In recent months, we’ve been fielding numerous inquiries about medical aid and healthcare. The escalating contributions to medical aid and healthcare plans over the past few years have begun to strain monthly budgets for many, with seemingly diminishing coverage. For a family of four, a well-known medical aid plan can range from R8,000 to R33,000 per month, depending on the chosen option.

Medical Aid and Healthcare

This significant financial commitment poses challenges, particularly for retirees and young families. Reflecting on my three decades in the financial services industry, I recall when traditional medical aid covered almost everything. Nowadays, a clear division exists between the insured portion, primarily for hospitalization, and the savings portion, covering day-to-day doctor visits and medication.

As private hospitals and specialists raise their rates annually, it’s not uncommon to find oneself paying out-of-pocket even after routine procedures. I recently encountered this firsthand when a family member underwent a hernia operation. Despite obtaining pre-authorization, they were shocked to discover an additional bill of over R10,000 from the surgeon, well beyond what their medical aid covered.

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In some instances, the specialists’ offices may fail to communicate that they charge over three times the rate covered by the medical aid. While the ethical implications are debatable, such scenarios occur frequently.

The bottom line remains that medical aid is a necessity, given the unreliability of state-provided healthcare. Here are some considerations if you’re contemplating your options:

1. Gap Cover: 

Ensure you have gap cover, opting for a comprehensive plan rather than the cheapest. Gap cover can address in-hospital expenses not covered by your medical aid, offering significant value for a relatively low cost.

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2. Self-Insure: 

Consider moving to a lower plan option on your medical aid and redirect the savings toward a “medical fund.” We recently assisted a family of four in making this transition, saving them R18,000 per month. In three years, they anticipate having around R500,000 in this fund to cover out-of-hospital expenses, supported by a healthy balance in their medical aid savings account and gap cover.

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3. Plan Ahead: 

Conduct thorough research before undergoing any medical procedure. Understand what will and won’t be covered and proactively negotiate with specialists regarding their charges or payment terms.

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4. Explore Other Options: 

Investigate alternative medical aid providers and their offerings. Some plans cater to lower-income earners with reduced contributions; certain providers even offer affordable student options.

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When strategizing with our clients, we assume medical inflation to be 5% higher than normal inflation. Have you incorporated this into your planning? If not, particularly if you’re nearing retirement, addressing this aspect is crucial, as it can significantly impact your retirement plan.

Dirk Groeneveld, Certified Financial Planner.

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