The long-awaited final report from the Section 59 inquiry has left more questions than answers regarding medical aid fraud in South Africa. The investigation, initiated by the Council for Medical Schemes (CMS) after complaints of racial bias from healthcare providers, found that while fraud detection methods were fair, black practitioners were disproportionately found guilty of fraud, waste, and abuse (FWA).
This paradoxical conclusion - a fair process leading to an unfair outcome - has sparked a debate. It raises questions about whether the inquiry correctly identified the root cause. It also asks if it overlooked the profound impact of class and socioeconomic pressures.
A Contradictory Verdict on Racial Bias
The inquiry, named after Section 59 of the Medical Schemes Act, scrutinised the FWA detection systems of major players. These included Discovery, the Government Employees Medical Scheme (GEMS), and administrator Medscheme.
The study concluded that the software developers did not create their algorithms and processes to be racially biased. However, the panel could not ignore the statistical reality: black healthcare providers were more likely to be penalised for FWA.
The report labelled this disparity as unfair racial discrimination, creating a contentious finding that the schemes themselves deny.
The High Stakes of Private Healthcare
South Africa dedicates approximately 9% of its GDP to health, with half of that funding a private sector. This sector serves less than a quarter of the population. As of 2024, medical scheme membership has grown to 9 million people.
However, access is starkly divided along racial lines. In 2022, 73% of white South Africans had medical aid, compared to 52% of Indians, 17% of coloured people, and just 10% of black people.
Despite lower per-capita membership, the country's demographics mean more black citizens are on medical schemes than all other groups combined. With fraud estimated to cost the industry between 5% and 15%, the financial impact on members' contributions is significant.
Overlooking the Class Factor
Critics argue the report’s conclusion is flawed because it fails to apply a "sociological imagination". The inquiry dismissed the suggestion from GEMS that "social ills" could be a cofounding factor. However, this dismissal may have been a critical error.
The argument posits that economic circumstances, rather than race, drive the propensity to commit fraud. In South Africa, race and class are deeply intertwined. Many lower-income workers, predominantly black, have medical aid as a mandatory but unaffordable condition of employment.
This creates an incentive to "maximise" benefits, sometimes through fraudulent means like cashback schemes, to offset the financial burden.
Pressure, Alliance, and Opportunity
This financial pressure is not limited to members. Many black healthcare professionals are first-generation graduates facing immense pressure to achieve material success. They often support extended families (the "black tax") and lack the inherited financial safety nets of their white counterparts. They also lack social capital.
This creates a stronger incentive to supplement their income. Fraud presents an opportunity where the economic interests of a financially stressed member and a pressured provider align.
Sociological analysis suggests that these illicit collaborations are facilitated by racial factors. Individuals are often more comfortable broaching sensitive topics with people from a similar background.
The statistics, therefore, may not indicate a racial propensity for fraud, but rather a higher concentration of socioeconomic pressures within a particular racial group. By dismissing class, the Section 59 report may have mistaken a symptom for the cause.
- Dickinson is an emeritus professor of sociology at Wits University.