The Discovery Group has identified the rising prevalence of chronic illnesses and an ageing population as key factors driving the high cost of private healthcare in South Africa. These factors, along with other market forces, contribute significantly to medical inflation, which continues to outpace consumer price inflation (CPI).
Key drivers of medical inflation
According to Discovery, increasing chronicity accounts for 15% of healthcare demand. The percentage of chronic beneficiaries within Discovery’s medical aid scheme has grown from 15.8% in 2008 to 33.1% in 2024. The ageing population, with older individuals requiring more medical care, has contributed 47% of the overall demand for healthcare services. With a membership base of 3.9 million in South Africa, Discovery is grappling with these inflationary pressures. In response, the company announced that it would raise its medical aid scheme rates by between 7.4% and 10.9% in the coming year, a rate increase higher than CPI.
Why does medical inflation outpace CPI?
Discovery CEO Adrian Gore explained that rising healthcare costs are primarily due to an ageing population, increased chronic illnesses, and the demand for advanced medical technologies. Gore acknowledged that the proposed price increases are “high” but stressed the need to understand the broader context of medical inflation. He said Discovery knows that and focuses hard on making healthcare affordable. Gore said healthy people often buy basic plans, creating an adverse selection effect. He said the demand-side utilisation adds 4% to 5% to the inflation rate, and it is not easy to manage.
Discovery’s initiatives to manage costs and improve health
Discovery is rolling out several initiatives to help manage costs and keep healthcare affordable. These include a new, cheaper plan for young professionals, priced at R1,300 per month. This plan is designed to provide a cost-effective healthcare option without compromising essential coverage. In addition, Discovery is ramping up programmes that encourage healthier lifestyles among its members. This approach will involve tailored incentives, rewards, and health targets for every member of the Discovery medical scheme, aiming to foster healthier behaviours and reduce long-term healthcare costs.
Outlook for the Discovery Health Medical Scheme
Discovery Health Medical Scheme holds a 57.9% market share in South Africa’s medical aid market, and these proactive measures are expected to enhance stability and growth potential. Gore believes that focusing on health promotion and personalisation of healthcare will ultimately help mitigate the rising costs associated with chronic diseases and an ageing population.