CMS launches investigation into medical schemes’ ‘extravagant’ AGM spending

The Council for Medical Schemes (CMS) is to launch an in-depth investigation into the potential factors contributing to the “extravagant costs” incurred by medical schemes in hosting annual general meetings (AGMs).

This follows a research report published by the industry regulator – Annual General Meetings of Medical Schemes: Importance and Challenges Associated with Limited Member Participation – which provided evidence that some medical schemes are spending exorbitant amounts on hosting AGMs.

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The CMS said this spending pattern is deemed worrisome and necessitates an in-depth investigation into the potential factors contributing to these extravagant costs associated with hosting AGMs in the evolving landscape of medical schemes.

It added that medical schemes remarkably allocate considerably higher expenditures towards hosting AGMs, particularly when juxtaposed with schemes possessing a significantly larger membership profile.

The research report said 33 of South Africa’s 71 registered medical schemes incurred a total of R29.2 million in expenses related to hosting AGMs for 8.1 million medical scheme beneficiaries.

This means these 33 medical schemes spent an average of R884 848 each to host their AGMs.

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The remaining 38 medical schemes, which have 850 248 beneficiaries, did not incur any costs for hosting AGMs, the report said.

Biggest spenders

The report revealed that five medical schemes exhibited significantly higher spending than others, bearing a substantially higher proportion of the total AGM expenditure.

These schemes were:

• Sizwe Hosmed Medical Fund
• Medipos Medical Scheme
• Engen Medical Benefit Fund
• Motohealth Care, and
• Foodmed Medical Scheme.

The report said other schemes with possible high AGM-related expenditure include:

• University of KwaZulu-Natal Medical Scheme
• TFG Medical Aid Scheme
• Cape Medical Plan
• SamwuMed, and
• Discovery Health Medical Scheme.
• CMS spokesperson Stephen Monamodi told Moneyweb the in-depth investigation will be launched after the council has engaged the affected schemes.

Monamodi said the Medical Schemes Act, under Sections 42, 43 and 45, empowers the registrar to request additional particulars or lodge inquiries with the medical schemes concerned.

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“We are in the process of engaging with the affected medical schemes to understand the causes of such exorbitant spending on AGMs.

“Where such allegations are deemed to be true, the CMS will utilise its regulatory powers,” he said.

Monamodi said the CMS does not want to speculate at this stage on what action, if any, it could take against medical schemes found to be incurring extravagant costs to host their AGMs.

However, he noted that the boards of trustees of medical schemes are accountable for managing scheme affairs and expenditures related to the hosting of AGMs.

“Therefore, the spending needs to translate into value for members. [Excessive] non-health care expenditure is not tolerated by the CMS,” he said.

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“As the CMS, in the interests of medical scheme members, we expect the majority of the funds in the medical scheme to cover health-related conditions.”

Non-healthcare expenditure

The CMS Industry Report 2022, released on 7 December 2023, said the non-healthcare expenditure for all medical schemes at the end of 2022 was R18.88 billion, an increase of 6.51% from R17.72 billion in 2021.

It said non-healthcare expenditure consists of commercial reinsurance agreements, administration expenditure, broker costs and impaired receivables.

It added that no discernible changes were noted in the composition of non-healthcare expenditure over the past five years.

Monamodi said it is premature at this early stage to provide a date by which the in-depth investigation into the costs incurred by medical schemes in hosting AGMs will be completed.

The CMS said last week it published the 2022 Medical Schemes Industry Report and annexures in December 2023, and, on closer inspection of the annexures, it noticed a significant trait in the information on AGMs hosted by medical schemes.

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It said AGMs are an essential governance component in the medical schemes environment, presenting a chance for schemes’ principal officers, boards of trustees and administrators to account for the management of the scheme to beneficiaries.

The CMS added that in the regulatory environment, medical schemes must, therefore, hold AGMs consistent with scheme rules on or before a particular date, and this is an opportunity for medical scheme members to voice opinions, ask questions and present motions.

In terms of the Medical Schemes Act, the CMS, as the regulator of the industry, is, among other things, required to:

• Protect the interests of the beneficiaries at all times;
• Control and coordinate the functioning of medical schemes in a manner that is complementary to the national health policy;
• Make recommendations to the minister of health on criteria for the measurement of quality and outcomes of the relevant health services provided for by medical schemes and such other services as the CMS may from time to time determine;
• Investigate complaints and settle disputes about the affairs of medical schemes as provided for in the act;
• Collect and disseminate information about private healthcare; and
• Advise the minister of health on any matter concerning medical schemes.

This article was republished from Moneyweb. Read the original here