As South Africa’s policymakers argue over the long-term shape of public healthcare, a nearer-term pressure is building inside the private healthcare system: medical schemes are losing younger members at the point the funding model needs them most, according to Luyanda Njilo, senior equity research analyst for healthcare at Nedbank Corporate and Investment Banking.
Medical schemes are designed around a simple form of cross-subsidisation. Younger, healthier people tend to claim less, and their contributions help to subsidise older, sicker members whose care costs more. That is not a flaw; it is how pooled cover is designed to function. The concern, Njilo says, is that the system depends on a steady inflow of younger contributors to broaden the risk pool, and that inflow is weakening.
Njilo points to the distribution of spending by age as a sign of the pressure baked into the model. People over the age of 65 make up roughly 10% of beneficiaries but account for about 30% of total healthcare expenditure, he says. Members aged 45 to 64 comprise about 24% of members yet drive 34% of costs. Younger adults, particularly those aged 20 to 44, still make up a comparatively large share of membership relative to their claims, which is precisely why their participation matters for overall affordability.
Njilo’s warning is not simply that healthcare costs rise – that is expected – but that the membership mix is shifting in a way that makes those costs harder to fund.
“Between 2015 and 2024, medical aid membership in the 25-to-34 cohort declined by 18%,” he says. “This is not demographic drift. It is the erosion of the system’s funding base.”
In most settings, that age group would be expected to grow scheme membership as people enter the workforce and build households. Njilo argues that many younger adults 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. Njilo notes that members over the age of 45 accounted for 27% of beneficiaries in 2005, rising to 34% by 2024. “Put simply, the system is gaining older members and losing younger ones,” he says. “That is not cyclical. It is structural.”
Contributions outpacing inflation
Njilo links the demographic shift to the price increases members feel most directly. Medical scheme contributions increased by more than 10% in both 2024 and 2025, he says, “against inflation of roughly 3%”. He adds that the increases announced for 2026 remain well above the consumer price index (CPI).
He also highlights another cost driver that can be less visible to members: the cost per hospital admission. That figure has risen sharply, he says, at close to 10%, despite minimal growth in admission volumes. The reason, he argues, is that an older pool tends to generate more complex and more expensive admissions, involving longer stays, more specialist input, and higher-cost interventions.
“Even flat utilisation now produces rising costs,” Njilo says. “In other words, the system is not only experiencing more claims over time; it is experiencing more expensive claims.”
Njilo adds that structural features of the private system can amplify medical inflation, including hospital-centric care models, fee-for-service incentives, and increasing clinical intensity. The outcome, he argues, is predictable: costs rise even when utilisation does not.
Njilo characterises the combined demographic and cost pressures as an “affordability spiral”: fewer young members join or remain; the pool ages; claims become costlier; contributions rise; and younger members are priced out, feeding the loop.
With unemployment above 30% and youth unemployment far higher, he argues, South Africa is not producing the base of younger, healthier contributors the system requires. In his view, the sustainability of private healthcare cannot be treated as a narrow policy issue, because the labour market and income growth strongly influence whether schemes can replenish the low-claiming segment that stabilises the pool.
“The 18% decline in the 25-to-34 cohort is not an isolated statistic,” he says. “It is evidence that this spiral is already in motion.”
He also cautions against interpreting uncertainty around National Health Insurance (NHI) as a protective buffer for private healthcare. “The stalling of NHI has been interpreted by some as a reprieve for private healthcare. It is not,” Njilo says. “The real risk is not legislative, but mathematical.”
Beyond pricing: a design problem
Njilo differentiates between a short-term pricing debate and a deeper system-design challenge. Schemes, he argues, are “not under pressure simply because costs are rising”, but because the people meant to fund those costs are “disappearing”. That makes the problem difficult to solve with incremental adjustments alone.
“Incremental reform will not be enough as this is not a pricing issue; it is a system design problem,” he says.
Part of that design problem, he argues, is an over-reliance on high-cost hospital settings and reimbursement models that reward volume of services rather than value. As the pool ages, the system is exposed not only to more illness over time, but to more expensive episodes of care even when admission volumes remain stable.
Shifting towards prevention and early intervention
Njilo notes that healthcare systems around the world are shifting away from reactive, hospital-based treatment towards prevention, early intervention, and behaviour change, with the aim of reducing the incidence and severity of disease and, in turn, expensive hospital interventions.
South Africa, he says, already has elements of this approach. He points to programmes such as Discovery’s Vitality as evidence that incentives can influence behaviour by encouraging physical activity, screening, and improved lifestyle outcomes. But he argues that prevention cannot remain a peripheral “wellness” feature.
“But this cannot remain a wellness add-on. It must become the economic foundation of the system,” Njilo says.
“A healthcare model that waits for patients to become expensive before it intervenes is structurally inflationary,” he adds. Sustainability, in his view, requires “a fundamental shift towards continuous monitoring, early detection, proactive management of chronic disease, and a decisive move away from high-cost hospital settings where clinically appropriate”.
Even then, he argues, redesigning care pathways will not be sufficient without improved economic fundamentals. “South Africa needs jobs,” he says. “Without stronger employment growth and rising incomes, the medical aid model will continue to lose younger members regardless of how efficiently it is redesigned.”
A gradual squeeze, not a sudden cliff-edge
Njilo says private healthcare is not facing an abrupt shutdown, but a slower affordability squeeze that may be less visible until it has progressed. The risk, he argues, is a system that becomes steadily less accessible to the middle class as the risk pool ages and costs rise faster than incomes.
“South Africa’s healthcare debate has focused heavily on funding for and affordability of the public health sector,” he says, “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.”
And if the affordability spiral continues, he warns, it can be difficult to reverse. “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.”
