SA's medical aid model is running out of young members

Johannesburg - While South Africa's policymakers argue about the future of public healthcare, a more immediate problem is already unfolding inside the private system, where medical schemes are losing young members at the exact moment they need them most, says Luyanda Njilo, Senior Equity Research Analyst, Healthcare, Nedbank Corporate and Investment Banking.

Medical aid is built on a simple premise: younger, healthier members subsidise older, sicker ones. But in South Africa, that balance is now deteriorating. People over the age of 65 make up roughly 10% of beneficiaries but account for about 30% of total healthcare expenditure. Members aged 45 to 64 comprise around 24% of members, yet drive 34% of costs. Younger adults, particularly those aged 20 to 44, carry a disproportionate share of membership relative to their claims.

This is not a flaw − it is how the system is designed to function. The problem is that the system depends on a steady inflow of younger members, and that inflow is no longer holding.

"Between 2015 and 2024, medical aid membership in the 25–34 cohort declined by 18%. This is not demographic drift. It is the erosion of the system's funding base. Medical schemes are not under pressure simply because costs are rising. Rather, they are under pressure because the people meant to pay for those costs are disappearing. This cohort should be entering the workforce, joining schemes and expanding the risk pool. Instead, many are opting out − not by choice, but because medical aid is becoming increasingly unaffordable relative to income. At the same time, the system is ageing. Members over the age of 45 accounted for 27% of beneficiaries in 2005. By 2024, that had risen to 34%. Put simply, the system is gaining older members and losing younger ones. That is not cyclical. It is structural," Njilo says.

This demographic shift is now feeding directly into cost pressures. Medical aid contributions increased by more than 10% in both 2024 and 2025 against inflation of roughly 3%. Even the increases announced for 2026 remain well above the consumer price index (CPI). At the same time, cost per hospital admission has risen sharply at close to 10% despite minimal growth in admission volumes. This is not coincidental. As the pool ages, each admission becomes more complex, involving longer stays, more specialist input and higher-cost interventions. "Even flat utilisation now produces rising costs. In other words, the system is not only experiencing more claims over time − it is experiencing more expensive claims. This is compounded by structural factors, including hospital-centric care models, fee-for-service incentives and increasing clinical intensity. The result is predictable: costs rise even when utilisation does not."

Njilo says the sustainability of private healthcare can no longer be viewed purely as a health policy issue. It is an economic one. With unemployment above 30% and youth unemployment closer to 40–45%, South Africa is not producing the base of younger, healthier contributors the system requires. The consequence is a self-reinforcing loop. Fewer young members enter the system, the risk pool ages, claims increase, contributions rise, and more young members drop out. This is the classic affordability spiral and once it takes hold, it is extremely difficult to reverse.

"The 18% decline in the 25–34 cohort is not an isolated statistic. It is evidence that this spiral is already in motion. The stalling of NHI has been interpreted by some as a reprieve for private healthcare. It is not. The real risk is not legislative, but mathematical. A system built on cross-subsidisation cannot remain stable if the base is shrinking while the cost burden continues to rise. Private healthcare in South Africa is not insulated from crisis. It is simply experiencing a slower, less visible form of it defined not by sudden collapse, but by steady unaffordability. Incremental reform will not be enough as this is not a pricing issue − it is a system design problem," he says.

Njilo notes that globally, healthcare systems are shifting away from reactive, hospital-based treatment and toward prevention, early intervention and behaviour change. The objective is no longer simply to fund illness, but to reduce its incidence and severity. South Africa already has elements of this approach. Programmes such as Discovery's Vitality have shown that incentives can change behaviour by increasing activity, encouraging screening and improving lifestyle outcomes. But this cannot remain a wellness add-on − it must become the economic foundation of the system.

"A healthcare model that waits for patients to become expensive before it intervenes is structurally inflationary. Sustainability requires a fundamental shift toward continuous monitoring, early detection, proactive management of chronic disease, and a decisive move away from high-cost hospital settings where clinically appropriate. And even this will not be enough without addressing the broader constraint," he says.

"South Africa needs jobs. Without stronger employment growth and rising incomes, the medical aid model will continue to lose younger members regardless of how efficiently it is redesigned. South Africa's healthcare debate has focused heavily on funding for and affordability of the public health sector, but the more immediate threat is already visible within the private system: an ageing membership base, a shrinking pool of young contributors and costs rising faster than incomes. This is not a future shock. It is a system-level failure already in motion. Private healthcare in South Africa is not facing a sudden collapse. It is being quietly repriced beyond the reach of the middle class. And once that line is crossed, the system does not adjust, it unravels," he concludes.