There are many people in Singapore who likely still hold the view that their MediShield plan is all the medical insurance they need. Recent talk about revamping MediShield has, however, thrown some light on the fact that it may not be able to cover medical costs.

MediShield plans are intended to take care of hospital costs by absorbing a portion of the bill, with the rest payable by the policyholder. Still, those facing large medical bills will need to pay about 60% or more from their own pocket. If the medical bill is small, most people should have sufficient cash or Medisave balances to pay for it. But for bigger hospital bills, people may see their cash and Medisave balances get seriously depleted.

Such an outcome can be avoided with an effective medical insurance programme. But there are several common problems that contribute to a general lack of understanding about how to construct these programmes.

One problem is the mismatch of Shield plans to people’s healthcare expectations. The type of Shield plan determines what out-of-pocket expenses patients will incur during hospitalisation. The suitability of the plan then depends on how affordable it is and the desired quality of healthcare.

If people intend to stay in class C or B2 wards, then the MediShield Basic Plan is adequate. However, if patients want to stay in class A or B1 wards, they should upgrade to Shield Plan A or B to reduce their expenses.

Relying solely on company medical insurance can also cause problems. Most companies provide some form of insurance for their employees, taking care of their outpatient and hospitalisation bills. However, the problem with such benefits is that they usually cease once people leave their companies, and that could be when they need medical protection most.

Getting The Right Policy
Another reason why people don’t get sufficient medical coverage is that they may have the wrong mix of insurance plans. Some purchase a personal accident policy thinking it covers their hospitalisation - it might, but only if the hospitalisation is caused by an accident. If that person were to be warded for cancer treatment, for example, their personal accident policy would be of no use. Such policies are not inferior - they just serve a different purpose.

So when constructing a medical insurance plan, people can start by laying the foundations with the right Shield plan. They are very affordable and could potentially take care of 60% of a hospital bill. Next, people should cover the gaps in Shield plans with a comprehensive hospital and surgical insurance policy, which will provide them with good medical care without many out-of-pocket expenses.

For instance, a comprehensive hospitalisation and surgery (H&S) plan essentially reimburses hospital bills subject to three sub-limits: benefit event, the annual limit and a lifetime limit. There is also no deductible and co-insurance (unlike in a Shield plan), meaning you can claim from the first dollar onwards. With a good understanding of their needs and with careful planning, people will not have to worry about hospital bills while seeking the best medical treatment.

Eddy Cheong is a certified financial planner and a CPA with the Institute of Certified Public Accountants of Singapore (ICPAS).