Unleash billions from medical emergency reserves, urges KHUSA Consulting

0
1049

Financial services expert, KHUSA Consulting, has called for the release of billions of rands from medical schemes’ emergency reserves to help treat COVID-19 patients in South Africa. 

Adrian Parsons, Executive Director at KHUSA Consulting, says that by law, medical schemes have emergency fund reserves amounting to at least 25% of members’ contributions. Collectively, they now have over R60 billion in their reserve funds, which could be released for the treatment of all South African COVID-19 patients – whether they are medical scheme members or not. 

Says Parsons: “Legislation in South Africa demands that medical schemes retain significant reserves. This solvency requirement is calculated as a scheme’s total reserves, divided by its annual gross contributions. Chapter 7 of The Medical Schemes Act 131 of 1998 requires this solvency to be at a level of at least 25%. The rand value of this “emergency fund” is in excess of R60 billion. It is KHUSA Consulting’s strong view that a large portion of this money should now be allocated to the provision of hospital resources for the hundreds of thousands of our people that will need life support in the very near future. Unfortunately, it’s not enough. Not nearly enough. But it’s a good start.” 

Parsons says that “legislatively”, this money belongs to medical scheme members, but these are extraordinary times, and it might be argued that it is in members’ best interests to contribute to a safe, healthy environment and the rebuilding of the South African economy. 

Noting that medical schemes typically cover middle to high-income earners, while the poor have no cover at all and are likely to be hardest hit by the pandemic, Parsons says: “We haven’t yet seen a model forecasting how many ICU and hospital beds may be required to combat the pandemic within South Africa. Using international models, however, one might expect an absolute minimum of 550 000 hospital beds and 130 000 ICU beds – all with the necessary personnel and equipment. It will come as no surprise to anyone that we currently have nowhere near the required resources.”

“To add insult to injury, last Friday, Moody’s highlighted the dire debt position that South Africa finds itself in. All three of the recognised international credit rating agencies now agree that the South African economy can’t be trusted to repay foreign debt – before we even start to dig into our pockets for the looming Covid-19 catastrophe,” says Parsons. “We need money to buy life support for the hundreds of thousands of lives that are at risk in our beautiful Rainbow Nation – and we need it fast.” 

Parsons says desperately disappointing to see so many First World leaders falling on the wrong side of the “Economy versus Public Health” conundrum over the past two months. “Fortunately, a counterbalance has also been evident and there are several instances of inspiration that already stand out. The leadership provided by the Governor of New York, Andrew Cuomo, as well as that shown by our own State President, Cyril Ramaphosa, spring to mind,” says Parsons. 

“There can be no doubt that the world economy must play second fiddle to the sanctity of life – and so it will be. Further to this, the economy must and will morph in the short-term. To the extent that Public Health requires support from the financial world, the economy must bend to meet those requirements. The sick, dying and dead are not yet a terrifying, tangible consideration for the average South African, but they will be very soon.” 

Parsons says multinational catastrophic events invariably have the effect of bringing people together. “They also have the habit of throwing light on real leadership while allowing unsteady orchestration to be flushed out and washed away. Covid-19 will prove to be no different,” says Parsons. 

“We have watched on as the Senate approved an enormous two trillion-dollar stimulus package into the American Economy and the British Government opened a GBP330 billion loan-guarantee into the United Kingdom. These cash injections are critically important to the battle against a fearsome and invisible foe. Unfortunately, it’s not enough. Not nearly enough. But it’s a good start.” 

In cash-strapped South Africa, Parsons believes medical schemes should collaborate to release and collectively manage the use of their emergency reserves for the treatment of all COVID-19 patients. 

Says Parsons: “Complications may arise in accessing these funds. They essentially belong to the 10 million members of medical schemes in the country – and not to the public at large. The schemes are governed by Boards of Trustees who are required, by law, to act in the best interests of their members and as such, are not at liberty to readily release these funds to the Covid-19 catastrophe. Also, in the instance that the schemes release these funds, they will fall foul of the solvency demands as detailed in The Act (which has been under review for some time anyway) – and these are just two of the many legal and social headwinds that will complicate the distribution of these monies.” 

“But we are convinced that togetherness and leadership must prevail now. We need to find a way to transfer this R60 billion to both our public and our private health facilities and we need to do it now. Together, we can save South African lives,” concludes Parsons.

For more details visit www.khusa.co.za