GEMS Presentation

Health Market Inquiry

1 March 2016
Structure
About GEMS
o Background
o Mandate, Mission, Vision and Values
o Role of a Medical Scheme (Operating Framework)
o Products (Plans) and Enrolment Criteria (Income Bands)
o Governance and Service Structure
o Scheme Statistics
o Strategy and Approach
Impact of GEMS
o Industry Growth
o Access (No Underwriting)
o Decrease in non-healthcare Spend
Our Challenges
o PMBs
o Absence of Tariff and Pricing Structure
Considerations
ABOUT GEMS
(Who We Are)
Background
The public service is the country's largest employer with
approximately 1.3 million employees
In fulfilment of its obligation as an employer, the public service
provides its employees with a remunerative package structured to
include and cover:
o Retirement/Pensions (GEPF/GPAA)
o Housing Benefits (Allowance)
o Medical Benefits (Subsidy)
Prior to 2005, one of the challenges faced by the Employer was that
a significant and growing number of its employees were unable to
gain entry into existing medical schemes due to the high cost
structure
o To address this challenge it was resolved to establish a single restricted
membership medical scheme to cover public service employees
Our Mandate, Mission, Vision and Values

To ensure that there is adequate provisioning

of healthcare coverage to public service
employees that is efficient, cost-effective and
equitable; and to provide further options for
those who wish to purchase more extensive Mandates
cover.

To provide all public service

employees with equitable access to
Vision affordable and comprehensive
healthcare benefits.

An excellent, sustainable and

effective medical scheme for all
public service employees.
Mission

Values
Excellence
Member-centricity
Integrity
Value for money
Innovation
Evolution of the GEMS Mandate
and Role
Since 1999: Equitable Access to Medical Assistance
Cabinet approved the registration of GEMS in 2004
Registered in 2005 and commenced enrolment in
2006
July 2006 a new medical subsidy policy was
introduced
GEMS like all medical schemes operates within the
legal framework provided by the Medical Schemes
Act
The Role of a Medical Scheme
“Business of a medical scheme” means the business of undertaking liability in
return for a premium or contribution:
a) To make provision for the obtaining of any relevant health service;
b) To grant assistance in defraying expenditure incurred in connection with the rendering of any relevant
health service; and
c) Where applicable, to render a relevant health service, either by the medical scheme itself, or by any
supplier or group of suppliers of a relevant health service or by any person, in association with or in
terms of an agreement with a medical scheme
“restricted membership scheme” means a medical scheme, the rules of which
restrict the eligibility for membership by reference to:
a) Employment or former employment or both employment or former employment in a profession,
trade, industry or calling;
b) Employment or former employment or both employment or former employment by a particular
employer, or by an employer included in a particular class of employers;
c) Membership or former membership or both membership or former membership of a particular
profession, professional association or union; or
d) Any other prescribed matter
“rules” means the rules of a medical scheme and include:
a) The provisions of the law, charter, deed of settlement, memorandum of association or other
document by which the medical scheme is constituted;
b) The articles of association or other rules for the conduct of the business of the medical scheme; and
c) The provisions relating to the benefits which may be granted by and the contributions which may
become payable to the medical scheme
Critical Aspect s for GEMS as a
Medical Scheme

Scheme
Members
Contributions
Advisors o Scheme rules
Bank account
Actuaries o Registrar and
Auditors Benefit options Council
o Medical Schemes
Investment Claims
Act
Managed care
Administrators
 Governance & Operational Structure
Governance , Direction & Oversight

Members
Employer
Employees
Board of Trustees Committees Support Services
Advisory,
Actuaries,
Auditors
Execution of Strategy & Investment
determination of Operational Principal Officer
deliverables Executive & Head Office

OUTSOURCED SERVICES
Performance of
Operational Administration Managed Care
Functions o Enrolment and Registration o Authorization Management
o Benefit Management and o Disease Management
Claims Payment o Claims Adjudication
o Member servicing (Contact
Centre Support).
Conceptualisation and establishment

“The state as an employer seeks to ensure that there is adequate provisioning of healthcare
coverage to public service employees that is efficient, cost-effective and equitable”

Cabinet Mandate (2004)

Registration (2005)

Funding R28 Billion (2015)

GEMS’ Strategy and Plan
The Scheme’s Strategy is based on a Three Year Planning
Cycle (Currently 2014 – 2016)
The GEMS Strategy is underpinned by four key pillars of:

Making healthcare spending a progressively smaller portion of

Affordability household income, while minimising member out-of-pocket spending
on healthcare for government employees from all income groups

Understanding member profiles and needs, promoting healthy

behaviours through well incentivised loyalty programmes that
Understanding Members
encourage members to lead healthier lives, minimising their risk of
developing lifestyle-related diseases

Promoting effective disease management of members and improving

Healthier Members the clinical outcomes so that they remain healthy and productive
members of the public service

Working together with government bodies and leading industry

Partner to Organs of the players, both local and international, to bring about innovative
State methods and leading practices in healthcare for the ultimate benefit
of society
 Prioritising healthcare

GEMS has realised significant savings on non-healthcare costs.

