Hospital plan or full cover medical aid?

A popular misperception is that a “hospital plan” is not medical aid or that an expensive, comprehensive medical aid plan provides better cover than a hospital plan.  Bigger medical schemes or expensive medical aid benefit options will, however, not give you a better bed in hospital.

With approximately 130 benefit options to choose from in the open medical scheme market in South Africa, it is important to do your homework properly and to make sure you get the medical aid benefit option that offers the best cover when it comes to your healthcare needs along with what you can afford.

Whether you are on a basic hospital plan or a full cover (comprehensive) medical aid benefit option, Regulation 8 of the Medical Schemes Act of 1998 determines that a medical scheme has to fund the full cost for the treatment of a list of 270 Prescribed Minimum Benefit (PMB) conditions – irrespective of what the service provider may charge in the private sector even if it has not appointed a designated service provider (DSP).

In reality, however, most hospital admissions are related to PMB conditions some of which include cancer, stroke, heart disease, fractures or open wounds, cataracts, appendicitis, hernias, aneurysms, pregnancy, respiratory conditions, pneumonia, asthma and diabetes – to name but a few.  Whether you are on a hospital plan or a full cover option, it makes no difference – your medical scheme must cover the in-hospital treatment cost in full – either at any private hospital in South Africa or at their DSP.

“So, what is the difference?” one might ask.

While the cost of medical aid benefits may vary significantly, one of the biggest differentiating factors lies in the amount of out-of-hospital (day-to-day) benefits available.  Let us demonstrate this with the following example:

Hospital Plan A

 Full Cover Medical Aid

(Hospital Plan A + 25% Savings)

Monthly contribution per adult

 

R1,665

R2,225

Annual contribution per adult

 

R19,980

R26,700

Annual cost difference

 

+ R6,720

Annual savings

 

R0

R5,820

Total “net loss”

 

R900

The only difference is that on the full cover medical aid benefit option, you have the benefit of a medical savings account to the value of R5,820 per annum.  This can be used to pay for your out-of-hospital medical expenses such as doctors’ visits, medication, prescription glasses, visits to the physio, etc. but to enjoy this benefit, the hard cost to you is R6,720!  That’s right – an annual savings account of R5,820 will cost you R6,720.In essence, the two benefit options provide exactly the same risk benefits – in other words, unlimited hospital cover for qualifying medical conditions at any private hospital in South Africa, cover for the diagnosis, treatment and care of 26 chronic conditions, as well as “pay in full” cover for a list of 270 PMB conditions.

Why?

Having a medical scheme managing your savings account (your own money) is probably one of the most expensive forms of saving.  It is your own money, but your scheme manages it on your behalf as they use your savings fund to reimburse out-of-hospital claims on your behalf.  You therefore “pay more” than what you “get out” because your monthly contribution includes admin charges and brokerages fees based on your total (risk + savings) contribution.

It therefore makes a lot more financial sense to rather select a good hospital plan and to pay for your out-of-hospital medical expenses on an “as-and-when needed” basis.  That way, you will actually have more money available to fund your day-to-day medical expenses.

Our example above was based on one adult’s contribution.  The cost implication and savings benefit of a hospital plan only will of course increase exponentially when you add your family.

Higher contributions or a medical savings account may not always equal better benefits.  At the end of the day, medical scheme cover is there to provide peace of mind and access to funds for private healthcare, i.e. the “big ticket” costs.  It may be wiser to take care of your day-to-day expenses from your own pocket.

Do your homework first.

Some hospital plans or full cover medical aid benefit options do provide additional cover by means of extended cover for chronic conditions, access to ethical drugs, unlimited cancer cover, etc. but these options cater for specific and / or extended medical cover.  The “average person” that is young and healthy, who wants to belong to a medical scheme “in-case something happens” may do themselves a favour by opting for a hospital plan only.

The information provided herein is for information purposes only and is not intended to flout or in any other way compromise the conditions prescribed in the Financial Advisory and Intermediary Services Act’s General Code of Conduct insofar as comparing different financial products with each other is concerned. Nothing herein contained is intended to be advice and any uncertainty regarding anything said should be referred to an accredited financial advisor.
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