Sick Prices: Why Health Care Inflation in Mauritius Outran Everything Else

Mauritius prides itself on having free education, free health care & partially free transport. The welfare state is quite generous. The budget for education and health care alone accounts for approximately 18% of government spending and 7% of GDP.   A rough comparison with other countries, however, breaks this illusion: Mauritius’ welfare spending compares poorly with that of its peers.

As the recent economic shocks have filtered through Mauritian society, much of the focus has been on inflation, with much of the conversation centred on food. But one particular aspect that has garnered much less spotlight has been the medical sector. Whilst it is true that 75% of the food consumed locally is imported, an even larger proportion of medical drugs and appliances are imported. Price controls have long been government policy — whichever party is in power. The country’s population suffers from high levels of diabetes and heart disease. As these medicines are consumed in large quantities by a mostly elderly population, the political calculation is easily made for any party seeking their votes.

Deep dive in medical inflation

Statistics Mauritius publishes detailed information on each category of the medical sector, namely: medicine, clinic fees and doctors’ fees. Over the period 2009–2026, the cost of health care in Mauritius rose by an average of 4.6% per year, while inflation for all goods and services rose by only around 3.8% annually. A closer look at what is driving health-care inflation shows that, over the same period, doctors’ fees tripled and clinic fees rose by 2.5 times. Meanwhile, medicines — which are largely imported and more prone to supply shocks — rose by only 1.6 times, thanks to the government’s price controls.

So what explains the sharp rise in doctors’ fees and clinic fees? Over the same period, the number of doctors per 10,000 inhabitants increased from 12 to 31, which shows that the price rises cannot be blamed on a shortage of supply. Interestingly, the number of private doctors grew much faster than the number in the public sector. No official data exists on the number of private clinics between 2009 and 2026, but it can safely be assumed that the figure has increased over the period.

The peculiarity of medical consumption

One partial reason for such high inflation lies in how Mauritians view health care. A 2021 paper by Jeetoo & Jaunky concludes that Mauritians view health care not as a luxury but as a necessity, which implies that demand is inelastic. Another paper by the same authors concludes that Mauritians would be willing to pay more to have better public health care. Post-Covid, operators realised that demand for health care was more inelastic than previously thought, and subsequent increases in doctors’ and clinic fees have not dampened demand.

This search for quality service is what makes the health-care industry unique. Baumol’s cost disease is an economic theory which holds that wages in labour-intensive, low-productivity sectors such as health care and education rise to match those in high-productivity sectors. Because productivity in these sectors is lower, the cost per unit rises over time. Health care is among the rare industries in which quality matters more than quantity (at least in theory). A doctor can only care for one patient at a time. In theory, the notion of productivity should not really apply to health care — measuring how many patients a doctor sees per hour would be detrimental to the quality of care. In reality, though, there are hospital managers and other data-centric professionals who track how many patients doctors see per hour. Despite that, we can assume that productivity in the health-care sector does not follow that of highly productive sectors like manufacturing or IT. While the economy at large can become more productive, the health-care sector does not necessarily follow the same pattern. As such, as wages rise, the cost per unit increases, since by definition a doctor cannot easily become more productive. Labour-intensive services therefore tend to experience higher inflation than other industries. This could be one explanation for why doctors’ fees rise faster than the price of medicine, which is a good rather than a service.

Moreover, compared with other industries, the health sector in Mauritius is generally less regulated. Take the Mauritian transport sector, for example: bus fares are regulated, as are bus routes. The education sector has more public oversight, with regular quality audits of educators. The construction industry is also heavily regulated by various institutions — the councils of engineers, construction laws and price controls on a few building materials — including strict rules on foreign construction labour. By contrast, the medical sector faces far fewer audits, unless patients report issues to the Medical Council or raise them on the radio. While the prices of medicines are regulated, the fees for private consultations are not. It is a paradox that, by definition, public and private health services are supposed to offer the same level of quality assurance; yet the price differential between the two would suggest a large difference in the quality of service. This regulatory asymmetry allows perverse incentives to creep in and overcharging to occur. 

