Healthcare: We all need to do our bit

Healthcare funding has gone through the roof according to October 2012 OECD figures which report that in 2010 healthcare spending per person rose from $294.87 in 2000 to $379.18 in 2010. This is a whopping increase of 28.6%. If this isn’t bad enough, then consider public health funding which has gone from $1,501.13 per person to $3,011.79 per person in the same period - an increase of 100.6%

New Zealanders will need to shoulder more of their own healthcare costs as public finances become increasingly stretched, health insurers say. The warning comes after another record year of private health insurance claims, with $876 million in payouts last year - up 5.2 per cent on the previous year. New Zealanders pay for 10.5 per cent of their own healthcare while the government contributes 83.2 per cent, according to the OECD figures.

Private insurers contribute about 4.5 per cent, according to the Health Funds Association. That puts New Zealand's total private health expenditure at about 17 per cent - well below the OECD average of 28 per cent.

There is no denying that healthcare costs will rise due to increasing costs of surgery, plus more people living longer and hence needing more health care in later years. Add to this the obesity epidemic, new strains of flu and all the other ailments associated with modern living and it becomes obvious that New Zealand is heading towards a healthcare tipping point. The government cannot keep providing ever increasing sums of money to prop up the health system, people are unlikely to stop getting sick or injured, so inevitably the public will need to increasingly self insure plus buy various forms of medical insurance to meet their healthcare expectations.

What can you do about all this?

If you are already well into retirement then the answer is not much. Your longevity, genetic composition plus your lifestyle up to this point will have a big influence on your remaining health needs. Stay mentally and physically active, don’t make any hasty decisions to cancel your medical insurance without getting good advice, and understand your full entitlement to medical benefits and hospital access. If medical insurance is not an option then be prepared to spend some of your retirement funds paying for and operations required. It is better to spend your money on your health and welfare, than give it to the kids.

If you are still working then your healthcare options are far greater. Consider:

• Getting and staying fit and eating correctly. This is a key part of self-insurance as it will hopefully reduce your healthcare demand. Money spent on these activities is akin to a form of long term investing - you are investing now to avoid increased expenses in the future.
• Develop a specific medical fund. This is common overseas where healthcare costs are astronomical. Not only do you set up a retirement fund, but you also concurrently establish a healthcare fund. The idea behind this being that in the event of you requiring surgery and it being not available in a reasonable time via the public system, then you dip into this fund to get the job done.
• Seek professional advice on the most appropriate form of medical insurance and which provider to purchase it from. This is a key step as you may end up remaining with that insurer for the rest of your insurable life. The Milestone team can guide you through the medical insurance minefield and identify a policy best suited to your situation.

The message is clear. We all need to shoulder the healthcare burden. If you want quality health care at a time of your choosing then you will need to pay for it - either via a lump sum from your savings or via a drip feed payment using medical insurance where the insurer takes on the risk of funding your current and future healthcare needs.

Talk to your Milestone adviser on what is the best option or combination of options for you.