Blue Chip Issue 89

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BLUE CHIP FINANCIAL PLANNING | Medical aid Limiting medical aid increases isn’t the answer Earlier in the year, the Council for Medical Schemes (CMS) recommended that medical aid schemes cap their contribution increases for 2023 at 5.7%. On the face of it, limiting medical aid increases looks like a prudent cost-cutting measure. The bigger challenge is that private healthcare is not sustainable in its current format. There is clear overservicing in many areas. That’s why both the private and public healthcare systems need to be reviewed to come up with a system that affords all South Africans access to decent healthcare. In the meantime, the healthcare industry is trying to balance affordability and sustainability. It’s essential that the industry finds ways to manage rising healthcare costs. However, restricting contributions to medical aid schemes is a blunt response to a complex and nuanced situation. The harsh reality is that few if any medical aid schemes will adhere to the 5.7% contribution cap being proposed by the CMS. Claims have gone back to pre-Covid levels, so schemes will come under severe financial pressure if they don’t make more realistic increases now. What type of increases can we expect? In general, medical inflation is around 3% higher than the consumer price index (CPI). What that means is that we can expect to see increases of at least CPI plus 3%, if not more. Some schemes will justify contribution increases above inflation due to some industry-specific cost factors. We’re already seeing hospitals increasing their prices by 10% or more, for example. It doesn’t help that providers hike their rates by 10%, but funders can only increase their contributions by 5.7%. That’s simply not sustainable. To ensure the sustainability of schemes, we anticipate increases of between 7% and 10%. Of course, the bigger question is what steps need to be taken to create a more sustainable and equitable healthcare system. At the moment, there are about 4.5-million registered members of different medical schemes, serving a total of around nine-million beneficiaries. That leaves 51-million South Africans who rely on the public health system. And here, the elephant in the room is National Health Insurance (NHI). Make no mistake, an NHI is necessary, because everybody in the country has the right to access decent healthcare. As we know all too well, there are several challenges to NHI. Perhaps the biggest of those challenges is that there’s low to zero trust in the ability of government to manage what will effectively be a medical scheme that’s 20 times bigger than Discovery. Then there’s the funding of the NHI, which remains a well-kept secret. Throw into the mix the chronic shortage of doctors, nurses and facilities in our country, and you’re starting to get an idea of the mountain facing NHI. Medical schools are still generating the same number of doctors they did 30 years ago, and our population has doubled since then. At the same time, the brain drain is robbing us of the highly trained medical professionals our healthcare system is crying out for. The bottom line? NHI may not be fully implemented in our lifetime. We’re already seeing many members downgrading their plans and options, and any further increases will only put more pressure on consumer wallets that are already under immense strain. Most of the larger medical aid schemes have introduced network options to maintain affordability. Other than that, their options are limited in the current healthcare setup. The best thing medical aid members can do at this stage is to speak to an informed broker to ensure they get the best coverage for their family’s needs at a price point they can afford. Ultimately, balancing affordability with the provision of quality healthcare requires a holistic approach that recognises the complex relationships between the various stakeholders in the system. Until then, we’re not going to reduce healthcare costs, let alone ensure a robust and sustainable healthcare ecosystem for all. Gary Feldman, Executive Head of Healthcare Consulting, NMG Benefits 80 www.bluechipdigital.co.za
FINANCIAL PLANNING | Retirement BLUE CHIP How to support your ageing parents financially A growing number of South Africans are finding themselves supporting their ageing parents, thanks to the combination of a tough economy and insufficient retirement funding. It’s critical to plan this key transition carefully to ensure your own finances stay on track and to maintain a healthy relationship with your parents. Financially preparing for ageing parents is an important responsibility that requires proactive planning and open communication, says Stian De Witt, CFP®, executive head of financial planning at NMG Benefits. By starting early, establishing budgets, understanding healthcare costs, seeking professional advice and regularly reassessing the plan, you can make a major impact on your parents’ financial stability. Here’s how to help your parents ensure their long-term financial security and well-being. Start the conversation This is the first and most crucial step to helping your parents with their finances. Have an open discussion with your parents about their financial situation, including their income, savings, investments and any debts they have. This will help you to understand their current financial situation and how much support they will need. Estate planning is important for the entire family. Create a budget If your parents don’t already have a budget, help them to set one up. Ask if you can look at their bank statements to make sure there are no hidden costs, such as banking charges. See if there are ways for them to save money, like downgrading their cellphone contracts. They could also trade their car in for a more economical model. Assess their healthcare requirements This is a key element of financial planning for the elderly. What are the future healthcare costs you need to consider? Do your parents need chronic medication? Will they need specialised treatment in future? If they have a medical aid, make sure they’re on the most appropriate plan for their budget and needs. Here, the help of a financial planner could make all the difference. Get their estate planning up to date Estate planning is important for the entire family. If they don’t already have one, encourage your parents to create a will and get all their financial documents and policies together in a safe place. This is a vital step to make sure their wishes are respected. It will also help avoid delays and legal complications that arise when an estate is wound up without a will in place. Get professional advice Speak to a professional financial advisor about your own financial plan, and that of your ageing parents. Regularly review and update these plans as your circumstances change. Make sure you stay involved in their financial matters to provide ongoing support as they need it. Be sensitive and empathetic This is a difficult time for your parents as well. Make sure they understand you’re not trying to take away their independence, and that any assistance you provide is based on their preferences and needs. “Being prepared, having a plan in place and monitoring your plan regularly will give your family the best chance at achieving your financial goals and keeping your loved ones financially secure,” says De Witt. Stian De Witt, CFP®, Executive Head of Financial Planning at NMG Benefits www.bluechipdigital.co.za 81
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BLUE CHIP 0.5 CONTINUOUS PROFESSION
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CONTENTS ISSUE 89 NOV/DEC/JAN 2024
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CONTENTS ISSUE 89 NOV/DEC/JAN 2024
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BLUE CHIP FPI UPDATES | CEO message
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BLUE CHIP On the money Making waves
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BLUE CHIP On the money Making waves
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RCA-BCJ-23-2 Our tailored platform
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BEHAVIOURAL FINANCE | Books BLUE CH
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COLUMN BLUE CHIP Consider paying of
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FPI | Financial Planner of the Year
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BLUE CHIP FPI | Research The power
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BLUE CHIP FPI | Research • 84% ag
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BLUE CHIP CLIENT ENGAGEMENT | Behav
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BLUE CHIP CLIENT ENGAGEMENT | Behav
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Page 37 and 38: INVESTMENT | Economy BLUE CHIP 1% o
Page 39 and 40: INVESTMENT | Asset management BLUE
Page 41 and 42: Partner with us, become an FPI Appr
Page 43 and 44: MAKE YOUR MONEY WORK ANYWHERE. At O
Page 45 and 46: INVESTMENT | Economy BLUE CHIP Thin
Page 47 and 48: FINANCIAL PLANNING | DFM BLUE CHIP
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Page 51 and 52: Help us create a better tomorrow. I
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Page 55 and 56: FINANCIAL PLANNING | Self developme
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Blue Chip Issue 89

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