This perverse incentive structure is most visible when it comes to medical tests. A patient cannot judge whether a test is really necessary; the provider of the service has that knowledge and is also the one charging for it. There is, therefore, scope to carry out extra tests that are not required. Workers in the private sector are also covered by private medical schemes, which means their insurance covers much of the medical fee. In recent years, overcharging has become a feature of the industry — all the more so now that insurance companies have introduced new rules and asserted oversight over medical procedures. Insurers now have the power, through their own terms of service, to appoint a doctor to review a medical file and judge whether a procedure is necessary. Insurance premiums have risen by an average of 5.6% every year from 2018 to 2026, with the steepest increases in 2023 and 2025.  

An aspect often overlooked in judging doctors’ fees is the cost of running a practice, which requires investment in equipment, the recruitment of highly specialised assistants and the cost of consumables used in consultations. The cost of medical tools and equipment has risen globally in the past few years, and since all such equipment is imported into Mauritius, these products are doubly exposed — to higher global prices and to the effect of rupee depreciation. The rupee has depreciated by about 30% over the past decade. Moreover, the medical-equipment market has been marked by a curious phenomenon that we explore further below: the prices of low-tech equipment such as a stethoscope have risen more than those of high-tech equipment such as MRI or X-ray machines. MRI and X-ray machines saw their prices increase by between 0% and 15% over the 2015–2025 period; by contrast, a stethoscope now costs 25–35% more. While doctors and clinics do not buy high-tech equipment every year, they may well invest in low-tech equipment more often, as its rate of use is much higher. The cost of servicing high-end equipment has also risen considerably locally, as it requires specialised technicians and there is little competition in that market — largely because of the small size of the market. There are only a few buyers of such equipment, so supporting multiple suppliers would not be financially sustainable for any of them.   

Concentration among service providers is also a feature of the medical sector. The number of private clinic providers (not the number of clinics, but the number of companies that own them) has increased by only four over the past decade. This concentration of power in the hands of a few also raises the possibility of abuse of a dominant market position. It is with that in mind that the Competition Commission has launched enquiry to gather more information on the market.

Abnormal price increases channelled through the insurance mechanism make patients less resistant to paying higher fees, since the brunt of the increase does not fall on them directly. Moreover, because medical insurance is paid partly or wholly by employers, the effect of the rise is not immediately perceptible.

Finally, there is one aspect that is both social and economic in nature but difficult to prove, as no real data exists on the matter. Certain jobs in Mauritian society carry higher social capital, and being a doctor is one of them. The introduction of the minimum wage in 2018 meant that labour-intensive jobs and low-entry white-collar jobs saw their wages rise. Subsequently, other professions had their pay realigned to keep the gap coherent in terms of skills and social signalling — though the increase has not been uniform across the board. In addition, the persistent shortage of manual workers has added a premium to those jobs. Professions for which the market is in equilibrium, or well supplied, have not seen the same premium effect. Doctors, on the other hand, largely set their own fees, so it has been easier for them to raise theirs, taking into account the introduction of the minimum wage, the premiums paid for manual work and the overall rise in wages captured by the wage rate index. While no data exists — and it would be near impossible to gather — a substantial body of work in sociology and economics has analysed this kind of hypothesis.  

The first part of the hypothesis is sociological in nature and rests on the idea that social status is not absolute but relative, and therefore has to be actively defended. Weber (1978) already separated income from social honour, arguing that status groups protect their standing through social distance rather than earnings alone, and Veblen (1899) showed how that distance is made visible through conspicuous consumption. What matters most for the Mauritian case is the concept of positional goods developed by Hirsch (1976): certain forms of status are inherently scarce, so when those at the bottom gain, the position of those above is mechanically eroded and has to be re-established. Bourdieu (1984) extends this to explain why professions such as medicine, which hold a high level of social capital, are particularly invested in preserving that hierarchy. Applied to Mauritius, when the minimum wage in 2018 and the persistent premiums on scarce manual labour lifted the bottom of the distribution, high-status professions had both the motive to restore the gap and, as the sociology of the professions argues (Freidson, 1970; Abbott, 1988), the collective latitude to do so. This is why the realignment of pay has not been uniform: it has tracked social standing as much as skill.

