"You can die in Singapore, but you can’t afford to fall sick here" is a common refrain heard on the street.

A recent survey by research company GfK found that 42 per cent of respondents expressed concern about the cost of healthcare in Singapore.

September 2013's inflation data released by the Department of Statistics showed that healthcare costs went up by 4 per cent compared to the same period a year ago, higher than the 1.6 per cent increase in the overall consumer price index.

But healthcare in Singapore can be affordable. The system has multiple tiers of protection to ensure that no Singaporean is denied access to basic healthcare because of affordability issues.

The first tier of protection comes from heavy government subsidies which all Singaporeans can access. The second tier of protection is provided by Medisave, a compulsory individual medical savings account scheme which allows practically all Singaporeans to pay for their share of medical treatment without financial difficulty. The third level of protection is provided by MediShield, a low-cost catastrophic medical insurance scheme.

Finally, there is Medifund, a medical endowment fund set up by the Government to act as the ultimate safety net for needy Singaporean patients.

Mr Tan Kuan Ho, Great Eastern Life’s Acting Chief Product officer said: “One should not wait until old age to plan for healthcare needs as being older, the time horizon for savings may be shorter and premium rates for protection insurance would be higher as premiums usually increase with age.”

One useful instrument in your medical financing toolkit is Central Provident Fund (CPF) savings, which you can use to pay for certain things such as your healthcare insurance premiums, outpatient or hospitalisation bills.

Tips to utilize your Medisave Account funds effectively

1. Know what Medisave can be used for

A part of your monthly CPF contribution will go into your Medisave Account, which can be withdrawn to pay for your healthcare needs or that of your immediate family.

Currently, between 7 and 9.5 per cent of your wages go to the Medisave Account, depending on how old you are. The contribution rate increases as you age.

Among other things, you can tap Medisave to pay for certain health screenings, outpatient treatments of some chronic diseases and premiums for MediShield.

The Ministry of Health (MOH) regularly updates and expands the list of procedures and treatments that can be paid using Medisave, so it reduces your out-of-pocket expenses if you know when you can use Medisave. For example, from January 2014, you can use Medisave to help pay for the treatment of five more chronic conditions, including Parkinson’s disease and osteoarthritis.

But before you go around using your Medisave for every eligible bill, financial advisors urge you to think again. Ms Lau Sok Hoon, Vice-President at NTUC Income’s Group and Health Division, said: “Everyone should exercise caution when using Medisave as there may not be sufficient funds in the account when he or she needs it. Also, the Medisave Account currently offers an attractive 4 per cent interest, which is another reason to keep the funds in this account.”

Another factor to bear in mind is the Medisave Minimum Sum, or the minimum amount you must leave in your Medisave Account when you withdraw your CPF savings. That figure has been on the rise, and it currently stands at $40,500 for Singaporeans turning 55 from July 1, 2013 to June 30, 2014. Even if you can attain the Medisave Minimum Sum, the money may not be enough to last you a lifetime.

Mr David Ng, Chief Marketing Officer, Prudential Singapore, said: “The reserve that we have set aside for Medisave would not be sufficient to cover escalating healthcare costs. In addition there may be a preference for higher-class wards, which would add to costs.”

Insurers say a better way to prepare for such an eventuality is to use your Medisave to buy insurance.

2. Pick the most suitable MediShield plan

A low-cost basic medical insurance scheme, MediShield is meant to cover large hospitalisation bills incurred at B2 or C class wards. In 2012, 92 per cent of the resident population were covered under MediShield, and less than 1 per cent of policyholders opted out of MediShield, according to an MOH spokesman. Annual premiums for MediShield can be paid using money from your Medisave Account.

You pay between $50 and $1,190 every year for the coverage, with the premium progressively higher as you grow older. If you want coverage for a higher-class ward or a private hospital, you will need to pay more for the options by buying Integrated Shield plans offered by private insurers, which give other benefits on top of the basic MediShield.

Currently, you can use your Medisave to pay for the premiums of the Integrated Shield plans offered by AIA, Aviva, Great Eastern, NTUC Income and Prudential, up to a stipulated withdrawal limit. It is tempting to make comparisons simply on the basis of the additional cost alone, but that would not be wise.

Mr Daniel Lum, Director of Product and Marketing, Aviva Singapore, said: “Integrated Shield plans offered by the various insurers vary not just in terms of premiums but also benefits. Rather than simply comparing premiums, consumers should look at the benefits to ensure the plan they’ve selected best suits their needs.” For example, some insurers already offer lifetime coverage now, ahead of MOH’s planned launch of MediShield Life, which will provide medical coverage for life.

Other Integrated Shield plans offer coverage for pre-existing conditions, overseas medical treatments and also insure your children for free up to a certain age.

Ms Ho Lee Yen, Chief Marketing Officer, AIA Singapore, said: “Health insurance is anything but a one-size-fits-all product and different schemes offer benefits to people of diverse financial and protection needs. If you are undecided on an Integrated Shield plan, you should meet up with your insurance advisor.”

3. Look beyond medical insurance

Mr Tan said healthcare coverage should also be viewed more holistically, so if you can afford it, consider an income protection insurance plan. Such policies give you payouts when you are unable to work due to a disability or an illness. If all else fails and you do not have much in your Medisave Account, there is still Medifund, an endowment fund set up by the Government.

This article is adapted from "How to get the max out of Medisave", The Sunday Times, dated November 3, 2013.

Ref: R14