Friday, November 26, 2010

Rising cost of health care

Many people are worried about the rising cost of health care. The insurance agent tell them that the solution is to buy private shield insurance. This is bad advice, especially for people who have a tight budget and do not have sufficient savings for their retirement.

My reasons are explained in several FAQs that can be found in my website, You can search for them by using the keyword "Shield" or "health".

The insurance agents tend to exaggerate the need frequency and high cost of medical treatment to get people to buy private shield. Here are the reasons why you should avoid spending this money:

  • Young people have a low incidence of serious illness
  • If it happens, they can be treated at a low cost in a subsidized ward or will be paid by the employer
  • By buying private shield, you have to pay a higher premium and a higher co-payment for treatment
  • There is the risk of the claim under private shield being rejected due to non-disclosure or exclusion. You can read a few stories of rejected claims in my website. 

The cost of health care can increase 5 to 15 times for older people. If the buy private shield, the cost can be 2.5 to 4 times of Medishield. To keep the cost at a more manageable level, the elderly people insure under Medishield and pay a lower premium and a lower co-payment when they are hospitalised.

Private shield should only be bought by people who are wealthy and have more than enough savings for their retirement, and want to have the choice of their own doctor, and do not mind paying a higher premium and higher co-payments.

Tan Kin Lian


poo said...

mr tan can i ask you if private shield integrated with cpf medishield simply means a private shield am i rite?

when you mention medishield, you are purely refering to the cpf basic medishield and premium deduction is 100% deducted by cpf board rite?

C H Yak said...

Cost is one thing. Time is the other. The procedure of having to get Polytechnic referral and long waiting time for appointment to see doctors at hospitals is a big hassle.

You wait at Polyclinic. You wait for appointment, usually 1.5 month later. On day of appointment, you wait again, whether you are early, on-time or late.

Time is also an indirect "cost" to patients.

MM Lee only admitted it recently at 40th anniversary dinner of Hewlett-Packard.

He emphasised that "to stay ahead of the curve, a stable society is necessary - one where it is 'easy to go to school and come back, easy to go to the hospital and come back". But I ask, “What are we doing to achieve this?”.

Redstar said...

Government must provide free medical treatment to people above 50 yrs and those unemployed because of foreign manpower influx.

They must collect more taxes from the ultra-rich, re-implement estate duty tax, increase corporate tax for businesses with exceptional bumper harvest/ profits not contributed by business efficiency & improved productivity, in particular from profits derived by asset/ financial speculation & creative accounting.

They must gradually phase out 7% GST. Capital gains tax must be imposed on gains above a certain amount eg. SGD 1 million per year.

Will this Govt do more for needy citizens? Or will it wait for the next Govt to take over this task? A task which is likely to irk the super wealthy and ultra elites of SG.

Vincent Sear said...

I don't think exclusion clauses and non-declaration rejection of claims are unfair practices on the part of insurers.

1. Exclusion clauses are stated at the outset. These are risks uninsurable at the premium, some risks may be deemed outright uninsurable at whatever premium.

2. Non-declaration of known pre-existing condition is oversight or even dishonesty on the part of the insured, not the insurer. Insurers are not saints, I agree, they run a business for profit. Neither can insured be assumed to be angels too. Some may try to unperpay.

For class C, there shouldn't be any need to buy a private shield. Basic Medishield and Medisave should be sufficient, and in very rare cases of hefty medical costs incurred by lower or no-income group, there's Medifund.

For the higher classes, a private shield may act as an umbrella cover. That's is, you don't rely on the private shield alone, you have Medishield (funded through CPF) and a private shield (funded in cash if you can afford it).

The dual-policy umbrella effect is that most whatever not covered (itemised limits, deductibles, co-insurance) by Medishield can be claimed from the private shield.

The recent high profile case with dual-policy claiming is none other than the Minister for Health Khaw Boon Wan himself. I understand that he ended up paying S$8 on hospitalisation and surgery that I estimate to cost about S$30,000.

I'm not saying Medishield or private shield is better, or advocating to buy both. It varies and depends on individual circumantances and objectives.

In fact, I was surprised to learn that Minister Khaw has private shield insurance. Rich folks with millions in bank accounts don't need insurance. Paying small premiums for insurance is based on the principle of pooling and covering big risks that individuals on their own can't afford by themselves on their own.

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