Un-funded medicines, the real risk to you

Un-funded medicines, the real risk to you

When the subject of medical insurance or cancer treatment comes up, the discussion on non-Pharmac medicines usually follows.

What are non-Pharmac medicines?

Non-Pharmac medicines are where the government does not fund the drug or treatment being prescribed or recommended for a treatment and you will have to find the money to pay for it.

It does not matter what the stats are, if you are someone who needs a treatment and the government does not fund it, you want to be able to access it. Which is why, dollar for dollar you take the medical policy with coverage over the one that does not, even if it is a bit more expensive you probably still should.

And the fish hooks?

The caveat on that, Medsafe needs to have approved the drug or treatment for your particular condition, though in general terms why is it being suggested if it is not going to help?

There are some rare and unusual conditions where Medsafe will not have approved a medicine, though my experience with these more unusual situations, Pharmac generally does come to the party. Your, run of the mill everybody gets it, cancer treatment, you will need to find funding for the non-Pharmac bits.

Ok back to the real risks.

With life and medical insurance covers, we are generally talking about risks from 4% to 45% chance of happening before age 65 where people feel they need to have cover in place. With medical cover sitting at close to 100% as almost everyone has something that needs a specialist before 65.

Insurers without provisions in their medical policy

The non-Pharmac cancer risk right now is quite surprising. Insurers without non-Pharmac cover or a small contribution will say it is not a high risk; we pay far more claims in x area. Of course they will, they do not cover non-Pharmac medicines so won’t pay much in the way of claims in this area.

The Southern Cross experience

Southern Cross, New Zealand’s largest health insurer had 15% of its cancer claims require non-Pharmac treatments. Of those 58% did not use the limit their policy with Southern Cross had, which means 42% of them needed to find the money from somewhere.

To put this into perspective the limit on a typical Southern Cross policy for non-Pharmac medicines is $10,000. When facing the extreme costs of chemotherapy we have had plenty of newspaper stories where it has been $100,000 to $150,000 for the unfunded cost of treatment for the subject of the story, personally $134,000 is the largest I have seen directly.

The bigger picture

Let us keep it simple. Southern Cross being the largest has the largest number of claims. Having some contribution in their policy, they will see the unfunded portion clients face too. The other providers are likely to have a similar experience, though will not see as many claims.

Southern Cross has 15% of it’s cancer claimants requiring non-Pharmac contributions this is quite high. When I was working for Sovereign in 2004-2005 the non-Pharmac medicines requirements were about 2% of claims, so a marked difference in the use of unfunded medicines today.

The real numbers you need to be concerned about

Looking at the numbers, 42% paying out of pocket of 15% of Southern Cross claims is an overall 6.3%. This is the real risk of having to put your hand in your pocket, if you have a Southern Cross policy and you have been diagnosed with cancer.

If you have a medical policy without a non-Pharmac contribution, then your risk is about 15%, though for a good portion of claims that the risk sits under $10,000 presently. However, you would still have to find the money.

The future

With baby boomers retiring and the Government’s tax base coming under pressure, the budget for public medical treatment will also come under pressure.

Higher numbers needing treatment, due to baby boomers increasing medical treatment needs, and the medical budget only going so far, we could face reductions in funding in some areas. This may be evidenced in longer waiting lists or higher requirements to qualify for the waiting list, which is what we have seen and has been the change in the last few years.

In some cases, it may be a lower level of care, for example funding for the less expensive hip replacement prosthetics rather than all that may be suitable. Meaning you get mobility now but you may have to have a revision sooner.

It may mean some treatments are not provided for in the public system as they are deemed a hassle rather than a disabling condition. Which forces those people to take their treatment privately and pay for it themselves or put up with resolvable limitations in their lives.

New treatments coming to market may have a long lead before we see them here. A recent OECD report on medicine funding, only 13% of new treatments typically are funded.

So what?

For you the person on the street, this all gets a bit complicated and overwhelming. What do you do?

The very simple answer is you have medical insurance. Quite specific medical insurance. Cover that also covers you for non-Pharmac medicines and is guaranteed.

Why guaranteed?

Medical polices generally speaking can be changed by the insurer to adapt to change. They say to keep up with changes in medical technology, but it can also mean manage claim costs too. If insurers find unfunded medicines are putting pressure on premiums, they have two options. Increase premiums or remove the benefit/coverage.

By having a guaranteed cover you remove the one thing from your plan that brings the most risk to you, the insurers ability to remove bits of your cover. As a result, if they have a substantial increase in claims they will increase premiums, as it is the only other lever they have.

The important bit is the majority of insurers have more than one medical policy. If premiums on your plan get too much, often you can transfer to another plan, with the same provider at a cheaper premium, understanding this is with less benefits. This is without exposing you to medical disclosures. The important point here is this is your choice, its not inflicted on you by the insurer.

My experience is where the risk of something happening is above 5% people want it insured. My question to you, facing a significant bill for future medical costs, why are you not insuring for it?

Give us a call and let us sort it out for you. It might surprises you how cheap cover structured for your situation actually is.

Jon-Paul Hale

Written by : Jon-Paul Hale

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