Non-healthcare costs Cost savings

15%
13.0%
11.8%
12%

9%
8.7%
7.4%
R1 200 000,000
6%
per year
3%

0%
Open Schemes Closed Schemes GEMS Total
(excluding GEMS) (excluding GEMS)
Prioritising healthcare

The R1,2 billion saved on non-healthcare expenditure allows for more healthcare services to
be funded.

3 million consultations
with family practitioners

500 000 radiology Or the total healthcare costs of

investigations
70 000 beneficiaries per year

12 000 hospital
admissions
 Scheme Statistics

2015
Principal Members 674,936
Beneficiaries 1,781,770
Eligible Members on GEMS 55%
Average Age 30.78
Level 1-5 46%
Average Family Size 2.64
Pensioner Ratio 13.70%
Claims Ratio 92.63%
• Hospital Spend 38.22%
Gross Contributions 28,139,221,000
Claims 25,539 ,196,000
Non Healthcare Cost 2,043,505,000
 Major Utilisation Cost Drivers
Practice Type Cost Paid (R)
Medical Specialists 2 824 183 078
General Practitioners 1 925 785 906
Optometrist 529 751 877
Pathologists 1 488 219 231
Radiologist 975 135 470
Dentist 534 044 298
Supplementary & Allied Health Services 2 823 406 633
Emergency Medical Services (EMS) 287 282 331
Private Hospitals 9 606 324 013
Provincial hospitals 101 395 668
Medicines 4 346 497 705

Private Hospital and Medical Specialists comprises of more than 45% of

the total
Scheme paid R1.8 billion above Scheme rates as PMB
 Utilisations Statistics
2014 Beneficiaries vs. Claims
14,000,000,000
5% of beneficiaries incur 51% of costs in any given year
12,000,000,000
Benefit amount paid

10,000,000,000

8,000,000,000

6,000,000,000

4,000,000,000
5 : 51
2,000,000,000

0
0% - 5%

45% - 50%

65% - 70%
10% - 15%
15% - 20%
20% - 25%
25% - 30%
30% - 35%
35% - 40%
40% - 45%

50% - 55%
55% - 60%
60% - 65%

70% - 75%
75% - 80%
80% - 85%
85% - 90%
90% - 95%
5% - 10%

95% - 100%
Band of beneficiaries
Claims Ratio
2014 Claims ratio per family
1800%

1600% 79% of beneficiaries pay more than is claimed back in any given
year
1400%

1200%

1000%

800%

600%
79%
400%

200%

0%
Medical Plans/Options
Enrolment Criteria (Income Bands)
Sapphire and Beryl
Income Bands 2016 Contribution per Member
2015 2016 Sapphire Beryl
R0 - R6 860 R0 - R7 340 R776 R895
R6 861 - R9 625 R7 340.01 - R10 299 R813 R971
R9 626 - R16 490 R10 299.01 - R17 644 R864 R1 059
R16 491+ R17 644+ R961 R1270
Ruby and Emerald
Income Bands 2016 Contribution per Member
2015 2016 Ruby Emerald
R0 - R10 330 R0 – R11 053 R1 796 R1 996
R10 331 - R17 840 R11 053.01- R19 089 R2 000 R2 210
R17 841+ R19 089+ R2 224 R2 477
Onyx
Income Bands
2015 2016 2016 Contribution per Member
R0 - R10 330 R0 - R11 053 R3 193
R10 331 - R22 010 R11 053.01 – R23 551 R3 322
R22 011+ R23 551.01+ R3 587
Impact of no change in Subsidy

Member portion of contributions increased from 35% to 48%

 Impact of New Subsidy
2011 2015 2016
Monthly Monthly Monthly
Family structure
medical aid Medical Aid Medical Aid
subsidy Subsidy Subsidy
Principal Member without
720.00 925.00 1,008.00
dependants
Principal Member with one
1,440.00 1,850.00 2,017.00
dependant
Principal Member with two
1,880.00 2,415.00 2,633.00
dependants
Principal Member with three
2,320.00 2,980.00 3,249.00
dependants
Principal Member with four or
2,760.00 3,545.00 3,865.00
more dependants
2015 Subsidy increase of 28.5% in line with the PSCBC Resolution

2016 Subsidy increase of 9% linked to Medical Price Index (MPI)

Affordability

\ On average, GEMS’ contributions represent 8% of income after allowing for

employer subsidies (and 20% of income before allowing for subsidies).

