Medical aid rip-off exposed

Trustees of medical schemes, registered as not-for-profit, earn "salaries" amounting to millions of rands - paid for by their members.

Ten of South Africa's 100 medical schemes together spent more than R28-million on their trustees last year.

The head of compliance and investigations at the government regulator, the Council for Medical Schemes, Stephen Mmatli, said he had noticed a "concerning" trend over the past few years as payments to trustees increased.

"The whole argument is that the bulk of your costs must go to healthcare, not lining your pockets," said Mmatli.

Medical aid schemes were not-for-profit entities, he said.

Trustee remuneration, which "is supposed to be a stipend", is increasing the non-health costs of medical aids, said Mmatli.

The council's annual report, released yesterday, reveals that the Liberty Medical Scheme spent more than any other scheme - R4.5-million - on its trustees in 2010.

An average remuneration of R412000 was paid to each of the 11 Liberty trustees.

Mmatli said being a medical aid trustee was "now seen as a career" even though trustees usually met for only a few hours, four times a year.

Increasing trustee remuneration has "contributed to governance failures" because "as a result of it being seen as a lucrative position, people will do whatever it takes to be a trustee", he said.

Deputy CEO of Liberty Health Holdings Andrew Schwulst said: "The trustees, who are independent, are not paid by Liberty.

"Liberty provides administration and managed-care services to the scheme as contracted by these independent trustees. Liberty has no influence over the trustees or the management decisions taken by the trustees in the running of the scheme, including the appointment or remuneration of the trustees," he said.

Principal officer of the Liberty Medical Scheme Andrew Edwards said that the trustees had not yet reviewed the council's report, but would respond after studying it today.

Last year, Spectramed - ranked ninth of 100 schemes on trustee spend - paid its five trustees a total of R1.7-million, more than double the R672750 spent on trustees in 2009. Trustee payments for "holding office" almost doubled from R69000 a trustee in 2009 to R120000 in 2010.

Spectramed chairman Christopher Sykes was paid R120000 for holding office, R324000 for attending meetings and R343100 for "specific projects".

A further R10660 was paid for Sykes's travel and conference expenses.

A note on Spectramed's audited financial statements for 2010 said that: "Members present at the AGM concluded that the trustees are under-remunerated."

Spectramed spokesman Chrizelda de Vos said she could not comment until the scheme had reviewed the report.

"Although we would very much like to respond, we simply cannot do so without the primary information at hand," De Vos said.

Last year, the Council for Medical Schemes instituted proceedings against three medical schemes whose trustees it believes are not fit and proper for their position.

According to the report, the council wants the entire board of two medical schemes - one of which paid an average of R259000 to each of its 10 trustees last year, and another which represents 161753 beneficiaries - to be replaced.

The Sunday Times reported last week that an employee at a medical aid administration company had pleaded guilty to fraud in exchange for a 12-year suspended sentence - in a case that could lift the lid on rampant corruption in the R92-billion industry.

The report said David Tselapedi, who was also placed under correctional supervision for three years, is now expected to blow the whistle on a racket in which some trustees, meant to look after the interests of medical aid members, are allegedly taking bribes to allow people to loot medical aid funds.

More arrests were expected in the case this week, the Sunday Times said.