van den Heever BMC Public Health 2012, 12(Suppl 1):S5 http://www.biomedcentral.com/1471-2458/12/S1/S5 system of social assistance grants reaching upward of 15 million people by 2011, with expenditure equivalent to 3.6% of Gross Domestic Product (GDP) [5]. South Africa’s burden of disease has deteriorated since 1994 due largely to HIV and AIDS and associated co- morbidities such as tuberculosis (TB). In 2011 HIV and AIDS prevalence is estimated at 10.6%, with life expec- tancy for males and females at 54.9 and 59.1 respectively [1]. However, maternal mortality ratios (MMRs) well below expectations for country of South Africa’s level of development, estimated at 300 out of 100,000 live births with a confidence interval of 15 to 500 [6], suggest that public sector clinical services are underperforming at existing levels of investment [7]. Although 43.7% of all maternal deaths involve AIDS, patient-related avoidable factors were recorded in 46.5% of maternal deaths with 38.4% clearly avoidable [8]. Human Rights Watch inves- tigations have also revealed that pregnant women are abused by nurses in public facilities with inadequate for- mal accountability mechanisms to protect patients [9]. South Africa has large public and private health systems, with the former funded by general taxes for nine provin- cial health departments and the national department, with spending equivalent to 3.8% of GDP in 2010 [10], and the latter through regulated voluntary not-for-profit private health insurance arrangements, referred to as medical schemes, equivalent to 3.4% of GDP in 2010 [11]. In 2010 there were 8.3 million medical scheme beneficiaries equivalent to 16.6% of the total population. This number is also growing continuously (figure 1). Overall health expenditure is consequently around 8.8% of GDP includ- ing out-of-pocket (OOP) expenditure estimated at 1.5% of GDP in 2009 [12]. Out-of-pocket expenditure, which is well within inter- national norms, predominantly occurs in the top income decile, although spending on private general practitioners and specialists occurs across all income groups despite access to free public services [13]. As public hospital ser- vices are free for low-income groups while medical schemes prioritise insurance for catastrophic expenses, most OOP expenditure is for basic doctor-based primary care services and some medicines. Given this configuration of protection, South Africa technically complies with the goal of universal coverage as a comprehensive package of health services is available on a pre-paid basis either through the public sector or regulated health insurance (medical schemes). However, poor policy development and implementation in the post-apartheid period (from 1994) have exacerbated rather than addressed historical institutional weaknesses [7,9,30].Government critics argue that inadequate atten- tion has been given to the correct mix of institutional mechanisms to permit both the public and private sys- tems to realise their full potential. Whereas much can be Page 3 of 13 said about the public system, this article focuses exclu- sively on the potential role of the private system and its contribution to extending and deepening universal coverage. Whereas the role of public subsidies, whether to fund in-kind health services or to finance private provision, is to maximise the horizontal extension of health services to those without adequate income, privately funded healthcare complements this role through the mobilisa- tion of additional revenue. This funding can extend the reach of government-subsidised services where income earners use private services, or fund supplementary pro- vision where coverage is highly rationed. South Africa’s experience is more consistent with the former. However, full advantage may not have been taken of the opportu- nities presented over time. This review therefore makes use of an historical analysis of the South African private health system and its regulation to identify whether pri- vate markets are susceptible to intervention such that coverage is extended and deepened in a sustainable manner. Research question Using South Africa as a case study, this review examines whether private health systems are susceptible to regula- tion and therefore able to support an extension and dee- pening of coverage when complementing a pre-existing publicly funded and delivered health system? Methods The approach involves a review of different stages in the development of the South African private health system and its response to policy changes. The focus is on the time-bound characteristics of the health system and associated policy responses and opportunities. The review is divided broadly into two periods: From 1889 to 1999: where the system moves from an immature non-commercial regime into a highly com- mercialised insurance and provision in the final ten years and where the latter period is heavily affected by a major deregulation of health insurance; and From 2000 to 2010: where the mature system is sub- jected to new regulatory interventions. The periods and regulatory regimes are evaluated quali- tatively with the relevant drivers of change identified, focusing on their susceptibility to regulatory interventions. The history of medical schemes to 1999 The emergence of occupational and industry schemes What are today regulated in law as medical schemes had their origins in various forms of occupational health insurance beginning as early as 1889 with the De Beers Consolidated Mines Limited Benefit Society Benefit Society within the territory of what is now South Africa.