It’s on the cards

Ad­van­tages of own med­i­cal debit card against med­i­cal aid sav­ings plan

Finweek English Edition - - MONEY CLINIC - VIC DE KLERK vicd@fin­week.co.za

“OH SIR, I’M SORRY – your med­i­cal aid’s sav­ings plan is used up. You’ll have to pay for the flu medicine your­self,” the new phar­ma­cist at my lo­cal chemist told me hes­i­tantly. “Re­lax, my girl. We don’t have a med­i­cal sav­ings plan, only a hos­pi­tal plan, which also makes pro­vi­sion for chronic med­i­ca­tion.” I was able to set her mind at rest while giv­ing her an or­di­nary debit card for the ap­prox­i­mately R600 of med­i­ca­tion an un­timely dose of flu cost me mid-sum­mer.

A week or two later I was talk­ing to my au­di­tor about ex­actly how much med­i­cal ex­pen­di­ture I can deduct from my in­come tax this year, since it’s my first year of be­ing older than 65. Sud­denly he re­alised he also still had the stan­dard kind of med­i­cal aid, where you con­trib­ute monthly for your hos­pi­tal in­surance and med­i­cal sav­ings plan, and had never thought about what a med­i­cal sav­ings plan re­ally is.

We’re both with Dis­cov­ery, by far South Africa’s largest med­i­cal aid ad­min­is­tra­tor. We’re both very happy with the ser­vice and I have the fur­ther plea­sure of know­ing we bought quite a large num­ber of its shares a few years ago at less than R10 each. The cur­rent price of R40/share is a nice bright green spot on my port­fo­lio.

The au­di­tor, Ger­hard, and I quickly an­a­lysed his med­i­cal aid con­tri­bu­tions, as well as work­ing out what my tax po­si­tion would be now I’ll never see 64 again. Ger­hard as­sured me he has R20 000 or a bit more con­ve­niently avail­able some­where. His con­tri­bu­tion to the med­i­cal sav­ings fund – note: not the hos­pi­tal plan – is around R36 000/year for a fam­ily of four, which will pay for the usual pills, specs, doc­tors, den­tists, blood tests and spe­cial­ists. Dis­cov­ery does that for him – but with his money, hence the name “sav­ings plan”.

A quick look at Dis­cov­ery’s lat­est an­nual re­port shows not ev­ery­thing you pay in on the sav­ings plan is made avail­able to pay for doc­tors and medicine. Af­ter all, Dis­cov­ery has ad­min­is­tra­tion and mar­ket­ing costs.

Ger­hard and I be­gan mak­ing plans to get a ded­i­cated debit card at the bank to pay our or­di­nary med­i­cal costs. That’s ev­ery­thing ex­cept hos­pi­tal. Kick off with a R20 000 or so de­posit and pay in R3 000/ month, whether you’ve had med­i­cal ex­penses or not.

At year-end the bal­ance on the debit shouldn’t be worse than the bal­ance on your sav­ings plan with Dis­cov­ery. In fact, there should be more money over. Af­ter all, there aren’t any ad­min or mar­ket­ing costs – or profit – to be de­ducted.

The state­ments for the debit card to­gether will also serve as the records of what your med­i­cal ex­penses were for the year. Tax­pay­ers aged over 65 can deduct all their med­i­cal ex­penses. So rather than a box full of all your re­ceipts, the card will serve as a record and that will pre­sum­ably be suf­fi­cient ev­i­dence to keep the tax­man happy.

In­surance against the un­known is ab­so­lutely es­sen­tial – and that’s why a hos­pi­tal plan isn’t ne­go­tiable. But if you’re a dis­ci­plined kind of per­son – es­pe­cially if you’re self-em­ployed – an or­di­nary debit card you pay into ev­ery month won’t only give you more peace of mind than Dis­cov­ery’s med­i­cal sav­ings plan, or any other one, but in ad­di­tion you get ev­ery­thing back you used for pills and so on.

Just to put our the­ory to the fi­nal test, we com­pared it with in­surance on our cars. By chance, we both use OUT­surance. Our cars are in­sured against third-party, fire and theft: that means even if you hap­pen to touch some­one else’s car if some­thing goes wrong at a stop sign or if you re­verse with­out look­ing and have for­got­ten there’s a gate back there. That’s in­surance. But nei­ther of us pay OUT­surance a monthly amount to cre­ate a sav­ings fund for run­ning ex­penses, such as fuel, new tyres or me­chan­i­cal re­pairs. So why should we do so with Dis­cov­ery – just so that we can pay R600 for flu medicine?

Your own med­i­cal debit card sounds so ob­vi­ous there must be a catch some­where. Here’s hop­ing Dis­cov­ery or one of the other med­i­cal aids will tell us more next week about the ben­e­fits of their sav­ings plan com­pared with an or­di­nary debit card.

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