Sunday 19 May

The Market Inquiry into the Private Healthcare Sector began its third week of public hearings with presentations from the Board of Healthcare Funders (BHF), the Government Employees Medical Scheme (GEMS) and Bestmed, amongst others.  The day’s hearings were punctuated with surprising and sometimes contradictory statements. Here is a summary of presentation by the BHF, GEMS and Bestmed.

Board of Healthcare Funders

The Board Healthcare Funders (BHF) explained to the Panel that it “represents over 70% of Medical Schemes” in addition to a significant proportion of medical scheme administrators and managed care programmes. Medical schemes (commonly referred to as medical aids) are not-for-profit entities according to the Medical Schemes Act. This is not the case for medical scheme administrators.

What does the BHF do?

Panel member Prof Sharon Fonn questioned the BHF on its mandate and purpose, asking “What do the BHF do? Who are you? Do you represent schemes? Do you represent their members?”. This question seemed to be one shared by other panel members. The panel also asked BHF how it could claim to represent Medical Schemes “who then contradict what BHF said in their submissions”? The Panel also asked for clarification about the functions and activities undertaken by the BHF. Here are some examples:

Panel: “How much time does BHF dedicate to enhancing access to health services?”

BHF representative: “Having joined this organisation in 2005 I can say ‘not much’

Panel: “What measures has BHF introduced to provide members with information?”

BHF representative: “We have not done enough. We need to do more.”

BHF had previously initiated litigation seeking clarity on the meaning of the provisions concerning Prescribed Minimum Benefits in the Medical Schemes Act. The BHF suggested that this litigation was done with the encouragement of the Department of Health, which had also sought clarity on the meaning of “pay in full” in terms of the PMB regulations. This action, coupled with inaction in other areas, seemed to raise some further interest from the Panel. A panel member questioned whether the BHF “doesn’t consolidate power” given the fact that “many submissions allege medical schemes & administrators have way too much power” as it is. It will be interesting to see if the Panel further investigates the impact of the BHF on the markets in which its members operate, including whether its existence contributes to anti-competitive practices or violations of patients’ rights to health

The BHF’s understanding of the role of medical schemes

The BHF presented a confusing and at times contradictory understanding of the purpose of medical schemes. Though the Medical Schemes Act does not set out an explicit purpose for the Act and Medical Schemes, SECTION27 in its submissions argued that in terms of constitutional law, the purpose of both the Act and medical schemes must be interpreted in light of the constitutional right to health. Medical schemes, as not-for-profit entities clearly exist to protect the interest of their members which ultimately includes, primarily, their access to quality healthcare services.

Though beginning its submission by acknowledging that “we know that with healthcare the SA Constitution is primary”, the BHF then immediately proceeded to describe medical schemes as a “financing vehicle for health services” and emphasising that “the business of medical schemes is not health.” This submission follows on a worrying trend thus far from some private sector market participants of paying lip service to the constitutional right to health and then denying any responsibility to ensure that it is made a reality.

To confuse matters further, later on in its presentation, the BHF complained that a problem with the private healthcare system is that it is “finance-centric not health-centric” and that “financers” (the BHF’s own members) “are not promoting health access”.

The relationship between medical schemes and medical scheme administrators

Given the fact that the BHF has some members who are medical schemes, on the one hand, and other members who are medical scheme administrations on the other, the Panel asked BHF representatives to explain “how can it be efficient for there to be two players: medical schemes in medical schemes administrators?” This question was followed up by the Chief Justice who interjected to ask “is there a potential conflict of interest here?” and if so “how does the BHF deal with it?

Interestingly, the BHF responded by acknowledging the potential for a conflict of interest without explaining how it is handled by the BHF and its members. It said that the source of the conflict was based on a question about whether incentives of entities – schemes and administrators – are related to healthcare outcomes or cost savings. This question has clear relevance to the discussion about the crucial role of medical schemes in protecting patients’ rights.

Specific issues raised by the BHF

BHF raised several issues in their submissions relating to the Prescribed Minimum Benefits. In this regard, the BHF, as many others, highlighted the concern that the PMBs “have not been reviewed since 1997”. Prompted by questioning, the BHF also submitted that prior to the passing of regulations and legislation with regard to PMBs, “costing was not adequately done” and furthermore there is “no capacity at all to monitor implementation”.

