Medical schemes are the primary financing mechanisms for private healthcare in South Africa.
They are not-for-profit entities owned by their members and are regulated on the basis of social
solidarity principles. The key features of the environment are open enrolment, community
rating and prescribed minimum benefits. However, social solidarity reforms were not fully
implemented and the system lacks any form of income cross-subsidy, risk equalisation or
mandatory membership. We argue that the system is intrinsically flawed in the absence of either
fully implemented social solidarity mechanisms for risk- and income-cross-subsidies on the one
hand, or managed open-market competition on the other. This uncomfortable middle ground
means there is currently no incentive for innovation or growth, an administration industry
which is prone to incumbency and cover that is increasingly unaffordable and unsustainable