Medical Schemes Affordability Crisis: Insights from the CMS Annual Report 2024/25
The CMS Annual Report 2024/25 highlights significant medical schemes affordability challenges in South Africa, where relevant healthcare expenditure per beneficiary surged by 8.70% year-on-year, far outpacing both contribution growth and general inflation. Solvency ratios have declined for three consecutive years to 43.45%, while out-of-pocket payments reached R43.3 billion in 2023. The sector is now implementing strategic interventions, including Efficiency Discount Options and expanded Disease Management Programmes, along with a transition toward Value-Based Healthcare to restore financial equilibrium. The report emphasizes that systemic reform is needed, as without addressing fee-for-service models and demographic ageing, ongoing reserve depletion could jeopardize the industry’s long-term viability.
Unpacking Key Trends and Data
The CMS Annual Report 2024/25 identifies several critical trends, including a persistent gap between medical inflation (8.70%) and general inflation (6.00%), which has eroded reserves built during the pandemic. Schemes implemented sub-inflationary increases to support members, and medical schemes now cover 9.13 million beneficiaries, representing 14.95% of South Africa’s population. The relevant healthcare expenditure ratio reached 95.88% in 2023, indicating that schemes pay out nearly all collected contributions in benefits. Demographic ageing pressures are clear, as the average beneficiary age increased by 0.27 years, directly correlating with higher claims intensity for chronic conditions. The fee-for-service model still incentivizes volume over value, even as managed care arrangements now cover 99.19% of beneficiaries. Efficiency Discount Options have grown substantially, increasing from 50 to 71 options between 2017 and 2023, with beneficiary enrollment rising from 20% to 37%, reflecting growing member acceptance of trade-offs between cost and provider choice.
South Africa’s Healthcare Landscape: Broader Economic and Global Perspectives
South Africa spends about 8.6% of GDP on healthcare, which is slightly above the global average of 7-8%, although there are stark disparities between public and private systems. Supporting the CMS Annual Report 2024/25’s findings, Statistics SA indicates that health insurance premiums rose by 12.9% in 2024, while the Aon Global Medical Trend Rates Report 2024 states that South Africa’s medical trend rates reached 9.5% (gross) against general inflation of 4.8%. Medical inflation consistently outpaces general inflation by 3-4 percentage points, casting unsustainable pressure on household budgets and leading many members to opt out of schemes entirely due to affordability challenges.
Strategic Implications for Policy, Research, and the NHI Transition
For health economics research, the CMS Annual Report 2024/25 highlights an urgent need for sophisticated risk-adjustment models that must reflect South Africa’s unique demographic and disease burden profiles, which is crucial as the industry transitions toward Value-Based Healthcare. The growing reliance on Efficiency Discount Options presents research opportunities, as we can study how constrained provider networks impact cost containment and health outcomes. The rise in out-of-pocket payments to R43.3 billion suggests significant gaps in financial protection, which could worsen health disparities. Economic pressures are driving members toward lower-benefit options or complete scheme abandonment, and these trends carry profound implications for the National Health Insurance transition. Without addressing fundamental reimbursement inefficiencies, both private and future public financing may struggle, as the industry’s current trajectory signals that traditional actuarial approaches may need rethinking to prevent systemic instability in South Africa’s healthcare financing. For more insights on these challenges, consider checking the Annual Report.
