For the average family, by the time they hit mid-year, most have exhausted their medical savings. In my family of four, that means we have six months of medical costs ahead – and with two young children, there are bound to be multiple visits to doctors for ear infections, viruses, and tummy bugs. And that’s not factoring in anything calamitous occurring.
This year is going to be a particularly difficult one due to the high-than-usual medical aid rate increases scheduled for all medical schemes. So is there any way we can make our medical savings last longer? And what can we expect our medical aid scheme rate to do over the next 12 months? Double digit increases, it seems. Corlene Botha, a healthcare advisor at Crue Invest, a Cape Town-based financial planning company, explains that many medical aid schemes are pricing in rises of around 11% this year.
Why such high increases to medical scheme rates?
Botha explains that, in general, medical inflation outstrips normal inflation – you’ll be relieved to learn that this happens not only here but is a common global trend. In South Africa, past trends have shown that the cost of health care rises year-on-year at a rate of the Consumer Price Index (CPI) plus 4%.
Plus, bear in mind that the decreased value of the Rand coupled with the rising costs of importing medicines and medical equipment have contributed to these steep increases.
How to manage your medical aid
As the entire medical aid industry has seen a spike in member claims, these increases are unavoidable to keep the schemes sustainable, explains Botha. Botha recommends the following to prepare for the year ahead:
1. Factor future healthcare increases of at least CPI plus 4% into your budget.
2. Build up an emergency fund to cover those expenses not covered by medical aid.
3. Take out a gap cover policy to fund the difference between the cost of the service provider and what is paid by the medical aid. Providers can charge as much as five times the scheme cover, explains Kim Matthews, an associate advisor at Core Wealth Managers. She adds that one can expect gap cover, which is really a short-term insurance product, to push up its charges this year as well. This is partly a consequence of medical schemes reducing their risk by structuring their plans so that they shift liability to gap cover providers.
4. Be careful about a knee-jerk response due to the premium increases. Incentive-driven healthcare brokers could use fear tactics to try and get you to move to a cheaper medical aid. Bear in mind the risk that the medical scheme may not stay solvent over the next few years.
5. Importantly, remember that your healthcare expenditure may suddenly go from low to high. Many people move to cheaper options because they have ‘never claimed from medical aid anyway’. But life is precarious; a car accident, stroke or severe illness can change everything in an instant.
6. Speak to an independent healthcare advisor, someone who can match your needs and affordability with an appropriate plan. Be honest and specific about your family’s requirements with respect to chronic illnesses, health status, family history, concerns and expectations.
7. Lastly, it’s worth keeping in mind the function of medical aids: they were never intended to be the funders of all healthcare costs a person may face. The idea is that the young cross-subsidise the old, and the healthy cross-subsidise the sick. Much like insurance on your vehicle, medical aid is not intended to cover maintenance and wear-and-tear costs, but rather large, unforeseeable expenses that are unaffordable to the average person.
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