DAVID DICKINSON: Medical schemes inquiry lacked sociological imagination

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 healthcare 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 schemes, Discovery and the Government Employees Medical Scheme (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. 

SA spends about 9% percent of its GDP on health, about half of this in the private healthcare system, which services well under a quarter of the population. CMS data shows that medical scheme membership increased from under 7-million in 2000 to 9-million in 2024. Much of this increase stems from the introduction of medical aid schemes to public sector employees.

In 2022, 16% of the population were members of a medical scheme. However, membership differed by race: 73% of white people had medical scheme membership; Indians 52%; coloured people 17% and black people 10%. Nevertheless, given SA’s racial demographics there are more black people on medical schemes than other races combined. 

Fraud is a problem for medical schemes. The actual scale of fraud in the industry is estimated at 5%-15%, which for a multibillion-rand industry produces significant sums, raising members’ contributions. There are various ways to defraud medical schemes. Many require co-operation between scheme members and healthcare providers. Medical scheme 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 SA townships, looks at medical scheme fraud from the perspective of workers, with medical aid as a condition of service but for whom medical scheme 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 documented involved public sector employees enrolling in a three-week residential rehabilitation programme covered by their medical scheme 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 socioeconomic position or class. Class is not considered in the section 59 report. Instead, the panel worked backwards from the constitution prohibiting 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 that “social ills” might be a “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 scheme as a condition of their employment — struggle to manage financially. From there it’s a short step to maximising what can be extracted from the medical scheme. But it takes two to tango — medical scheme member fraud often requires collaboration with providers.

It is black (African) healthcare providers who in the statistical analysis of the section 59 inquiry were found more likely to be found 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 the so-called 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 around economic interest. These interests are advanced in alliance with other classes. Health professionals and medical scheme members are linked by their respective positions within medical schemes. Fraud provides an opportunity for health professions to advance their interests in alliance with medical scheme members looking to best a resented salary deduction. Here race does facilitate relationships. The SA reality is that people are more at ease with people of their own race. It is far easier for a black medical scheme member to broach fraud, inevitably euphemised, with a black healthcare 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 professionals commit FWA while other races don’t. They show that the former has a statistically higher rate of FWA than the latter. With a little sociological imagination we can see that the more likely explanation is not skin colour but that financially stressed medical scheme 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. 

• Dickinson is emeritus professor of sociology at Wits University. His book, “SA’s constitution and the Law of the Township: Looting from Below” will be published by James Currey in November.