Beyond contributions: The new forces shaping medical scheme sustainability

As healthcare costs continue to rise, the sustainability of South Africa’s medical schemes is facing increased scrutiny.

Annul contribution increases often dominate conversations, but industry data suggests that a focus on pricing alone is not sufficient to address the increasing structural pressures facing the industry. Ageing membership, ongoing healthcare inflation and rising system-wide costs mean that long-term sustainability will not only depend on pricing, but on how schemes are able to manage demographics, maintain financial discipline and mobilise members to invest time in prevention.

Under strain
According to the latest CMS Medical Schemes Industry Report, covering the 2024 financial year, for every R100 received in medical aid contributions, on average, schemes had to spend R103.07, effectively having to use their reserves for the R3.07 deficit. Of this, R96.18 went directly to healthcare claims, and R6.89 was directly attributable to medical aid service expenditure (non-healthcare costs), including information technology, operational expenses, buildings, salaries, etc. This means that reserves are becoming a funding source, rather than a prudential buffer and, over time, this will inherently reduce the industry’s resilience and strategic flexibility.

This pressure is compounded by healthcare expenditure per beneficiary rising 9.03% between 2023 and 2024, while contributions increased by 8.65%. Although the gap seems small, it erodes financial stability over time.

Open medical schemes are faced with an ageing membership base, with the average beneficiary age reaching 36.77 years and the average pensioner ratio reaching 12.46% across the industry at the end of 2024.

More important than age alone is cost concentration. Beneficiaries over the age of 44 account for just over a third (34.01%) of total membership across the industry, yet they are responsible for nearly two thirds (63.61%) of total healthcare expenditure. Healthcare costs accelerate sharply with age, peaking in the 85+ age band.

This is not intended as a critique of older members but rather reflects a clinical and funding reality. An increased burden of chronic disease, multi co-morbidities and higher hospital utilisation are natural consequences of an ageing population. As a result, medical scheme sustainability is increasingly shaped by membership composition which has a direct impact on utilisation patterns.

Importantly, this shift is not confined to mature members only. Chronic conditions such as hypertension, diabetes, mental health disorders and musculoskeletal conditions are increasingly being diagnosed earlier in life, extending the cost curve across more years of membership. This strengthens the case for early, preventative intervention, particularly during midlife, where the return on proactive healthcare investment is highest both for the members’ health as well as the funding requirements for the scheme which ultimately impacts the rate at which contributions increase.

A system problem, not a scheme problem
Rising contributions are often framed as scheme level decisions and often discussed in isolation from broader system dynamics. Healthcare benefits paid continue to be dominated by hospital services, followed by specialists and then medicines. These cost drivers are largely outside the direct control of medical schemes and reflect broader clinical and economic realities within the healthcare system.

Positioning healthcare costs as a system-level challenge, creates space for more honest dialogue about healthcare inflation relative to CPI and reframes the debate around shared accountability across the eco-system including funders, providers, regulators and beneficiaries.

Prevention is no longer optional
Against this backdrop, prevention is no longer a wellness initiative. It is a financial imperative and the economic logic of early intervention becomes undeniable. Preventing, or delaying, the onset of chronic disease has direct implications for hospital admissions, specialist care and medicine expenditure later in life. In a system where older beneficiaries consume a disproportionate share of resources, the sustainability lever is not utilisation management alone, but risk reduction upstream.

Effective prevention involves benefit designs that actively encourage regular health screenings, vaccinations and early risk assessments including chronic disease management programmes that help members manage conditions such as diabetes before complications develop. It is also about member engagement that supports healthier lifestyle choices around nutrition, exercise, recreational habits and mental wellbeing with targeted interventions for younger and mid-life members, where identifying risks early and encouraging proactive healthcare behaviours can significantly reduce long-term hospital admissions, specialist treatment and medicine costs later in life.

Partnership between members, medical schemes and healthcare service providers is crucial for improved health outcomes. What really drives success is building trust through transparency, shared goals and accountability, rather than focusing only on managing claims and reserves.