Watched Satyamev Jayate
episode on state of healthcare in India today (27/05/2012). One of the issues which attracted lot
of sound bites was high cost incurred on medical treatment today. One study
estimates demand for healthcare to be increasing at a rate of 25% a year. This
demand coupled with growing middle class and rise in cost of medical treatment
raises the costs of medical treatment even further.
With a rise in lifestyle
diseases and high healthcare costs, lack of adequate health insurance coverage
can severely impact not only your finances, but can also derail achievement of your
financial goals.
However, it is sad that the
concept of adequate health insurance is still missing in India. Cost of medical
insurance is usually treated as sunk costs and hence low priority is accorded
to it. Further we usually do not want to believe that we will be facing a
medical emergency ever—until we face it.
The most popular personal
medical insurance—Mediclaim-- are-imbursement medical insurance policy offered
by private & public sector insurance companies. While the maximum coverage
offered by public sector mediclaim insurance companies is Rs. 5 lacs, private
companies offer a higher coverage.
Health insurance is a hospitalization cover where the actual medical
expenses are reimbursed subject to overall limits as set by companies. This is
termed as individual health insurance.
Where the entire family is
covered under a single insurance policy is called Family Floater Policy. The
logic of such a policy—which is cheaper than individual cover-- is that all the
family members are less likely to fall sick together. This results in higher
coverage for the family member who may need the coverage in any eventuality.
Another type of medical
insurance (it is a rider benefit) which is available is called Critical Care
Insurance. This is a replacement type of insurance rather than re-imbursement.
Under such a policy the entire sum assured is paid on diagnosis of a specified
disease---irrespective of actual expenses incurred. Critical illness like
·
Kidney Failure
·
Cancer
·
Stroke
·
Heart Attack
·
Major organ transplant (as a recipient)
·
Coronary Artery Bypass Graft Surgery
The above is not exhaustive
and the list of critical illness may vary from company to company.
For salaried individuals,
where employer normally subscribes to a group insurance plan for the benefit of
employees, and non-salaried people the critical care policies—if subscribed by
them-- can be a blessing in disguise. In such cases, while mediclaim takes care
of actual medical expenses, payment of the guaranteed sum assured ensures
that the family finances are not disturbed and the person can meet his life’s
goals.
However, one of the basic
flaws in medical insurance policies is that your cover mostly expires at age
65—the period when you are most likely to fall ill.
So does it mean that post
retirement, meeting medical expenses should be left to chance, or should it be
met out of your retirement fund?
The answer is big no! You can
make your own health insurance by investing a small sum every month till you
retire. (Goal based planning)The fund so accumulated can fund your medical
treatment even when you do not have the security of medical insurance. For
example if you invest Rs. 1000 per month(less than the cost of a movie at
multiplex) in a Monthly Income Plan(MIP) of a mutual fund religiously for say
40 years (typical working life) @ 8%, then you would have accumulated close to
Rs.35,14,280—a decent fund to meet medical exigencies.