Counting the Costs of Medical Aid Fraud

Counting the Costs of Medical Aid Fraud

By Terri Chowles, 28 June 2017,

Acting Principal Officer of Bonitas Medical Fund, Gerhard Van Emmenis, explains how fraud, waste and abuse are the biggest contributors to escalating healthcare costs as the fee-for-service model of payment encourages people to over-charge or over-service for profit. 

The private healthcare funding industry spent over R150 billion on private healthcare in 2016. Of this a staggering 10 -15% of these claims contained elements of fraudulent information – adding an estimated R22 billion to the annual cost of private healthcare in South Africa.

Last year Bonitas identified over R79 million in irregular claims involving medical practitioners. To date, the Fund has recovered millions of rand which could be used to pay for at least 57,000 more family practitioner consultations for members, or potentially be used to fund an additional 18 lung or liver transplants. It’s a travesty that greed ultimately denies others the opportunity for quality healthcare.

The culprits are not just medical practitioners. Guilty parties are found all along the healthcare delivery chain – from medical practitioners through to employees, service providers and members. There has also been an increase in collusion between members and healthcare providers.

The trends

Fraud may not necessarily be on the increase but the high level analysis means medical schemes are uncovering substantially more fraud than previously. These include:

Identity fraud: Current trends seem to be ‘bogus doctors’ who submit claims, using another doctors’ practice number.

Time-based health practitioners: 2016 data revealed a massive increase in costs for allied/auxiliary service providers.  These are your dieticians, physiotherapists, psychologists and most time-based non-surgical healthcare practitioners. Using Big Data analytics, we are now able to identify these culprits much sooner, some of whom claim as much as 50-60 working hours a day.

Waste and abuse is far higher than fraud and is more easily quantifiable in terms of values as it is usually a clear contravention of tariff codes or a rule that exists. Most of the common practices include: billing for services not rendered (over billing); using incorrect codes for services (at a higher tariff); waiving of deductibles and/or co-payments; billing for a non-covered service as a covered one; unnecessary or false prescribing of drugs; and corruption due to kick- backs and bribery.

When the economy is bad, people including medical practitioners and suppliers can get desperate. There are numerous ways in which the system can be manipulated. For example, if a doctor does not get enough patients to cover his expenses he may well resort to abuse or fraud. If a member has used all their out of hospital expenses, a doctor might admit the patient to hospital just to access more benefits.  If hospital occupancy is low, the hospital may well extend the stay.

Paying the price

As medical aid schemes became acutely aware last year during the increased tariff period, everyone suffers, including the general public. Schemes have to introduce double digit increases which are sometimes affordable. This forces members to buy down or leave the medical scheme and join the public healthcare sector. This not only creates an additional burden on the state where they are already under-resourced but medical schemes start to stagnate if they are losing members and the vicious cycle of premium increases continues.

The best deterrent

In our experience, the biggest single deterrent to fraud, waste and abuse is making it known that we are actively investigating every suspicious or unusual claim or activity. Education in terms of the relationships with medical aids, their members and the healthcare providers goes a very long way in curbing the abuse of medical aid benefits and, as such, our approach to fraud management speaks to this education component in all the matters we deal with.

We believe in ‘prevention is better than cure,’ and encourage the members to participate in the process.  For example by checking their accounts and questioning strange or unfamiliar claims.


Working together is the only way to combat this scourge in the industry. To this end SA Fraud Prevention Services (SAFPS) is encouraging all the role players to come aboard its new initiative. This is a listings database where details of reported and investigated cases are captured to enable all members of the initiative to mitigate their risk with the sharing of information and identifying serial abusers or fraudsters.

Bonitas actively participates in industry initiatives including the SAFPS, the Healthcare Forensic Management Unit (HFMU) and Association of Certified Fraud Examiners (ACFE) as well as a range of associations focused on preventing fraud.

Another important aspect of this initiative is the coordination of collaboration among healthcare insurers, where knowledge, skills, operating structures and many other important aspects can be shared.

Dealing with the perpetrators

The only body who can deal with this is the Health Professionals Council of SA (HPCSA) or the Pharmacy Council. There is no one monitoring the hospitals. The Medical Schemes Act states that it is a criminal offence but, due to volumes and complexity, it is difficult to prove intention beyond reasonable doubt. A more effective measure is to stop payment.

We believe the HPCSA are too lenient on offenders. According to Section 66 of the Medical Schemes Act, medical aid fraud, committed either by a member or a healthcare practitioner, is a criminal offence which carries a fine or imprisonment or both.

Fraud and abuse is committed by a small number of healthcare providers but is a major cost driver in terms of financial impact. Bonitas is leading the way in effectively detecting and preventing the fraud because substantial losses are suffered and it adds between R192 and R410 per month to every principal member’s medical aid contributions.

It will take a combined effort of the regulatory bodies, the professional associations and the medical schemes to raise the necessary awareness and stop fraud, waste and abuse going forward.

Prosecution and consequences

A member found guilty of committing fraud will have their membership terminated. All fraudulent claims submitted will be reversed and the member will be liable for them. A criminal case will also be opened. In addition, members who commit fraud may also have their employment jeopardised – especially in cases where their medical aid contributions are subsidised by their employer.

In instances where a healthcare provider is guilty of committing fraud, all fraudulent claims will be reversed. The provider will be reported to the relevant regulatory body and a criminal case will be opened.

If you suspect any medical aid fraud, contact our independent Whistleblower Hotline on 0800 112 811.

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