Broadly, the BHF emphasised with reference to the WHO report presented in the Pretoria hearings that “the lions share of what is collected [from patients] goes to private hospitals and specialists”. The BHF therefore firmly recommended “price regulation” for hospitals and specialists stating that “detailed regulation” would lead to “downward pressure on costs”. The BHF also emphasised the lack of bargaining power that medical schemes have in terms of the Council for Medical Schemes’ meaning of “pay in full” in terms of the PMB regulations. In BHF’s view, paying in full on invoice – a legal requirement – is “reckless spending of Trustees money”. This is the opposite of the submissions made by health care providers, who have said at the public hearings that the schemes hold the power and that healthcare providers are “price takers”.


Following BHF’s submission, the Panel heard from Bestmed Medical Scheme. Bestmed is an open and self administered scheme.  In their submission, they emphasised the importance of brokers for self-administered schemes saying that brokers act as marketing agents and bring new members to the scheme. Bestmed said that the reality is that open schemes compete on their ability to attract younger healthier members to fund healthcare coverage. The nature of social solidarity in schemes functions to pool the risk of the healthy and unhealthy. In their final remarks Bestmed built on this point asserting that the users’ distrust of schemes can be associated to circumstances when the schemes act in the collective interest of all of its members over individual interests.

In principle, Bestmed said it was not opposed to regulation but argued that the present regulation is inappropriate, and that PMB regulation in particular is an example of the imbalance of regulation between health service providers and medical schemes. Like BHF, Bestmed argued that the obligation on schemes to pay out in full for PMB conditions should attract regulation on the pricing of medical services to curtail costs. However, Bestmed acknowledged that the Designated Service Providers exemption envisaged in PMB regulation serves as a mechanism to mitigate what seems to be limitless liability placed on schemes.

Bestmed blames PMBs for the increase in costs and cited cases of exploitative behaviour by service providers who, for example, bill more for conditions identified as PMBs because of the requirement of full payment. Even though this conduct is not prevalent, they admitted, Bestmed affirmed that it occurred and is a possible driver of costs.

Bestmed repeatedly criticised members of medical schemes, insisting that they expect their contribution to translate to good healthcare provision and are not price sensitive. This is a curious criticism because both the panel and different stakeholders have picked up on the concerns about information asymmetries between schemes and users, advocating for openness and transparency in the system.

Government Employee Medical Scheme (GEMS)

As a restricted medical scheme, GEMS is only open to those who are employed in the public sector, and their dependants. As Panellist Mr van Gent commented, “GEMS is like a market in itself”.

The Panel was very interested in the special nature of GEMS in light of its relationship with the State. GEMS serves public service employees, has its Trustees appointed by the Minister of Health, reports to state entities such as the Ministry of Health and Treasury on its operations. This prompted the Chair of the Panel to ask whether GEMS was in fact an organ of state or whether it had any additional responsibilities given its connection to the state, for example, obligations in terms of the Public Finance Management Act (PFMA). GEMS indicated that it did not have any special responsibilities, but was governed by the Medical Schemes Act like all other schemes.

GEMS indicated that the state, which includes public hospitals, was its chosen Designated Service Provider for PMB conditions. It stated that in most instances, GEMS pays for public hospital services but if a member chooses to attend a private hospital, GEMS would pay the private hospital at the GEMS scheme rate, with co-payment from the member. GEMS noted that hospital costs were not significantly higher than the GEMS rate but that if specialists were involved, the costs tended to be very high. In relation to the quality of services in the public health sector, Chief Justice Ngcobo asked what GEMS was doing to improve the quality of health care in the public sector. The GEMS representative gave no satisfactory answer simply stating that the Minister is taking steps.

The public hearings continue with the much anticipated presentation by Discovery Health on Wednesday 2 March 2016.

For more information contact:

Umunyana Rugege at or +27 83 458 5677

Tim Fish Hodgson at or +27 82 871 9905

Luvo Nelani at or +27 79 381 8521


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