Fraud, waste and abuse (FWA) in South Africa’s private healthcare sector is an unspoken drain on the system’s ability to deliver quality care. It does not make headlines in the way that political corruption does, but arguably is as damaging, since it undermines the affordability and sustainability of medical cover for millions of South Africans.
The Health Funders Association (HFA), representing a significant portion of the medical scheme market, has placed the issue at the heart of its advocacy.
“Our estimates are that fraud, waste and abuse costs the private healthcare sector between R22-billion and R28-billion a year,” says Thoneshan Naidoo, CEO of the HFA. “That is between 15% and 20% of annual healthcare 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 that global healthcare FWA sits between 10% and 25% of total spend. In South Africa’s context, the percentage translates into a massive annual diversion of funds away from genuine patient care.
“If we could reduce FWA by even a third, that money could fund thousands of additional procedures, treatments and preventive interventions,” says Naidoo. “It would go directly into improving health outcomes and extending benefits to members.”
The concept of FWA covers a wide spectrum of behaviour. At one end is outright fraud: deliberate acts such as billing for services not rendered, falsifying diagnoses, or collusion between providers and members. At the other end is waste: inefficiencies, over-servicing, and duplication of tests or procedures. In between sits abuse, where 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 around R10-billion annually, while waste accounts for about R12-billion, and abuse a further R4- to R6-billion. The problem is amplified by the sheer volume of claims – over 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,” says Naidoo. “We are facing escalating healthcare costs, economic strain on members, and regulatory requirements that are expanding. FWA undermines every effort to maintain affordability.”
Now, however, artificial intelligence is playing an increasingly important role in healthcare management. According to market research advisory firm Spherical Insights, the South African AI in healthcare market was valued at only $0.072-billion in 2023, but is projected to reach $3.199-billion by 2033, reaching a compound annual growth rate of 46.14% from 2023 to 2033.
Technology is part of both the problem and 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 artificial intelligence 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 cooperation between schemes, administrators, regulators, and law enforcement,” he says. “We need a coordinated national approach to FWA, with consistent definitions, shared data, and aligned penalties.”
This is easier said than done. The private healthcare 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 healthcare fraud are relatively rare, and sentences often do not reflect the seriousness of the crime,” says Naidoo. “We need to change the perception that FWA 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,” says 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 healthcare sector covers around 16% of South Africa’s population but accounts for nearly half of total healthcare spend. According to the Council for Medical Schemes, private expenditure in 2023 was R239-billion, with medical schemes paying R197-billion of that. A 15% loss to FWA represents almost R30-billion: 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 FWA, from integrated fraud units in the UK’s National Health Service to AI-driven claims analysis in the United States. South Africa’s context is different, with a smaller insured population and a complex dual healthcare system, but lessons can be adapted.
Naidoo believes the fight against FWA will also strengthen the case for broader health system reform.
“Addressing FWA is not only about protecting the private sector. It is about making healthcare more sustainable for the country as a whole,” he says. “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 of FWA, which can get lost in the focus on financial losses.
“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.
“We cannot afford to let billions of rand be siphoned away from where it is needed most. Tackling FWA is one of the most powerful ways we can improve access, quality, and sustainability in healthcare.”