It is that time of the year again when medical schemes are announcing their 2025 benefits and new contribution rates. So why are these medical schemes cost keep on rising way above the average inflation rate of South Africa? We have seen to date that contributions increased between 7.4% and even as high as 12.75% on more expensive plans on the schemes that have already announced their new contributions.
Healthcare costs are rising globally, and South Africa is no exception. Medical scheme members are often confronted with annual increases in contributions that outpace inflation, leaving many wondering why this happens. Several factors contribute to these hikes and understanding them can help you as a member to manage your healthcare budgets more effectively.
1. Medical Inflation vs. General Inflation
One key reason for the steep increases is the difference between medical inflation and general inflation. While general inflation reflects the rising costs of goods and services in the economy, medical inflation is often higher due to the increasing costs of medical technology, pharmaceuticals, and healthcare services.
New treatments and advanced diagnostic techniques, while improving health outcomes, come at a cost. As medical schemes need to cover these advancements, they pass the expenses on to their members.
2. Ageing Population
As South Africa’s population ages, medical schemes are seeing a larger portion of their membership base requiring more medical care. Older members tend to claim more frequently and for more expensive procedures and treatments, such as surgeries, chronic disease management, and long-term medications.
To balance out the rising claims from older members, medical schemes must increase contributions across the board to maintain financial sustainability.
3. Increased Disease Burden
The increasing prevalence of chronic diseases, such as diabetes, cancers, heart disease, and hypertension, places additional strain on medical schemes. Treating and managing these conditions over the long term is costly, leading to higher claims by members. With a higher disease burden, schemes need to adjust contributions to ensure they can cover these ongoing medical expenses for longer periods.
4. Medical Fraud and Over-Servicing
Another significant factor driving up costs is fraudulent claims and over-servicing.
Some healthcare providers or members may abuse the system by submitting false claims, while others may prescribe unnecessary treatments or procedures to increase billings. This misuse inflates the overall costs borne by the scheme, which is then recouped by raising member contributions.
5. Escalating Hospital and Specialist Fees
Private hospitals and specialists are key contributors to the increasing costs of medical schemes. Hospitalisation and specialist consultations are expensive, and the fees for these services continue to rise each year. As more members access private healthcare, schemes have to increase contributions to cover the rising fees.
6. Administration and Reserve Requirements
Medical schemes are also required by law to hold reserves equivalent to a certain percentage of their contributions. This ensures that schemes can cover unexpectedly high claims and remain financially stable. Maintaining these reserves, along with the cost of administering the schemes, adds to the financial burden and is another factor behind the contribution hikes.
7. Advances in Medical Technology
Innovations in medical technology, such as new diagnostic tools, surgical techniques, and advanced drugs, improve patient care but come at a higher cost. Medical schemes have to adjust their contributions to cover these cutting-edge treatments, ensuring that members have access to the best possible care.
What Can Members Do?
While contribution hikes may feel burdensome, there are ways for members to mitigate the impact:
- Review your plan annually to ensure it matches your healthcare needs. Also consider a free comparison with what other schemes might offer in comparison with your current scheme.
- Use the preventive care available on most schemes to reduce the need for expensive treatments later.
- Stay informed about changes in your scheme’s benefits and what options are available to manage out-of-pocket expenses.
Take control of your health and finances by ensuring your medical scheme is aligned with your needs. With 2025 medical scheme contribution increases ranging from 7.4% to 12.75%, it's essential to:
· review your options,
· update your plan if necessary, and
· make the most of your benefits.
Don't wait until the changes impact your budget; reach out to me today as your trusted advisor with 40 years of experience to explore your options and ensure you're getting the best coverage at the most affordable rate. I will provide you with a no-obligation comparison upon request.
