Healthcare expenditure

One of the main components influencing the performance of a medical scheme is its healthcare expenditure or claims experience. In this section, the claims ratio as well as the actual level of claims that are paid by medical schemes are considered.

Healthcare expenditure includes all payments made for claims incurred by members. The risk claims ratio is defined as the ratio of risk claims to risk contributions (the proportion of contributions that are used to fund claims, excluding any allowance for medical savings accounts).

Many restricted schemes do not incur certain nonhealthcare expenditure items such as distribution costs, marketing expenses and broker fees. As a result, they can often afford to use a higher percentage of risk contributions towards risk claims than open medical schemes. This trend is illustrated in the graph below for most of the period until 2018 where the claims ratios were very similar. In 2020, the claims ratio was the lowest it has been over the past 16 years, this is largely attributed to the impact of the Covid-19 pandemic.