The High Court erred when it dismissed Discovery Health’s application to compel the Road Accident Fund (RAF) to pay for the medical expenses incurred by medical scheme members, says Mfana Maswanganyi, the executive manager in charge of regulation at the Council for Medical Schemes (CMS).
Maswanganyi expressed his opinion on the judgment in an article published by the CMS. The article made it clear that Maswanganyi wrote in his personal capacity and did not express the official viewpoint of the Council.
In December, the full bench of the High Court in Pretoria dismissed, with costs, an application by the medical scheme administrator to declare the RAF in breach of an order relating to the Fund’s liability for medical expenses incurred by medical scheme members. Discovery has said it will appeal against the decision.
Discovery Health brought the application for a declarator that the RAF was in breach of an order handed down in October 2022. In that order, Judge Mandla Mbongwe declared unlawful a directive issued in August 2022 in which the RAF instructed its employees not to make any payments to claimants if their medical scheme has already paid for their medical expenses arising from a road accident.
Discovery Health also sought a pronouncement that the RAF’s reliance on two directives it issued subsequent to the Judge Mbongwe’s order perpetuated its breach of that order.
The majority decision, by Judge Dunstan Mlambo, the Judge President of the Gauteng Division of the High Court, and Judge Noluntu Bam, found no evidence that the RAF’s directives constituted a breach of Judge Mbongwe’s order.
In a dissenting judgment, Judge Ingrid Opperman said the RAF violated its constitutional obligations by failing to comply with Judge Mbongwe’s order.
Read: Discovery to appeal ‘far-reaching’ judgment in favour of RAF
Maswanganyi said the Mlambo judgment “had to do some serious intellectual legal gymnastics” to conclude that the RAF did not breach the Mbongwe judgment on the ground that the Fund’s second and third directives were different to its first directive.
He said the Mlambo judgment committed six errors.
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Unjustified distinction between the first and second directives
The first error is the distinction it makes between the first directive and the second directive based solely on language. The second directive specifically mentions claims that are Prescribed Minimum Benefits (PMBs) and Emergency Medical Conditions (EMCs), whereas the first does not. However, Maswanganyi argues that both directives impose an obligation on medical schemes to pay a member’s claim in full.
In terms of section 26(b) of the Medical Schemes Act (MSA), a medical scheme assumes liability for and guarantees the benefits offered to its members and their dependants in terms of the scheme’s rules. Therefore, the legal obligation to pay benefits was inherent in the first directive.
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Mischaracterisation of the obligation to pay PMBs as statutory
The second error is to characterise the obligation on medical schemes to pay the PMBs in full as a statutory obligation.
Maswanganyi says it is trite that the relationship between a medical scheme and a member is a contractual one. Section 29 of the MSA sets out the minimum terms of the contract. Specifically, section 29(1)(0) requires that “a medical scheme cannot be registered and should not do business unless its rules provide for, amongst other terms, the scope and level of minimum benefits as may be prescribed”.
Even if the obligation to pay PMBs and EMCs was not contractual, this has no bearing on the matter because the RAF has a statutory obligation to pay claims, per section 17(1) of the RAF Act.
The central issue, Maswanganyi says, is to identify who has the primary responsibility for paying claims. He asserts that “the RAF would have the primary responsibility to pay” because the law does not exclude members of medical schemes from paying the fuel levy and claiming benefits from the RAF. In contrast, membership in medical schemes is voluntary and represents a private contractual arrangement.
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Failure to adhere to the established doctrine of subrogation
The third error is despite the fact that the High Court was not sitting as an appeal court, it contradicted the legal position pertaining to the doctrine of subrogation as explained in the Mbongwe judgement.
The Mlambo judgment holds that a decision as to whether or not a medical scheme can claim from the RAF requires a value judgment. This is despite the fact that the SCA confirmed the legal position in the Mbongwe judgment by refusing to entertain the RAF’s appeal application and so did the Constitutional Court.
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Incorrect conclusion that subrogation does not apply to medical schemes
The fourth error committed by the Mlambo judgment is that despite concluding that subrogation requires a value judgment, which means each case must be judged on its own merits, it concluded – without providing reasons – that the doctrine of subrogation does not apply to medical schemes.
Maswanganyi says the Mlambo judgment seems to have reached this conclusion on the basis that medical schemes are not insurance companies, nor is the RAF. But there is no legal authority that suggests that subrogation is an insurance doctrine. All authorities consulted in this regard only indicate that subrogation is predominantly used in the insurance industry, which shows it can also be used in other industries.
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Unsubstantiated assumption about schemes’ financial viability
The Mlambo judgment cites the rules of the Government Employees Medical Scheme (GEMS) to argue that subrogation does not apply to medical schemes. Specifically, it notes that GEMS does not have a rule that allows it to recoup medical expenses for motor vehicle accidents suffered by its members.
Maswanganyi challenges this approach by pointing out that GEMS is only one of the 71 registered medical schemes in South Africa. He says the MSA dictates the minimum terms that all medical schemes must have, but schemes may adopt additional rules as long as they do not conflict with the Act or other laws. Thus, singling out GEMS’ rules is arbitrary.
The Mlambo judgment concluded that medical schemes are financially viable even without recouping from the RAF. To support this, it cited provisions from the MSA, which include requirements for a minimum solvency level.
Maswanganyi says “this seems to be a strange way to prove what the reality on the ground is”. For example, the Act mandates a solvency ratio of 25%. However, of 71 medical schemes, three currently do not meet this requirement. He also notes that section 33 of the Act requires all benefit options to be self-supporting and financially sound, yet a large number of benefit options do not meet this requirement.
Maswanganyi says he is not aware of a financial analysis that examines the viability of medical schemes without the funds they would normally recover from the RAF in a given year, casting doubt on the judgment’s assumption.
He criticises the judgement’s “deafening silence” on the potential repercussions for medical schemes and their members if they are prevented from claiming past medical expenses from the RAF.
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Misinterpretation of the Mbongwe judgment’s ruling on RAF directives
The Mlambo judgment concluded that because the Mbongwe judgment found that the RAF’s first directive was illegal for failing to comply with the Promotion of Administrative Act (for not consulting before publication), it implies that the directive could be legal if handled properly.
Maswanganyi says this reasoning is “baffling”, asserting that the Mbongwe judgment offers no support for such a conclusion. The Mbongwe judgment does not merely critique the lack of consultation under PAJA but also highlights the irrationality and unlawfulness of the directive because of its conflict with section 17 of the RAF Act.
Leave it to the policymakers
Maswanganyi concludes his analysis by responding to the policy question raised by the Mlambo judgment: whether, in light of the many social challenges facing South Africa, the government would be justified – “based on policy considerations, fairness and reasonableness” – to protect the interest of medical schemes.
He says this policy issue should be resolved by policymakers (not the judiciary) who are appreciate the likely impact of any decision in this regard and take steps to mitigate its impact.
He asks whether the court appreciates the likely impact on the public health service if prohibiting medical schemes from recovering from the RAF results in price hikes for medical scheme members, rendering medical schemes unfordable to many people, or if it renders some schemes financially unsustainable.
