Healthcare in Retirement: How to insure yourself amid rising medical costs

Medical inflation ranges from 15% to 45% compared with normal inflation of 6-8% per annum. With more people falling prey to lifestyle diseases, retirees have to deal with the astronomical costs of medical treatment for not only themselves but their spouses as well.

Spending on the healthcare sector has increased tremendously in the past few years in India. As reported by the Insurance Regulatory and Development Authority of India, the medical inflation scale hovers around an average of 14%-15% per annum. This pattern shows that the cost of medical treatment is increasing at the same proportionate rate and doubles every three to five years.

Costs of common surgeries

Here are the typical costs of various surgeries in India:

1. Knee replacement: ₹3,00,000 to ₹5,00,000

2. Bypass surgery: ₹2,50,000 to ₹7,50,000

3. Angioplasty: ₹2,00,000 and ₹6,50,000

4. Cataract surgery: ₹25,000 to ₹50,000 per eye

5. Hip replacement: ₹3,50,000 to ₹5,50,000

While most of these costs are covered by health insurance, hip replacement and cataracts are not covered by normal health policies and are treated as exclusions. Therefore, investors need to create a separate health fund at the start of their retirement to cover such exclusions.

Planning for healthcare in retirement

1. Top-up plans

Taking a top-up plan or a super top-up plan dramatically reduces the cost of health insurance while also widening the scope of coverage. Further, deductibles and copay options reduce the premium. Youngsters should purchase medical insurance before marriage because some providers cover maternity benefits only after a waiting period.

Look for health policies that allow enrolment of pre-existing ailments once a certain cool-off period is completed and for policies allowing restoration of benefits.

2. Critical illness coverage

Apart from general health insurance, it is possible to insure oneself for critical illnesses including certain types of cancer, strokes and heart attacks. These policies provide a one-off payment when a client has been diagnosed with a severe illness, which can be spent on treatment, changes in lifestyle, or compensation for lost income during the treatment period.

Critical illness policies can be purchased from a health insurance company or life insurance company as an add-on rider. The differences are in the coverage of critical illnesses, the payout benefits, and the premium.

3. Dedicated healthcare fund

As much as people would like to go for treatment, they face the problem of high costs, and this leads to insurance being insufficient. Having a unique healthcare fund for yourself in your retirement plan is very much mandatory. It is advised to set aside 20-25% of your total retirement corpus solely for medical needs.

Perhaps this corpus should be invested in a combination of fixed income and hybrid instruments for security and in equity mutual funds for growth to combat medical inflation.

5. Preventive healthcare

An ounce of prevention is worth a tonne of cure. A proper lifestyle that includes a good exercise regime and a good diet can reduce the cost of healthcare. Some contemporary health insurance policies include annual check-ups for free, some also provide discounts on renewal premiums, subject to minimum health precautions considered such as walking 7 km daily. These can be tracked on an app and shared with the health insurance provider to get a favourable discount on premiums or an increase in the sum insured.

6. Long-term care

With life expectancy increasing, there is a greater role for long-term care. Long-term care insurance is almost non-existent in India, except for specific policies that include term care, and customers have the option of buying critical illness and disability riders as additions to their life insurance policy.

Further, planning for living on life support and decisions to be taken when on life support require attention, especially for the aged.

Dilshad Billimoria is founder, managing director, and chief financial planner at Dilzer Consultants Pvt Ltd.