Medisave is one of three accounts that form our Central Provident Fund (CPF). Unlike the Ordinary Account (OA) and the Special Account (SA), Medisave is more complicated, with various clauses in place to govern the use of the funds within the account.
Recently, we were invited to join a CPF focus group and there were feedback from other participants within the group who felt that Medisave was like a “Black Hole”. This is because you can never ever see that portion of your savings in the form of cash in your life.
But what is this “Black Hole”, and more importantly, why is it essential for Singaporeans?
What is Medisave?
Medisave is a national healthcare savings scheme that was established with the intention to help every Singaporean prepare for accidents that could potentially deplete their savings through costly medical bills.
While we can never be sure of when an accident or illness may occur to our loved ones, or ourselves, what we are sure about is that medical cost will consistently be rising.
The Ministry of Health introduced the Medisave scheme in 1984 and made it mandatory for all Singaporeans to set aside a certain portion of their salary for medical expenses.
Exhibit 1: Contribution and Allocation Rates to CPF w.e.f. Jan 2016
|35 and below||23||6||8|
Source: Central Provident Fund Board
Some facts of Medisave worth knowing.
1. You will earn 4% interest on balances in your Medisave
2. Starting from 1 January 2016, the Medisave Minimum Sum (MMS) has been removed. As such, you will no longer need to top-up your Medisave to meet the MMS before making a CPF withdrawal at 55.
3. The only limit on your Medisave Account, is the Basic Healthcare Sum (BHS), previously known as Medisave Contribution Ceiling (MCC). The BHS is the maximum amount you can have in your MA. The BHS will be adjusted yearly to account for increasing life expectancy and healthcare costs and will be fixed when you turn 65.
What can I do with my Medisave?
Use it to stay healthy:
Prevention is always better than cure. Early detection can greatly reduce total healthcare cost, since most costly medical fees are incurred when the condition of the patient reaches its final stages.
Under the Medisave400 scheme, the Ministry of Health is encouraging Singaporeans to take up preventive measures such as early detection and vaccination.
This scheme also allows us to use our Medisave to pay for our children’s vaccination and certain newborn test.
Starting a family:
A common problem in our country is that we are not reproducing enough babies to replace our population. Medisave allows those who are seeking help in conceiving a child, to be able to pay for professional consultation and procedures of up to $6,000.
As parents welcome their young ones into our little red dot, they are allowed to use their Medisave to pay for hospital charges, delivery procedures and pre-delivery expenses.
Our Medisave is largely created to serve the purpose of paying for prolonged and regular treatments that will be expensive in the long haul. These illnesses can be a huge financial burden for families, especially those who do not have sufficient cash to pay for these treatments. Rather than to accumulate debt for these costly medical treatments, Medisave is one avenue that Singaporeans can tap upon.
Treatments include but are not limited to, cancer chemotherapy, renal dialysis, antibiotic treatment and long-term drug intake.
Paying for medical and long-term care treatment:
Medishield Life will kick in from November 2015, where it will become mandatory for every Singaporean to participate in. It is a national healthcare insurance scheme that does not discriminate between healthy people and those with existing conditions, the elderly or those with special needs.
Alike all insurance schemes, premiums must be paid and these premiums can be paid using the monies in our Medisave.
Other uses of Medisave:
1. Premiums for private integrated shield plan.
2. Regaining mobility after hospitalization
3. End-life care (inpatient hospice and home palliative care)
Withdrawal limits in Medisave
Withdrawal limits are set in place to prevent Singaporeans from depleting their Medisave too quickly in the event of an illness.
In our opinion, the withdrawal limits have been set at a prudent level to balance between the cost of medical treatment, and the importance of ensuring that people have enough money in their Medisave for future uses.
Is Medisave essential to Singaporeans?
According to MasterCard
, Singaporeans’ financial literacy has declined from 2nd place to 6th place across 16 Asia Pacific countries where the survey was held. We also performed one of the worst based on overall basic money management.
We believe that Medisave is an essential instrument for each individual healthcare needs. Collectively, it is an important tool to also ensure that our country does not end up being in a situation where funds are extensively deployed to cover healthcare needs simply because individuals do not bother to save or get appropriate insurance coverages. Dumping personal responsibility onto the government should not be encouraged.
Even while some people may call it a “Black Hole”, it is this very same “Black Hole” that we might one day find ourselves needing to tap upon for our healthcare needs.