Fraud, waste and abuse in South Africa’s private health-care sector are a drain on the system’s ability to deliver quality care and undermine the sustainability of medical cover for millions of South Africans, says the Health Funders Association (HFA).
“Our estimates are that fraud, waste and abuse costs the private health-care sector between R22bn and R28bn a year,” said Thoneshan Naidoo, CEO of the HFA. “That is between 15% and 20% of annual health-care claims.”
The figures come from actuarial models based on claims analysis, cross-checked against global norms. HFA analysis shows that this range is consistent with World Health Organisation estimates of the global size of the problem.
In South Africa’s context, the percentage translates into a substantial diversion of funds away from genuine patient care.
“If we could reduce fraud, waste and abuse by even a third, that money could fund thousands of additional procedures, treatments and preventive interventions,” said Naidoo. “It would go directly into improving health outcomes and extending benefits to members.”
Medical schemes are under pressure from multiple sides. We are facing escalating health-care costs, economic strain on members, and regulatory requirements that are expanding
— Thoneshan Naidoo, Health Funders Association CEO
The term fraud, waste and abuse covers a wide spectrum: from deliberate acts such as billing for services not rendered to inefficiencies and duplication of tests or procedures. “Abuse” refers to the way providers may exploit loopholes or push ethical boundaries without necessarily breaking the law.
The numbers reported by the HFA are sobering: fraudulent claims alone are estimated at about R10bn annually, while waste accounts for about R12bn and abuse a further R4bn-R6bn. The problem is amplified by the sheer volume of claims — more than 500-million line items processed annually across the industry — making detection a complex and resource-intensive exercise.
“Medical schemes are under pressure from multiple sides,” said Naidoo. “We are facing escalating health-care costs, economic strain on members, and regulatory requirements that are expanding. Fraud, waste and abuse undermines every effort to maintain affordability.”
Now, however, AI is playing an increasingly important role in health-care management. According to market research advisory firm Spherical Insights, the South African “AI in health care” market was valued at about R1.3bn only in 2023, but is projected to reach R55bn by 2033.
Technology is part of both the problem and of the solution. While digital systems have made it easier to submit and process claims, they also provide opportunities for fraudulent activity to be automated and scaled. At the same time, advanced analytics and AI tools are emerging as powerful weapons in identifying irregular patterns and flagging suspect claims for investigation.
Naidoo sees collaboration as critical. “One of our strategic priorities is to foster greater co-operation between schemes, administrators, regulators and law enforcement,” he said. “We need a co-ordinated national approach to fraud, waste and abuse, with consistent definitions, shared data and aligned penalties.”
This is easier said than done. The private health-care sector is highly competitive, and data-sharing between schemes raises both commercial and legal challenges. However, the HFA has been working on frameworks that enable anonymised data pooling, allowing collective detection of trends without compromising competitive sensitivities.
Beyond detection, deterrence is vital. The HFA is advocating for stronger penalties and more visible enforcement.
“Prosecutions in health-care fraud are relatively rare, and sentences often do not reflect the seriousness of the crime,” said Naidoo. “We need to change the perception that [it] is a low-risk, high-reward activity.”
Education is another pillar of the strategy. Many cases of waste and abuse arise from ignorance rather than malice. For example, over-servicing may stem from outdated clinical habits, defensive medicine or patient demand.
“We are engaging with providers to promote evidence-based practice and to align incentives with patient outcomes,” said Naidoo.
Members themselves are also part of the equation. The HFA encourages schemes to provide tools for members to check their claims and understand their benefits.
“When members are informed and engaged, they are less likely to be complicit in fraudulent activity and more likely to question irregularities.”
The stakes are high. The private health-care sector covers about 16% of South Africa’s population but accounts for nearly half of total health-care spend. According to the Council for Medical Schemes, private expenditure in 2023 was R239bn, with medical schemes paying R197bn of that. A 15% loss to fraud, waste and abuse represents almost R30bn: enough to fund a substantial expansion of primary care or to reduce contributions for members across the board.
Globally, health systems have adopted various strategies to tackle the problem, from integrated fraud units in the UK’s National Health Service to AI-driven claims analysis in the US. South Africa’s context is different, with a smaller insured population and a complex dual health-care system, but lessons can be adapted.
Naidoo believes the fight against fraud, waste and abuse will strengthen the case for broader health system reform. “If we can demonstrate that we can manage resources efficiently and ethically, we can contribute to a more integrated and equitable health system. We have the tools, the data, and the expertise. What we need is alignment and commitment from all stakeholders.”
He emphasises the human impact: “Every rand lost to fraud, waste and abuse is a rand that cannot be spent on a child’s surgery, a cancer patient’s chemotherapy, or a diabetic’s insulin. That is the real cost we have to keep in mind.”
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