The High Court in Pretoria has upheld section 59(3) of the Medical Schemes Act (MSA), rejecting a constitutional challenge to the provision that allows medical schemes to recover payments made in error or losses arising from theft, fraud, negligence, or misconduct.
The ruling, delivered on 17 June 2026, is the latest development in litigation launched in 2021 over the legal basis for the “clawback” powers used by medical schemes to recoup money from members or healthcare providers.
The application was brought by SAPS Commercial Affairs (Pty) Ltd, a company wholly owned by the South African Society of Physiotherapy (SASP).
At the centre of the dispute was not whether medical schemes may ever recover improper payments. Section 59(3) already allows a scheme, in specified circumstances, to deduct money from benefits payable to a member or a healthcare provider. The section applies where money was paid bona fide to someone not entitled to it, or where the scheme suffered a loss through theft, fraud, negligence, or misconduct.
In practice, the issue often arises because medical schemes commonly pay healthcare providers directly rather than reimbursing members first. When a scheme later concludes that a claim was wrongly paid, section 59(3) allows it to recoup the money by withholding future payments that would otherwise be due to the provider or member.
The SASP contended that this process gives schemes too much power when disputes arise. It argued that schemes could investigate a claim, decide that a payment was improper, and then enforce repayment within a process that lacked sufficient independent oversight. In the applicant’s view, this made the scheme “judge, jury, and executioner” in its own cause.
The Society also complained that disputes were often handled by administrators appointed by the scheme, creating a built-in lack of impartiality.
The SASP asked the Court to declare section 59(3) unconstitutional and invalid, arguing that it allowed schemes and their administrators to investigate, determine, and enforce disputed recovery decisions without adequate structural safeguards for providers. It also sought a suspension of any declaration of invalidity and interim safeguards pending legislative amendment.
Why the challenge failed
Judge Corrie van der Westhuizen’s judgment turned on the proposition that section 59(3) cannot be assessed in isolation from the rest of the MSA.
The Court held that the sub-section forms part of an integrated statutory framework governing the submission, payment, and recovery of claims. Section 59(1) regulates the rendering of accounts, section 59(2) deals with payment for services, and section 59(3) provides for the recovery of amounts paid in specified circumstances. The regulations under the Act supply the practical machinery through which those provisions operate.
For that reason, Judge Van der Westhuizen said section 59(3) has no independent existence outside the broader legislative scheme. It rejected the SASP’s attempt to isolate the recovery provision from the surrounding statutory and regulatory framework when assessing its constitutionality.
The Court also rejected the argument that the absence of detailed dispute procedures within section 59(3) itself rendered the provision unconstitutional. In the judge’s view, the sub-section does not have to contain every procedural safeguard or remedial mechanism in order to pass constitutional muster. Those questions must be considered against the wider framework established by the Act and its regulations.
Significantly, the Court noted that concerns about the adequacy of dispute-resolution procedures do not necessarily translate into a constitutional defect in the statute. If shortcomings exist in the regulatory framework, those may be matters for amendment by the relevant authorities rather than grounds for striking down section 59(3).
A further consideration was the availability of remedies to healthcare providers who dispute recovery decisions. The Court pointed to section 48 of the MSA, which allows an aggrieved party to appeal to the Council for Medical Schemes (CMS). The existence of that appeal mechanism weighed heavily against the applicant’s contention that providers were left without meaningful recourse.
Viewed in its entirety, the statutory framework persuaded the court that section 59(3) does not infringe the constitutional rights to just administrative action or access to courts. The application was accordingly dismissed, with no order as to costs.
Wider dispute over FWB investigations
Section 59 is at the centre of a wider regulatory and policy dispute. The Section 59 Investigation Panel’s 2025 final report found procedural unfairness and systemic racial discrimination in how certain schemes and administrators conducted fraud, waste, and abuse (FWB) investigations between 2012 and 2019. The findings were strongly disputed by parts of the industry, but they have already pushed the CMS into a reform process aimed at standardising and tightening procedures.
The CMS said in March 2026 that the application of section 59 had been inconsistent and fragmented across the industry and that weaknesses in audit processes and a lack of standardisation had contributed to mistrust between schemes and providers. Circular 10 of 2026 was issued as an interim step while longer-term reforms are developed.
The High Court’s decision does not amount to a judicial endorsement of every clawback practice used in the medical schemes industry. Although the Court rejected the constitutional challenge to section 59(3), it indicated that if dispute procedures are deficient, the remedy may lie in amending the regulations rather than striking down the section. Therefore, the judgment does not end the debate over how those clawbacks should be implemented.
Medical schemes welcome the judgment
The SASP told Moonstone it would be premature to comment immediately after the judgment, and it was consulting its legal representatives on the implications. It would issue a formal statement in due course.
The Health Funders Association (HFA), which represents medical schemes and administrators, welcomed the ruling. In a statement, the HFA said the judgment has “important implications for the healthcare sector” and reinforces the responsibility of medical schemes to safeguard member contributions.
HFA chief executive Thoneshan Naidoo said the ruling helps to ensure that healthcare funding is used appropriately, sustainably and for the benefit of members. The Association said fraud, waste, abuse, and error management programmes enable schemes to recover about R1 billion a year and, together with their deterrent effect, help to keep contributions about 4% to 8% lower than they would otherwise be.
The HFA also said only a small minority of healthcare providers become the subject of such investigations, and that eight out of 10 investigations arise from tip-offs.
It added that the judgment confirms providers are not without remedies where disputes arise and that the MSA already provides mechanisms, including referral of disputes to the CMS.
The Board of Healthcare Funders (BHF), which also represents medical schemes and administrators, also welcomed the judgment. Managing director Katlego Mothudi said the ruling affirms the lawfulness of section 59(3) in the broader regulatory framework governing medical schemes.
The BHF said the clawback provision serves an “important financial stewardship function” by enabling schemes to recover payments made in error, or losses arising from fraud, theft, negligence or misconduct, thereby helping to protect member funds.
At the same time, it acknowledged that concerns have been raised about how section 59(3) has been implemented in practice and said there is value in continued engagement among schemes, healthcare providers, regulators, and other stakeholders to promote greater consistency, transparency, and guidance.
