Basic Medishield vs Private Shield Plan

Recently a friend of mine showed me an article regarding the Basic Medishield Plan. Apparently the author argued that "the insurance that offers the best value for money is the basic Medishield offered by the Central Provident Fund", and he asserted that there are 3 reasons for that:

1) A private shield plan gives you 50% more coverage at the expense of a premium which is 100% more costly.

2)When the Basic Medishield plan is unable to pay for your medical expenses at a private institute, you can always choose to 'top-up' your medical bills using your savings.

3) The risk of the above (point 2) occurring is "likely to be quite low."

This issue brings to mind a real-life example of how limited the Basic Medishield Plan can be. Ms Chew wrote to the Straits Times lamenting that the Basic Medishield Plan paid only $1,438 of $50,000 hospital bill ("MediShield paid $1,438 out of $50,000 hospital bill", The Straits Times, 28/11/2006). There are a few crucial points which can be gleaned from her experience:

1) When it comes to seeking medical treatment, not everyone will have the luxury to analyze the cost of treatment and then to seek the most 'cost-effective' treatment. This is due to 2 reasons:

a) The inception of means testing means that even if one wish to choose the class C and B2 wards, one might not qualify for the 80% subsidy.

b) Another reason is due to the emotional aspect of preserving life. There are two other examples to illustrate this point. The parents of 12-years-old Marjorie Soh spent $400,000 in medical bills for her cancer treatment ("Girl, 12, dies after battling cancer for 6 years", The New Paper, 22/07/2009). Also, 4-years-old Charmaine Lim needed USD$350,000 in order to seek cancer treatment in New York.

The point is, does anyone have the capacity to haggle over the cost of treatment? Do you know exactly how much your medical bills are? If you don't, then the private shield plans - with the 'as-charged' feature - will offer a better package than the basic MediShield plan with all the limitations such as paying only a mere $270 for a 7-day treament cycle of chemotherapy! (in comparison with the hefty bills of the above cases)

2) This brings us to the second point. How much savings do you intend to part with in order to top-up the difference? Are you willing to pay $48,000? $100,000? How about your entire retirement funds?

3)The risk of incurring these medical bills might be low simply because one is not in the shoes of the first-party. The point is such risk can happen to ANYBODY, and when such calamity befalls an individual or family, the impact is 100%.

So, be wary of being "penny wise and pound foolish".