Report reflects industry turbulence and Scheme reform
Monday, 17 July 2017 - The Government Employees Medical Scheme (GEMS) recently released its annual report for 2016, a year which saw the Scheme grow to provide healthcare cover for some 1.8 million lives, including 694,262 principal members thereby covering the healthcare needs of 57% of eligible public service employees.
"While we saw pleasing membership growth, 2016 also presented a number of challenges. Our 2016 annual report reflects the influence of developments impacting the greater South African healthcare funding industry," says GEMS Principal Officer Dr Gunvant Goolab.
"During the year under review we continued to provide substantial value for our members, including cover for 457 026 hospital admissions, over 5 million general practitioner visits, over 1 million specialist visits and 44 million medicine prescriptions. We paid 92.2 million claim lines and further expanded our doctor network to cover the services of 1 055 specialists including physicians, paediatricians, psychiatrists, anaesthetists and gynaecologists."
In August 2016, there was some speculation about GEMS' financial sustainability. However, as at April 2016 GEMS' cash position stood at a healthy R4.5 billion. This has subsequently been further strengthened to reach R5.6 billion as at the end of April 2017, reflecting an increase of some 24%. The Scheme's reserve ratio as at 31 December 2016 was 6.99% compared to reserves of 9.46% in December 2015.
"We are working to an approved business plan with the Council for Medical Schemes [CMS] to reach an agreed reserve ratio of 8.2% for 2017 and are on track to achieve this target. Our members and the healthcare service providers who care for them can be assured that GEMS remains able to fully meet its obligations in order to provide the best possible care for our members," says Dr Goolab.
GEMS identified three key challenges in the early part of 2016 and moved swiftly to develop and implement strategies to mitigate these risks, as outlined below.
Sharp increase in claims - With a claims ratio of 96.6% for 2016, up from 95.7% the previous year, GEMS along with other medical schemes noted a sharp increase in claims, primarily arising from hospitalisation, during the first half of 2016. Through the introduction of advanced claims management and the deployment of on-site case managers, significant progress has been achieved in containing costs while ensuring members receive the level of care they require.
"Since October 2016 and into 2017 we have realised meaningful improvements which are already resulting in substantial savings in hospitalisation expenditure," says Dr Goolab.
"GEMS has previously alerted the CMS to concerns surrounding the migration of a large number of pre-1992 pensioners to the Scheme in 2012. As anticipated at the time, based on actuarial predictions, this continues to have a significant impact on the Scheme's financial position. Overall, these pensioners contributed a deficit of R320.7 million towards the financial results of the Scheme in the year under review and are expected to continue to incur higher claims per capita than our overall membership base," says Dr Goolab.
Anti-selective behaviour among certain beneficiaries - Beneficiaries practising anti-selective behaviour claimed R149 million, while contributing only R30 million in 2015 and this continued into the first half of 2016. Anti-selection is when beneficiaries join a scheme for a short period of time with the objective of claiming for costly medical care before resigning once their treatment has been paid for.
"With the introduction of limited underwriting and condition-specific waiting periods from October 2016, appreciable results are being achieved in protecting Scheme resources for the benefit of all our members. One-in-10 new members and beneficiaries joining the Scheme now undergo some form of underwriting," says Dr Goolab.
Fraud - "The Scheme's resources have been targeted by both members and providers seeking to enrich themselves through fraudulent means. Regrettably, fraud and abuse is a cancer that is eroding all sectors, including healthcare, and like other organisations, GEMS has not been spared from fraud, waste and abuse."
"During 2016, GEMS tackled instances of irregularities involving scheme members, providers and employees. Decisive action, including the investigation of these instances, was taken and will continue into 2017 as these processes take time to finalise. GEMS uncovered an alleged syndicate that made significant irregular claims for the services of clinical psychologists. We can now report that this has been handed over for investigation by the Commercial Crimes Unit of the police in March 2017," Dr Goolab adds.
"The Scheme also took action against four GEMS employees for involvement in misconduct and irregularities during the course of their employment. Investigations and legal processes are ongoing, and more information will be made available at the appropriate time."
In further developments, proactive measures implemented following the Scheme's experience in 2016 include the introduction of the Emerald Value Option for 2017, whereby members are rewarded for accessing healthcare through their nominated general practitioner, including referrals to specialists and network hospitals. This option is in line with best practice trends towards co-ordination of care, and also has demonstrable benefits in terms of the health and wellbeing of members and the sustainability of the Scheme.
"The 2016 annual report reflects short-term issues of concern and the initial cost of implementing long- term, sustainable solutions which will take GEMS into the future. At a level of 5.7%, the Scheme continues to maintain one of the lowest rates of non-healthcare expenditure in the industry. GEMS remains firmly dedicated to serving its members' healthcare needs and further advancing the national imperative of broadening access to healthcare," Dr Goolab concludes.
GEMS fast facts for 2016 financial year
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