IN CASE YOU MISSED IT

How to get the max out of Medisave

This story was first published in The Straits Times on Nov 3, 2013

"You can die in Singapore, but you can't afford to fall sick here" is a common refrain heard on the street.

A recent survey by research company GfK found that 42 per cent of respondents expressed concern about the cost of health care in Singapore.

September's inflation data released by the Department of Statistics showed that health-care costs went up by 4 per cent compared to the same period a year ago, higher than the 1.6 per cent increase in the overall consumer price index.

But health care in Singapore can be affordable.

The system has multiple tiers of protection to ensure that no Singaporean is denied access to basic health care because of affordability issues.

The first tier of protection comes from heavy government subsidies which all Singaporeans can access. The second tier of protection is provided by Medisave, a compulsory individual medical savings account scheme which allows practically all Singaporeans to pay for their share of medical treatment without financial difficulty. The third level of protection is provided by MediShield, a low-cost catastrophic medical insurance scheme.

Finally there is Medifund, a medical endowment fund set up by the Government to act as the ultimate safety net for needy Singaporean patients.

In the last of a four-part series on understanding your CPF, the Sunday Times Invest explains how CPF can help you meet your health-care needs.

Great Eastern Life's acting chief product officer Tan Kuan Ho said: "One should not wait until old age to plan for health-care needs as being older, the time horizon for savings may be shorter and premium rates for protection insurance would be higher as premiums usually increase with age."

One useful instrument in your medical financing toolkit is CPF savings, which you can use to pay for certain things such as your health-care insurance premiums, outpatient or hospitalisation bills.

1 Know what Medisave can be used for

A part of your monthly CPF contribution will go into your Medisave Account, which can be withdrawn to pay for your health-care needs or that of your immediate family.

Currently, between 7 and 9.5 per cent of your wages go to the Medisave Account, depending on how old you are. The contribution rate increases as you age.

Among other things, you can tap Medisave to pay for certain health screenings, outpatient treatments of some chronic diseases and premiums for MediShield.

The Ministry of Health (MOH) regularly updates and expands the list of procedures and treatments that can be paid using Medisave, so it reduces your out-of-pocket expenses if you know when you can use Medisave.

For example, from January next year, you can use it to help pay for the treatment of five more chronic conditions, including Parkinson's disease and osteoarthritis.

But before you go around using your Medisave for every eligible bill, financial advisers urge you to think again.

Ms Lau Sok Hoon, vice-president at NTUC Income's group and health division, said: "Everyone should exercise caution when using Medisave as there may not be sufficient funds in the account when he or she needs it. Also, Medisave Account currently offers an attractive 4 per cent interest, which is another reason to keep the funds in this account."

Another factor to bear in mind is the Medisave minimum sum, or the minimum amount you must leave in your Medisave Account when you withdraw your CPF savings.

That figure has been on the rise, and it currently stands at $40,500 for Singaporeans turning 55 from July 1 this year to June 30 next year.

Even if you can attain the Medisave minimum sum, the money may not be enough to last you a lifetime.

Mr David Ng, chief marketing officer of Prudential Singapore, said: "The reserve that we have set aside for MediSave would not be sufficient to cover the escalating health-care costs. In addition there may be a preference for higher-class wards, which would add to costs."

Insurers say a better way to inoculate yourself against such pain is to use your Medisave to buy insurance.

2 Pick the most suitable MediShield plan

A low-cost basic medical insurance scheme, MediShield is meant to cover large hospitalisation bills incurred at B2 or C class wards.

Last year, 92 per cent of the resident population were covered under MediShield, and less than 1 per cent of policyholders opted out of MediShield, according to an MOH spokesman.

Annual premiums for MediShield can be paid using money from your Medisave Account.

You pay between $50 and $1,190 every year for the coverage, with the premium progressively higher as you grow older.

If you want coverage for a higher-class ward or a private hospital, you will need to pay more for the options by buying Integrated Shield Plans offered by private insurers, which give other benefits on top of the basic MediShield.

Currently, you can use your Medisave to pay for the premiums of the Integrated Shield plans offered by AIA, Aviva, Great Eastern, NTUC Income and Prudential, up to a stipulated withdrawal limit.

It's tempting to make comparisons simply on the basis of the additional cost alone, but that would not be wise.

Mr Daniel Lum, director of product and marketing at Aviva Singapore, said: "Integrated Shield plans offered by the various insurers vary not just in terms of premiums but also benefits. Rather than simply comparing premiums, consumers should look at the benefits to ensure the plan they've selected best suits their needs."

For example, some insurers already offer lifetime coverage now, ahead of MOH's planned launch of MediShield Life, which will provide medical coverage for life.

Other Integrated Shield plans offer coverage for pre-existing conditions, overseas medical treatments and also insure your children for free up to a certain age.

The chief marketing officer of AIA Singapore, Ms Ho Lee Yen, said: "Health insurance is anything but a one-size-fits-all product and different schemes offer benefits to people of diverse financial and protection needs. If you are undecided on an Integrated Shield plan, you should meet up with your insurance adviser."

3 Look beyond medical insurance

Great Eastern's Mr Tan said health-care coverage should also be viewed more holistically, so if you can afford it, consider an income protection insurance plan.

Such policies give you payouts when you are unable to work due to a disability or an illness.

If all else fails and you do not have much in your Medisave Account, there's still Medifund, an endowment fund set up by the Government.

feimok@sph.com.sg


TIPS ON HOW BEST TO USE CPF SAVINGS

Here's a summary of the last three weeks' CPF tips.

If you are under 35

1 Make health care top priority

You are more likely to enjoy coverage without exclusions due to a lower chance of health issues.

2 Do your housing sums

Buy a home you can afford. Try not to use more than 20 per cent to 25 per cent of your family's gross income to service monthly repayments.

3 Weigh pros and cons of investing

Top up your Ordinary Account (OA) with spare cash as returns from CPF savings currently exceed bank deposit rates.


If you are 35 and above

1 Take care of your housing loans, needs and wants

Review your mortgage periodically to see if it is still competitive or if there are better options.

2 Boost your CPF savings

Enjoy tax relief by making annual CPF top-ups for your parents and grandparents.

3 Bolster your insurance coverage

Make sure you are well covered with health and mortgage insurance.

4 Invest using OA funds

If you can take some risks but have no time to track stocks, financial advisers suggest considering unit trusts or exchange-traded funds.


If you are 55 and above

1 Check how much you have in your CPF Retirement Account

It will determine the payout on the annuity scheme, CPF Lifelong Income For the Elderly (Life).

2 Calculate how much you need

Determine the kind of lifestyle you want so you can figure out if your retirement income is enough.

3 Choose a CPF Life plan that fits you

Decide which of the two CPF Life plans, Life Standard Plan or Life Basic Plan, suits you better.

This story was first published in The Straits Times on Nov 3, 2013

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