By Laura du Preez
Many medical scheme members who belong to options that provide cover for day-to-day healthcare costs through a medical savings account, find their accounts depleted before the end of the year – sometimes long before.
There are a number of steps you can take to make your savings last longer, but there may also be times when you have to face up to the fact that your savings may not be enough and you should set aside additional savings for your needs.
Make your savings last
- If you want your savings to last, you need to make good decisions about how to use the money:
- Do not use your savings account to pay for over-the-counter medicines;
- Choose cheaper generic medicines whenever you can;
- Look for doctors and dentists who charge lower rates – if your scheme refers you to doctors it may have negotiated favourable rates with them;
- Choose cheaper frames for glasses;
- Opt for more affordable dental procedures;
- If you have a prescribed minimum benefit (PMB) chronic condition, ensure your consultations and chronic medicines are paid by the scheme;
- If you have any other PMB condition, such as pneumonia or depression, check how your scheme covers this and try to get your claims covered; Read more: What is a prescribed minimum benefit?
- Check what benefits your scheme offers as, and make use of, preventative benefits such as those for pap smears, mammograms, prostrate cancer screening, dental check-ups and flu vaccines.
It may still not be enough
Despite taking all the steps to choose more affordable healthcare services and use the benefits your scheme provides to ensure your medical savings account lasts, it may still not be enough.
Medical schemes are by law not allowed to use more than 25% of your contributions to fund your medical savings account.
On a lower-cost option in particular, the rand amount may be low. And if your medical needs are high and not covered by the PMBs, your savings may soon run out.
In this case, you can consider upgrading your cover or setting aside additional savings for medical expenses yourself.
Consider how much you have spent on average on day-to-day health care out of your own pocket over the past three years. If you have submitted all your healthcare costs to your scheme, it should provide you with a certificate showing the amounts the scheme did not cover.
If you did not submit all your expenses, you will have to work out how much you spent from your own pocket.
If you are consistently paying claims from your own pocket, consider – or ask a medical scheme broker to consider - a more expensive scheme option. Compare the amount allocated to a medical savings account for the year to what you are currently contributing.
Then compare this to the increase in contributions you will pay in a year.
A higher medical scheme option may give you more savings or even offer you the protection of an above threshold benefit – a benefit that pays some of your day-to-day expenses once your savings are exhausted.
But it may cost you a lot more in contributions. You need to consider what additional benefits that will bring you and if it is worth it.
If you are a disciplined saver it may be more cost-effective to save the additional contributions yourself.
Your own dedicated savings
You should consider a dedicated savings account for your day-to-day medical expenses if your medical savings account within your scheme is routinely depleted before year end.
You can set aside savings for medical expenses in any savings account that offers immediate access to your funds.
Some medical scheme administrators offer savings accounts for medical expenses that are outside of the scheme. Using these accounts may bring benefits from associated loyalty or rewards schemes.
Any payments by members or their employers to these accounts are not regarded as medical scheme contributions for the purposes of the medical scheme fees tax credit. Read more: What is a medical tax credit?
Savings into such an account is also unlikely to qualify for a subsidy from your employer.
Expenses paid through these products may qualify as tax deductible medical expenses. However, they will need to meet the criteria to be qualifying expenses and exceed the thresholds for the additional medical expense tax credits set in the Income Tax Act.
This article was originally published on SmartAboutMoney.co.za, an initiative by the Association for Savings and Investment South Africa (ASISA)
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