Gore’s worst nightmare

Discovery has made billions from the “independent” medical aid that shares its name. But not everyone believes this is entirely fair

Jonathan Egdes is not the most obvious man to be tilting at Adrian Gore’s R80bn behemoth, Discovery Holdings. The 58-year-old Egdes is pretty much your everyday Joe. By day, he works as a maize trader, making a thin margin intermediating between farmers and wholesalers. Tethered to his cellphone in case there’s a maize deal to be cut, Egdes is a father of four who has quietly built a steady career over the past two decades. But this all changed four years ago, when he picked up Discovery’s financials — and his blood boiled.

“I got furious when I saw how much Discovery Health was being paid. Medical schemes are meant to be like mutual societies, run independently for the benefit of their members. But with Discovery, the scheme’s 1.2m members are providing super profits for Gore — and no-one has said enough is enough,” he says. Egdes isn’t kidding. Last year, the Discovery medical aid scheme paid R3.9bn in “administration fees” and R1.3bn in “managed care” fees to Discovery Holdings, via its subsidiary Discovery Health. For every R1 you pay to the medical aid, 10.4c goes to Gore’s firm for these non-healthcare costs.

Few medical aid members query these costs, partly because many don’t know how it’s meant to work — that the medical scheme, overseen by a board of trustees, is meant to be independent of its “administrator”.

In theory, if the Discovery medical aid trustees reckon they’re not getting value, they can “terminate” the administration deal with Discovery Health with just 90 days’ notice. But given how the administrator seems to wear the pants, this seems unlikely.

Two years ago, a fired-up Egdes went to the Discovery scheme’s AGM and put the trustees on the spot, asking: how many quotes had they ever got from other administrators to run the scheme? Not a single one, they said. “Can you believe that? I don’t care how good someone is; to do justice to your members, you should always get three quotes. Bidvest might be excellent at cleaning your offices, but that doesn’t mean someone can’t do it better or cheaper,” he says.

So Egdes has now decided to stand as a trustee at Discovery medical scheme’s AGM on June 23 at Sandton’s Hilton Hotel. It’s his second stab at it: in 2013, he stood too, but was defeated.

“Look, I don’t expect to be elected. They won’t give me access to their member lists, so I can’t canvas support or ask for votes. But still, I think they should know that not everyone is going to stand by while they glibly tell us no-one else can administer the scheme,” he says.

Egdes will tell you he’s not doing this because he despises Discovery either. “I actually think they’re excellent, which is why I have all my business with them — insurance, life products, you name it. But they are making a massive margin for risk-free work,” he says.

Which isn’t to say the medical scheme is deaf to this criticism. Two years ago, it hired Deloitte to “benchmark” its costs against other medical aids.

Deloitte found that while Discovery charged R11.43/month more for “non-healthcare costs” than other medical aids, it delivered “better performance”.

Not everyone agrees, and in his “manifesto”, Egdes says Discovery’s members should vote for him so he can “ask the difficult questions and ensure the scheme is run for our benefit”.

It’s compelling, but there are 119 people vying for just four trustee positions, including Stephen Mulholland, former CEO of Times Media (which owns the Financial Mail), and National Lotteries Commission board chairman Prof Alfred Nevhutanda.

Egdes, for his part, conjures up comparisons with US presidential hopeful Bernie Sanders, railing against the complacent “establishment” with its vested interests and its troop of docile, rubber-stamping bureaucrats.

It’s a pity that Egdes, like Sanders, will likely fall short. We need more mavericks like him, demanding accountability.