Seven ‘mistakes’ in RAF past medical expenses high court judgment – CMS

The executive responsible for regulation at the Council for Medical Schemes (CMS) claims there were seven “mistakes” in the high court judgment dismissing Discovery Health’s application to make the Road Accident Fund (RAF) pay for the past medical expenses of road accident victims who are members of medical aids.

Mfana Maswanganyi said he explored the reasoning in the judgment, and it shows “the errors committed”, resulting in him concluding that an appeal to at least the Supreme Court of Appeal (SCA) is necessary.

The judgment was handed down in December by a full court of the High Court in Pretoria by Gauteng Division Judge President Judge Dunstan Mlambo and Judge Noluntu Bam, with Judge Ingrid Opperman dissenting.

Discovery Health CEO Dr Ron Whelan said in December the scheme disagrees with the judgment and, given its far-reaching implications, intends to apply for leave to appeal.

Discovery Health previously indicated that medical schemes incur an irrecoverable loss of about R500 million per year when the RAF fails to pay medical scheme members for past medical expenses resulting from a road accident.

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Who should pay?

Maswanganyi, who stressed he was writing in his personal capacity, said the proper inquiry is to determine who has the primary responsibility to pay claims.

He said the RAF would have the primary responsibility to pay because the law does not exclude members of medical schemes from paying the RAF levy in the fuel price and claiming benefits from the RAF.

On the other hand, membership in medical schemes is voluntary and constitutes a private arrangement, he said.

“If prohibiting medical schemes from recovering funds from RAF results in price hikes for medical scheme members – rendering medical schemes unaffordable to many people who are currently enjoying cover or if it renders some medical schemes not to be financially sustainable – will the court appreciate the likely impact of that on the public health service?” he asked.

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PMBs: Contractual or statutory obligation?

This formed part of Maswanganyi’s discussion of the judgment’s “second error”, which characterised the obligation of medical schemes to pay prescribed minimum benefits (PMBs) in full as a statutory obligation.

Maswanganyi said the Medical Schemes Act (MSA) provides that a medical scheme cannot be registered and should not do business unless its rules provide for, among other terms, the scope and level of minimum benefits as may be prescribed.

He said this is a term inputted into the contract by legislation, and it becomes part of the contract between a medical scheme and a member, making the obligation to pay PMBs and emergency medical conditions (EMCs) a contractual and not a statutory obligation.

Maswanganyi responded to the question posed by the Mlambo judgement that: “[g]iven the myriad of social challenges facing this developing country, is there justification based on policy considerations, fairness and reasonable, for the government to concern itself with protecting the interest of medical schemes?”

He said the CMS’s view is that this is a policy question better answered by policymakers, not the judiciary.

“If prohibiting medical schemes from recovering from RAF results in price hikes for medical scheme members, rendering medical schemes unfordable to many people who are currently enjoying cover or if it renders some medical schemes not financially sustainable, does the court appreciate the likely impact of that on public health service?

“The South African government has recognised that the current dual health care system, one funded publicly for the poor and another funded privately through medical schemes (for those who [can] afford), is not sustainable.

“It is for this reason the government has promulgated the National Health Insurance Act (NHI Act), which aims, among others, to achieve universal access to quality healthcare services,” he said.

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Maswanganyi said the NHI Act envisages a phased-in approach to benefits coverage, with Section 33 providing that once the NHI is fully implemented, medical schemes may only cover complementary services that are not covered under the NHI.

“This means that until such time that the NHI is fully implemented, medical schemes should and are protected by law in terms of the Medical Schemes Act, which among others requires the regulator to at all times protect the interest of the beneficiaries and imposes the same obligation on trustees of medical scheme,” he said.

Maswanganyi added that as part of the NHI reform, government is currently looking at how, when, and which funds to redirect from the private to the public sector.

“The question that must be asked then is: Are trustees whose medical schemes do not have a rule providing for subrogation to enable the medical scheme to claim medical expenses relating to motor vehicle accidents from the RAF acting in the best interest of members, as this will no doubt affect the contribution members pay?”

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RAF directives

The “first mistake” Maswanganyi referred to related to directives issued by the RAF.

A 12 August 2022 RAF directive, which was declared unlawful on 27 October 2022 by Judge Mandla Mbongwe, instructed RAF employees not to make any payments to claimants if their medical aid scheme has already paid for their medical expenses arising from a road accident.

The RAF issued two further directives subsequent to Judge Mbongwe’s order, with a “phantom” directive issued on 13 April 2023 related to the obligations of medical schemes under the MSA to provide PMBs for emergency treatment required by medical scheme members.

Maswanganyi said the judgment held that the first and second RAF directives are different because the language of the second directive specifically relates to PMBs and EMCs claims, while the first directive did not use such language.

But Maswanganyi said the legal obligation on a medical scheme to pay benefits was central even in the first directive.

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Other ‘mistakes’

Other “mistakes” in the judgment highlighted by Maswanganyi include:

• Despite not sitting as an appeal court, the judgment contradicted the legal position pertaining to the doctrine of subrogation as explained in the Mbongwe judgment;
• Despite concluding that subrogation requires a value judgment, which means each case must be judged on its own merit, the judgment still concluded that the subrogation doctrine does not apply to medical schemes in general and without providing reasons for this conclusion. In addition, there is no legal authority that suggests subrogation is only an insurance doctrine;
• The Mlambo judgment ruled that a decision as to whether or not a medical scheme can claim from the RAF requires a value judgment despite the SCA confirming the legal position in the Mbongwe judgment by refusing to entertain the RAF’s appeal application, as did the Constitutional Court;
• It cites the rules of the Government Employees Medical Scheme (Gems) to show that Gems does not have a rule allowing it to recoup medical expenses for motor vehicle accidents suffered by its members to bolster its argument that subrogation does not apply to medical schemes, but Gems is but one of the 71 registered medical schemes in South Africa, and questioned why the judgment only selected Gems’ rules and ignored the rules published by the medical schemes regulator, the CMS; and
• It concluded that medical schemes are financially viable even without recouping from the RAF, which is financially ailing, but three out of 71 medical schemes currently do not meet the 25% solvency ratio requirement.

Maswanganyi added that he is not aware of any financial analysis looking at the financial viability of medical schemes minus what would have been recovered from the RAF by all medical schemes in a particular year.

“What is even more worrying is the deafening silence of the Mlambo judgment on the consequences that will befall medical schemes and members of medical schemes if medical schemes are prohibited from claiming past medical expenses from the RAF,” he said.

This article was republished from Moneyweb. Read the original here.