Before subsidy After subsidy

Sapphire 19% 1%
Beryl 16% 4%
Ruby 20% 7%
Emerald 21% 9%
Onyx 17% 11%
Total 20% 8%
Affordability

\ On average, GEMS’ is 19% more affordable than comparable plan options

Less expensive than

comparative Schemes
Sapphire 26%
Beryl 15%
Ruby 1%
Emerald 27%
Onyx 25%
Total 19%
Understanding members

Understanding member profiles and needs, promoting healthy behaviours through

incentives that encourage members to lead healthier lives.

Mammograms Pap smears

(annual) (annual)

PSA tests Bone density

(annual) scans
GEMS will offer industry leading preventative
care and screening test benefits in 2016.
Glaucoma Occult blood
screening screening

Influenza Pneumococcal
vaccinations vaccinations

GEMS is now participating in the Health Quality Assessment (HQA) – this is further
indication of the Scheme’s commitment to improving healthcare outcomes.
 Disease Management Programmes

Chronic Disease Management Numbers (2015)

Programme

Diabetes 90 634
Hypertension 210 825
HIV 119 894
Mental Health 48 446
Oncology 11 133

More than 20% of beneficiaries have Chronic Diseases

Number of
 The Funding Challenge
2014 Cost ratio examples

27
Chronic Renal Disease

3 For every beneficiary with hypertension,

GEMS requires 3 healthy members to cross-
Hypertension
subsidise

3
HIV

3
Hypothyroidism
Hospital-centric Care is Dominant

In- and out-of-hospital spend Spend by discipline

10%

13%
38% 39%
43%

38%
19%

Hospital spend Hospital related spend Out of hospital spend Family Practitioners Specialists Hospitals Other

Only 10% of spend pertains to family

Nearly 60% of expenditure pertains to hospital
practitioners (which is higher than the industry
or hospital-related costs
average of 7,0%)
Healthier members

Disease management programmes

• Disease specific programmes aimed at improving clinical outcomes

HIV programmes

• Holistic wellness and prevention of avoidable hospitalisations

Maternity programmes

• Early detection and treatment of comorbidities and complications

Back management programmes

• Promotion of conservative treatment where clinically appropriate

Diabetes management programmes

• Holistic wellness and prevention of avoidable hospitalisation

 2015 Healthcare Indicators
Q1 Q2 Q3 Q4 FY Target

Disease Outcome Measures:

- HIV/AIDS

Enrolment on HIV DMP as a %

76% 79% 82% 83% 79% 77%
of Scheme prevalence rate

Viral Load <1000 as a % of

those on first line regime of 82% 85% 89% 90% 87% 85 %
ARVs for more than 6 months

% of those on ARVs >6

months who show an 83% 88% 84% 90% 86% 85%
improvement in CD4 count
 2015 Clinical Statistics
HIV/AIDS Q1 Q2 Q3 Q4 FY Target

Health Outcomes

Pneumonia hospital 13 110 16 974 14 760 12 121 56 965

admissions

2 299 1 763 1 957 1 913 7932

TB hospital admissions

% increase/decrease
Reduce by 5%
over previous year - -11% 4% -19% 5% -5%
per year
Pneumonia hospital
admissions

Reduce by 5%
% increase/decrease -22% -25% -20% -4% -17%
per year
over previous year - TB
hospital admissions
Partner to organs of state
Working together with government bodies and leading industry players to bring
about innovative methods and leading practices in healthcare to the ultimate
benefit of society.

Data sharing and support of strategic initiatives

Supporting NHI pilot site in Eastern Cape

Benchmarking SA private hospital costs

Data sharing on male medical circumcisions

GEMS Model

Efficient practitioner networks Comprehensive disease

management programmes

Family practitioner networks

(already well established)
HIV Maternity

Specialist networks
(obstetricians and paediatricians) Diabetes Back pain

Hospital networks And more

(Currently in Development) …
Impact of GEMS
Growth

GEMS has realised significant and sustained growth and is now the second largest medical
scheme in South Africa

2007 2009 2011 2013 2014

Over 1,7 million beneficiaries 1 in 5 beneficiaries 1 in R10 spent on healthcare

Impact of GEMS Growth on Industry

Medical scheme membership is flat in 2014 (CMS)

 Prioritising healthcare

GEMS has realised significant savings on non-healthcare costs.

