Inquiries are supposed to be the final word. However, the Section 59 Medical Aid Fraud Inquiry’s long-awaited final report has settled little. The investigation followed complaints to the Council for Medical Schemes (CMS) by health care providers that they were being treated unfairly because of their race. The name of the report refers to Section 59 of the Medical Schemes Act which regulates how medical aid schemes challenge claims from providers they suspect of fraud, waste or abuse, ‘FWA’ in industry jargon.
The inquiry found that the methods used by two medical aid schemes, Discovery and GEMS, and medical aid administrator Medscheme, to detect FWA were not racially biased. Yet, statistical evidence showed that black practitioners were more likely to be found guilty of FWA than those of other races. The inquiry found this constituted unfair racial discrimination. If this sounds counterintuitive – fair procedures leading to unfair outcomes – it’s because it is.
Some context. South Africa spends around nine percent of GDP on health, around half of this in the private healthcare system which services well under a quarter of the population. CMS data shows that medical aid membership increased from under seven million in 2000 to nine million in 2024 Much of this increase stems from the introduction of medical aid schemes to public sector employees. In 2022, 16 percent of the population were members of a medical aid scheme. However, membership differs by race: 73 percent of whites had medical aid membership; Indians 52 percent; coloureds 17 percent; and Africans 10 percent. Nevertheless, given racial demographics, there are more Africans with medical aid than other races combined.
Fraud is a problem for medical aid schemes. The actual scale of fraud in the industry is estimated at between five and 15 percent, which for a multi-billion-rand industry produces significant sums, raising members’ contributions. There are various ways to defraud medical aid schemes. Many require cooperation between scheme members and healthcare providers. Medical aid fraud is primarily detected though statistical analysis of claims and by members acting as whistle blowers.
My own research, part of a wider study of law in South African townships, looks at medical aid fraud from the perspective of workers, with medical aid as a condition of service but for whom medical aid deductions are unaffordable. For many, struggling to make ends meet at the end of the month is a higher priority than medical aid. One fraud I document involved public sector employees enrolling in a three-week residential rehab program covered by their medical aid in return for ‘cashback’ payments. These they saw as equalising what was otherwise a financial burden.
A sociological understanding of fraud must recognise individual agency. However, the incentive to commit fraud is influenced by personal circumstance which, in turn, is determined by socio-economic position or class.
Class is not considered in the Section 59 report. Instead, the panel worked backwards from the Constitution’s prohibiting of racial discrimination to conclude that if FWA correlates with race then it must be discriminatory. The schemes deny this, but it was only GEMS that hinted, indirectly, that class may be a factor. It suggested ‘social ills’ as a possible ‘cofounding factor’ to the correlation between FWA and race. This the Section 59 report brushes off in a couple of sentences.
The sociologist C. Wright Mills enjoined us to use what he called the sociological imagination. To extrapolate from personal troubles (struggling to manage financially) to understand public issues (fraud). If we take as a starting point that the colour of your skin has no relationship to your propensity to commit fraud, but that your economic situation might, the report’s dismissal of social ills was ill advised.
Many township residents, largely Africans, in relatively low-paying but permanent employment, who have become members of a medical aid as a condition of their employment, struggle to manage financially. From there it’s a short step to maximising what can be got out of medical aid.
But it takes two to tango, and medical aid member fraud often requires collaboration with providers. It is black (i.e. African) healthcare providers who in the statistical analysis of the Section 59 inquiry were found more likely to be guilty of fraud. Often as first-generation graduates, they are ambitious and under pressure to demonstrate material success within our hyper-materialist society. At the same time, they are subject to black tax (demands from impoverished family members). They are also without the advantages of health professionals of different races, especially whites, with stronger family finances, social capital and connections. Taken as a group, the incentive to earn extra, to euphemise fraud, is stronger among black health professionals. The cashback sums in the rehab scam were paid directly to members’ bank accounts by healthcare professionals working at the rehab centre.
For the sociologist Max Weber, classes are formed arounds economic interest. These interests are advance in alliance with other classes. Health professionals and medical aid members are linked by their respective positions within medical aid schemes. Fraud provides an opportunity for health professions to advance their interests in alliance with medical aid members looking to best a resented salary deduction. Here race does facilitate relationships. The South African reality is that people are more at ease with people of their own race. It is far easier for an African medical aid member to broach fraud, inevitably euphemised, with an African health care professional, or vice versa, than with one of a different race.
The statistics with which the Section 59 Committee wrestled don’t show that black medical professional commit FWA while other races don’t. But that the former has a statistically higher rate of FWA than the latter. Race picks this up the statistic. However, with a little sociological imagination we can see that the more likely explanation is not skin colour, but that financially stressed medical aid members and a new generation of health professions, have greater incentive, and are under greater pressure, to take fraudulent routes.
Race remains the primary, most visible, and most emotive social division in our society, but for the Section 59 investigation to brush off the significance of class was a mistake.
