Am I adequately covered for healthcare costs?

If you talk to taxi drivers during cab rides, a common refrain you hear from them is,

"It is better to die than to be sick in Singapore!"

Medical costs are rising with rising affluence and longevity
Wow... Has our society turned so commercial and materialistic that life is not precious anymore? Why does the taxi driver make this observation about healthcare costs in Singapore?

Many of you who read this blog are just fresh out of school, you are starting on your first job or have worked for a few years. You realise that as you start planing for your financial future, healthcare costs must be factored in. In order for you to make the right choices regarding your healthcare insurance and savings needs, you need to be aware of the 3M framework! :-)

Nope, I am not talking about Making More Money but Medisave, Medishield, Medifund.

What is the 3M framework?
Let's see what the Ministry of Health website has to say about this: http://www.moh.gov.sg/

Medisave
"Medisave, introduced in April 1984, is a national medical savings scheme which helps individuals put aside part of their income into their Medisave Accounts to meet their future personal or immediate family's hospitalization, day surgery and certain outpatient expenses.

Under the scheme, every employee contributes 6-8% (depending on age group) of his monthly salary to a personal Medisave account. The savings can be withdrawn to pay the hospital bills of the account holder and his immediate family members. "

This is your first line of defence, essentially, Medisave is YOUR OWN MONEY and you can use for for certain medical expenses if needed and also to buy medical insurance plans either from CPF or from private insurance companies. Now let us look at the 2nd M, Medishield.

Medishield
"MediShield is a low cost catastrophic illness insurance scheme. Introduced in 1990, the government designed MediShield to help members meet medical expenses from major or prolonged illnesses, which could not be sufficiently covered by their Medisave balance. MediShield operates on a co-payment and deductible system to avoid problems associated with first-dollar, comprehensive insurance.

Premiums for MediShield are payable by Medisave. A very large medical bill can easily wipe out your Medisave balance, as it is only a cash savings account. For this reason, you are advised to take up MediShield or an appropriate private health insurance in order to stretch your Medisave dollars.

MediShield will cover an average of nearly 60% of your large medical bill at Class B2 or C wards. Your co-payment and deductibles can be payable using Medisave or cash. MediShield and other Medisave-approved private integrated plans are designed to cater to your different insurance coverage needs."

Your second line of defence is medishield. How medishield helps you is that it is a form of medical insurance, i.e. you pay a premium from your medisave and the insurer will absorb part of the costs of your medical treatment subject to deductible. What is a deductible? A deductible is the portion that you first need to pay either in cash or medisave (which are both your monies but from different sources) before the medishield kicks in to cover a PORTION of your medical bills. According to the Ministry of Health,

"Deductibles are set high because the scheme is intended to cover large or catastrophic bill sizes. A high deductible is also necessary to discourage excessive use of medical services, and keep the premiums low and affordable."

What this means is that insurance is not meant to cover EVERYTHING! It is meant to protect you against very serious illnesses where the treatment costs would bankrupt you. This is an important concept in insurance. The more protection you want, the higher your premiums-- the amount you pay per year for your medical insurance. Hence, the optimal level is sufficient protection so that you will not be financially wiped out by an unforseen illness or condition and yet pay reasonable premiums.

Medifund
The final component of the 3M framework is medifund. This part only kicks in if you have exhausted your medisave, medishield etc and a committee will scrutinise if you tap on this funding. Typically, it's given on a case-by-case basis on a very selective criteria. If you really need to tap on this, talk to a medical social worker in the public hospital who will be able to help you with the paperwork if the need arises.

So what does that mean for me
Having at least seen what is the 3M framework, what you need to know is that your health is in your own hands. In general, your company's plan or your own pocket will cover the outpatient consultations for normal cough, cold and flu. Medisave generally cannot cover this unless it is for specified medical services such as regular consultation for chronic diseases such as diabetes, etc.

What do you do then with your medisave monies? Buy insurance. The basic medishield only covers the bare minimum to reduce the risk of major illnesses and subsequent treatment from bankrupting you. If you are working and contributing to CPF, then you should consider buying privatised medishield plans that provides greater coverage for a higher premium. It's generally easier to join such schemes when you are younger and healthier and your premiums are lower per year.

Keep yourself healthy
However, the most important thing you should do is to keep a healthy lifestyle! One thing I learnt from serving national service in the army is to take care of my own health. This is one of the most cost-effective ways to reduce your healthcare costs.

So eat that apple, go for that jog and be well (and prosper!)