Health market inquiry ‘too lenient’
The recommendations of the health market inquiry, released a week ago are problematic and need to be strengthened, the National Education Health and Allied Workers ’ Union says.
SA’s two biggest medical schemes have rejected the notion of capping principal officer and trustee remuneration, which is among the recommendations made by the Competition Commission’s health market inquiry in its final report released last week.
The scale of principal officer and trustee remuneration has been a concern for the Council for Medical Schemes (CMS) for several years, and the latest figures are laid bare in its 2018/2019 annual report, due to be presented to parliament on Thursday. The CMS regulates the medical schemes industry, which at the end of 2018 included 79 schemes covering about 15.4% of the population.
The regulator’s annual report shows the principal officers of Discovery Health Medical Scheme (DHMS) and the Government Employees Medical Scheme (Gems) were the most handsomely rewarded in the industry in 2018, earning R7.64m and R5.82m respectively. DHMS is the biggest open scheme in the country and had 2.82-million beneficiaries, or 31.6% of the 8.92-million market at the end of 2018.
Gems is the biggest restricted scheme and had 1.84-million beneficiaries at that stage. DHMS’s eight trustees were on average paid more than double that of the 14 trustees on Gems’s board, receiving fees of R1.2m in 2018, compared to Gems trustees, who on average each received R519,000.
The health market inquiry was established to probe the barriers to effective competition and patient access in the private health-care industry. It recommended wide-ranging reforms to stabilise the private healthcare sector, including a proposal that trustee and principal officer remuneration be capped and linked to scheme performance.
“Part of their salary should be based on demonstrable benefit to members — for example, if they could show that their preferred provider network was saving the scheme money, or they engaged in risk transfer mechanisms that brought down costs,” said Wits professor Sharon Fonn, who was part of the five-member team that conducted the health inquiry.
DHMS chair Neil Morrison said the scheme needs to attract and retain talent to ensure its principal officer could manage the complexities involved in such a large entity.
“Remuneration is benchmarked periodically, through an independent review conducted by an external consultant using the appropriate market norms,” he said.
DHMS supports the principle of performance-linked remuneration for principal officers, but not for trustees, as it might create perverse incentives and an inappropriate focus on shortterm targets, he said. DHMS does not support a cap on remuneration, as it could have unintended consequences. Too low a cap would make it difficult to attract people with the right skills, while too high a cap might be seen as a target and lead to widespread increases, he said.
Gems deputy chair Millie Hlatshwayo said the scheme regularly benchmarks principal officer and trustee remuneration. “In light of the size and complexity of Gems, the trustee remuneration policy is considered reasonable,” she said.
“We agree that there should be an aligned incentive for principal officers, but without a cap, as the size and complexity of schemes differ,” she said.
Council for Medical Schemes spokesperson Grace Khoza said the regulator is “acutely aware” of the need to develop a framework to regulate trustee and principal officer remuneration. A study had been done by the CMS to understand the factors underpinning their remuneration, and the Medical Schemes Amendment Bill contains provisions for the regulator to set parameters for their pay, she said.
The bill was released for public comment in June 2018, but work on it was suspended pending the outcome of the health market inquiry.