South Africa’s medical schemes regulator has told parliament it will implement the recommendations of a long-awaited investigation into alleged racial discrimination against black healthcare providers, and will introduce a legally binding universal code of conduct to govern how medical schemes and administrators conduct fraud, waste and abuse audits.
The final report of the section 59 investigation, published in July 2025, concluded that black healthcare providers were more likely to be singled out for fraud investigations but found no evidence that they were targeted on the basis of their race. Medical schemes and administrators told the inquiry that healthcare providers are identified by their practice numbers, which contain no racial information.
The inquiry was launched by the Council for Medical Schemes (CMS) in response to complaints from black practitioners who alleged they were being unfairly targeted by audit and fraud detection systems operated by major schemes and their administrators.
The statistical evidence compiled during the seven-year investigation was stark. The panel’s expert found that across the three major schemes examined — Discovery, GEMS and Medscheme — black providers were between 1.5 and 3.5 times more likely to be identified as guilty of fraud, waste and abuse than their non-black counterparts. In certain disciplines, including physiotherapy, psychology and social work, the risk ratios reached as high as 12 times more likely to be found guilty.
The three-member panel was chaired by advocate Tembeka Ngcukaitobi SC and included advocates Adila Hassim and Kerry Williams.
The CMS’s Circular 10 of 2026, issued on 17 March, sets out immediate regulatory expectations pending the finalisation of the universal code of conduct. It directs that no part of any fraud, waste and abuse audit, recovery or payment process may directly or indirectly differentiate on the basis of race, and instructs schemes and administrators to review existing processes to ensure the disparities identified by the section 59 panel are not repeated. It also requires that schemes consider the potential hardship to providers in their recovery decisions and notify providers as soon as anomalies are detected. CMS senior manager for legal services John Letsoalo told parliament’s health portfolio committee on Wednesday that there is no standardisation across the industry, with materially different practices operating between different schemes and administrators.
Medical schemes and administrators have contested several of the investigation’s statistical findings, raising technical objections — including the methodology used by the panel’s statistician, Dr Zaid Kimmie, who used surnames as a proxy for race. The Board of Healthcare Funders, which represents schemes and administrators, has maintained that the findings are fundamentally flawed and that accepting them would expose the sector to runaway fraud. The panel acknowledged it was not operating as a court of law and did not apply the Promotion of Equality and Prevention of Unfair Discrimination Act formally, but held that it had sufficient power to make findings and recommendations. Ngcukaitobi called for the CMS to be given full transparency over the algorithms and artificial intelligence systems that schemes use, arguing that these tools should be accountable to a public body. The report identified additional procedural failures, including the failure to notify providers of alleged irregularities within a reasonable time, audits stretching back more than three years, the use of non-transparent risk-rating tools, and the absence of independent mediation or effective appeal mechanisms.
Wednesday’s parliamentary engagement also drew attention to a separate, longer-standing set of reforms. Members of the health portfolio committee pressed the CMS on why the recommendations of the Health Market Inquiry — whose final report was published in 2019 — had still not been substantially implemented. The government’s first regulatory response to that inquiry came in February 2025, when Trade, Industry and Competition Minister Parks Tau published draft regulations under the Competition Act proposing an interim block exemption for medical schemes and healthcare providers to negotiate tariffs. Those draft regulations have since attracted significant criticism for addressing only a single, isolated aspect of the inquiry’s interlocking recommendations, and are currently under review.
According to the Council for Medical Schemes, fraudulent claims, over-servicing, abuse of benefits and improper billing are estimated to cost South Africa’s medical schemes approximately R30 billion annually, losses that fall directly on the 9.7 million scheme members — the majority of whom come from historically disadvantaged communities. The health department’s deputy director-general for regulation and compliance, Anban Pillay, acknowledged on Wednesday that some of the Health Market Inquiry’s recommendations intersect with National Health Insurance plans, and that it would need to be determined whether the reforms could be pursued through NHI structures or through amendments to the Medical Schemes Act. Discussions on a potential review of that legislation are already under way.