Act 1995, Act 66 of 1995, medical aids established by bargaining councils must register in terms of this Act and in all other regards operate consistent with this Act."
The bill creates a new institution, the Appeal Board, to hear appeals from decisions by the Council but it does not ensure that the Board will be able to function without subsidy from the fiscus. Whilst the bill permits the Board to prescribe fees to be paid by those who appeal to it, those fees cannot be set high enough to fully fund the Board’s operations without unduly discouraging appeals. Therefore, we suggest that Appeal Board operations be funded from the levy.
This can be done by amending section 8(e) to provide that the levy shall be imposed "for the purpose of meeting the general administrative and other costs of the Council, the Appeal Board and the [functions performed by] the Registrar" and amending section 13 to require the Council to set the levy so as to cover the budget of the Appeal Board.
It seems to us that the Minister rather than the Registrar should have the quasi-legislative power to designate undesirable business practices. In general, the Minister has the authority to make policy and promulgate regulations; the Registrar, on the other hand, implements policy and enforces the rules. This separation of function is desirable, unless there is a strong reason to breach that separation.
The bill should define the term "personal savings account" so that the scope of the Minister’s authority to prescribe regulations is clear.
The bill makes no provision for evaluation of the extensive changes in the medical schemes industry that it contemplates. The bill should set a time by which the Minister, with the assistance of the Council, must evaluate and report on the effects of various measures taken in terms of the legislation on the medical scheme industry and on the viability of public health facilities and further report on the Minister’s progress toward developing a proposal for a national health insurance system.
COSATU believes that the bill correctly confers on the Minister the authority to make regulations in a number of areas. We support the provisions made by section 68(2) of the bill for advance publication of proposed regulations and for solicitation of public comment. We further recognise that there may be circumstances when it will be in the public interest to promulgate regulations expeditiously, without first publishing draft regulations and engaging in consultation. However, we believe that consultation is always advisable and, therefore, suggest that when no advance consultation occurs, post-publication consultation should be required.
Specifically, we propose that regulations promulgated without advance publication and comment, in the public interest, under section 68 (3) (b) of the bill, should have force for only a limited period of time, during which the public comment process can take place. If regulations so adopted are not re-promulgated (with or without change) after the normal consultation process, then such regulations would lapse after a specified time. Six months or a year should be an adequate life for a regulation promulgated without advance consultation (3).
COSATU urges the Portfolio Committee to give careful consideration to all aspects of this bill as well as our proposals for amending it. The bill should then be endorsed. There are those who oppose the bill on the basis of narrow interests. Many of them argue that the bill inappropriately interferes in the market. The health care market is unusual, however, in that the public sector is a major participant in the market and must, by virtue of the legal and moral obligation of the state to protect the health, provide whatever basic health care services the private sector chooses not to provide. In this context, regulation is essential in the interest both of protecting health and of ensuring that the private sector does not continue to make money in this sector without providing an appropriate level of service.
The Committee is urged to bear in mind, at all times, that this bill is not the end to the work that government must do in reforming the South African health care delivery system and to encourage government to expedite the process of bringing to you a bill creating a comprehensive system of social health insurance.
FOOTNOTES
In addition to providing undesirable incentives, personal savings accounts undermine the fundamental purpose of medial aids. Medical aids were created to protect people against the risk that they would incur medical expenses that exceed their ability to pay. They do so by collecting contributions from large numbers of people and using those contributions to pay the expenses of those who are unfortunate enough to experience significant medical needs. If schemes allocate a large share of contributions to individual accounts, then those who are fortunate enough to enjoy good health keep their money, rather than seeing it used to help the less fortunate. Ultimately, this drives up premiums and prices schemes out of the reach of ordinary people. For all of these reasons, regulation of the personal savings accounts is desirable.