The second part is economic and explains why doctors in particular were able to act on that motive when other well-supplied professions could not. Frank, Levine and Dijk (2014) formalise the “expenditure cascade”, in which rising incomes and spending at one level pull up the level immediately above — the precise mechanism behind the realignment described here — while Baumol (1966, with Bowen) adds the complementary point that labour-intensive services must follow economy-wide wages regardless of productivity, so a rising wage floor feeds directly into fees. But the decisive difference is one of market structure, and here Arrow (1963) remains the reference: pervasive information asymmetry and provider-set pricing shield physicians from the competition that would otherwise discipline their fees. Evans (1974) took this further and showed, with evidence, that where doctors set their own fees the market can respond “perversely”, with prices rising rather than falling as supply increases — a finding later absorbed into the broader supplier-induced-demand literature (McGuire, 2000). Because most Mauritian doctors fix their own fees in a market where demand is inelastic and necessity-driven (Jeetoo & Jaunky, 2021), they could pass through the minimum wage, the manual-labour premiums and the general rise captured by the wage rate index in a way that professions sitting in competitive equilibrium simply could not — which is why a near-tripling of the number of doctors since 2009 coincided with fees that rose rather than fell.  

Unequal weight

Often, those at the bottom of the income ladder are either on a pension or in low-paying jobs for which medical insurance is not part of the salary package. As the 2023 Household Budget Survey shows, health expenditure accounts for an unusually high share of the poorest households’ spending — a little more than a tenth of their monthly outlay.

The lack of medical coverage is one part of the explanation. The other rests on the inelastic demand for health care. Those at the top of the income distribution spend twice as much on health care, but they are also the most likely to have generous coverage. The health-inequality gap is therefore wider than the data alone would suggest.

A growing sector

The health-care sector has broadly been growing in line with GDP, and since Covid it has grown above the GDP trend. With more clinics opening and steady demand driven partly by an ageing population, the sector is projected to keep growing in the coming years.  

So what can be done ?

• The Competition Commission is already investigating unfair practices. No date has been set for the publication of its findings, but, judging by past reports, an interim report will probably appear within a year. Reducing the market power of certain actors would go a long way towards better-quality care and lower prices.
• Regulating the price of doctors’ visits could help curb inflation and ensure patients receive value for money. The French model could be one to emulate.
• The government could offer a public option for medical insurance. One already exists in some form, but making more information available and offering more public options would give the public better choices.
• Employees should be able to choose their own medical insurance, even if it is backed by their employer. It makes sense for companies to negotiate a single package for all staff, but that leaves smaller firms with fewer employees, and less leverage. A public option would broaden the choices available, so that a firm’s negotiating leverage would matter less.
• Consideration could also be given to a public-private partnership: public hospitals built and operated by private companies under contract, but with access publicly funded so that care remains free at the point of use. Well-designed, this can bring private capital and management discipline into the system; poorly designed, as some PFI schemes have shown, it can raise long-run costs. The Alzira model in Spain offers both the template and a cautionary tale.
• Some basic medical goods in common use could be manufactured locally — surgical gloves, stethoscopes and the like. This would lower the operating cost of the system while developing a local industry. In the same vein, producing some medicines locally makes sense, though the capital outlay is much higher and quality control is more demanding than for other goods.
• Increased public pay and better working conditions for doctors in the public sector would help create a more competitive market. While unproven, private doctors may be subject to income targets in their contracts with clinics. The incentive structure is too open to such leverage; reducing it could ease the upward pressure on prices.