Non-healthcare costs Cost savings

15%
13.0%
11.8%
12%

9%
8.7%
7.4%
R1 200 000,000
6%
per year
3%

0%
Open Schemes Closed Schemes GEMS Total
(excluding GEMS) (excluding GEMS)
Balancing Sustainability with Social
Solidarity

GEMS has achieved solid financial results in the context of social solidarity.

No waiting periods

No late joiner penalties

Income-related contributions
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Increasing reserves Stable loss ratio Broad beneficiary definitions

Aligned to the Principles of Universal Healthcare Coverage

Our Challenges
Industry Dynamics
Healthcare is increasing in real terms (CMS)
The PMB Challenge

The regulation stipulates that PMBs must be paid at cost

When PMBs were introduced the “pay in full” provision wasn’t a risk for
medical schemes
Healthcare tariffs were collectively negotiated by medical schemes and
healthcare providers at the time
Tariffs were published in a “reference price list”
Professional healthcare organisations published “ethical” charging
guidelines setting limits
o Claims that are not PMBs are subject to benefit limits, co-payments and being paid
at scheme tariff
PMB claims may be limited to scheme tariff if the scheme has a DSP for
that healthcare service and the member voluntarily used a provider who
is not a DSP
o This creates an incentive for providers to change the way they apply clinical coding
to claims in order to ensure that claims will be paid as PMBs
The PMB Challenge
Like all Schemes a significant challenge for GEMS is the issue of PMBs
In 2015 the cost of PMB benefits alone was in excess of R760 per life per month
PMB cost for GEMS have almost doubled over the past five years and accounts
for more than 50% of claims
PMB and non-PMB claims PLPM
900
800
700
600
500
400
300
200
100
0
Jan MarMay Jul Sep Nov Jan MarMay Jul Sep Nov Jan MarMay Jul Sep Nov
2013 2014 2015
Non-PMB claim PMB claim
Incidence

The proportion of claims classified as PMBs has increased significantly in recent years. In 2010, 60.7% of
expenditure was classified as a PMB. By 2015, 72.3% of expenditure was classified as a PMB. This
amounts to an increase of 19.0%.

100%

90%

80%
72% 72% 72%
70% 66%
61% 63%
% of expenditure

60%

50%
39% 37%
40% 34%
28% 28% 28%
30%

20%

10%

0%
2010 2011 2012 2013 2014 2015
PMB Non-PMB
In this context, PMBs refer to claims flagged as PMBs as well as potential PMB claims on according to ICD
10 codes. Pharmacy claims are not considered given their limited impact on Prescribed Minimum Benefits.
Disaggregating Trends

By discipline By diagnosis

% PMB
% PMB

2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015

Increases are evident across provider types.
Whether such substantial and consistent
increases can simply be attributed to variances in
the clinical characteristics of patients is
questionable
Increases are evident across diagnosis categories.
Whether such consistent increases across
diagnoses is a function of changes in the mix of
diagnoses is questionable
Cost

Payments in excess of tariff Payments in excess of tariff, as a % of PMB

R 2,000,000,000 R 100 expenditure
12.0%

R 1,800,000,000 R 90
11.5%

R 1,600,000,000 R 80 11.0%

R 1,400,000,000 R 70 10.5%

10.0%
R 1,200,000,000 R 60

9.5%
R 1,000,000,000 R 50
9.0%
R 800,000,000 R 40
2011 2012 2013 2014 2015 8.5%

Payments in excess of tariff

8.0%
Payments in excess of tariff PLPM 2011 2012 2013 2014 2015

In 2011, payments in excess of tariff amounted to In 2011, the amount paid in excess of tariff was
R839 million. This increased by 22.2% per year to 9.2% of the PMB expenditure. By 2015, this had
R1,869 billion in 2015. increased to 11.4%.
Considerations
Potential for Way Forward

There should be consideration of a pricing framework

through a collective bargaining structure for fees and tariffs
Develop national PMB billing rate file that provides a ceiling
or cap
o Regulation 8 to be amended to reflect billing and payment for PMBs
to be at a national PMB billing rate
o Enforce uniform billing between PMB and non PMB services without
a significant difference in the rates
o Opening up healthcare to competitive pricing below the cap
The current PMB framework is hospital centric and
consideration should be given to revise PMB entitlements in
the regulations with a shift to primary care
Thank You