Medical cost are going up again in 2020
By Bruce Cameron (Semi-retired founding editor of Personal Finance of Independent Newspapers and co-author of the best-selling book, The Ultimate Guide to Retirement in South Africa.)
Every year Alexander Forbes publishes a Hot Topics Insight, which is aimed mainly at trustees and administrators of funds who also attend seminars on the publication at which skilled professionals of Alexander Forbes deliver presentations.
The topics should not be restricted to trustees and administrators. It is important that everyone gets a chance to see what their trustees and administrators are doing.
Bruce Cameron will write about the latest Hot Topics report of Legal and Regulatory Insights to show what you should also be considering.
Hunker down! Medical cost are going up again in 2020 by 3% to 4% above inflation!
These increases in the current economic climate, says Butsi Tladi, a consulting executive at Alexander Forbes, are likely to impact in option downgrades and cancellation of membership.
She says that over the past 18 years that the annual rate of inflation for contributions, medical care and healthcare expenses has soared. With an average inflation rate of 5,7%, medical scheme contribution have increased at a rate 7,6% a year while medical care and health expenses have gone up at an average rate of 7,5 percent a year.
And part of these figures over the average of 1,9% a year over inflation are hidden because of the changes to medical scheme benefits.
The main reason for the above inflation rate increases are:
Tariffs: High increases in health care service provider fees and in hospital admission rates.
Utilisation: A rising burden of disease, more use of benefits and new medical technologies.
Reserves: Medical schemes must maintain reserves of at least 25% of gross contribution income.
Benefit changes: Benefit enhancements.
Tladi says the main reason for reducing the gap lie in your hands and that of the medical scheme.
Efforts by medical scheme to manage the costs paid to providers;
Buy-downs to lower costs benefits. The lowest entry cost to a medical scheme costs about R870 a month;
Changes to family-size, possibly reducing dependents due to affordability constraints;
New entrants joining low-income options.
Tladi says that it is important you receive advice in making choices. She says you pay for this advice whether you use it or not. The fees are 3% of contribution premium to a maximum of R94,77 a month.
An adviser will help you make the right choice and will continue to provide you with intermediary services.