MediSave Basic Healthcare Sum: 5 things you should know about it

You might already have heard about the CPF Basic Retirement Sum. Not to put more pressure on you, but there’s ANOTHER “sum” in town that most of us didn’t know existed: the MediSave Basic Healthcare Sum.

… Whaaat?? Here’s the lowdown on the Basic Healthcare Sum (BHS).

1. It’s NOT a minimum sum, but a maximum

Before you freak about how there’s YET another minimum sum that we need to bust our asses to obtain, we have some good news!

Previously known as the MediSave Contribution Ceiling, the MediSave Basic Healthcare Sum is a maximum, not a minimum. In other words, it is a cap on your MediSave balance.

As it is pointless for you to amass millions in your MediSave account, the government only allows you to keep up to the BHS in there.

Neither the savings in your MediSave account nor the BHS affects your withdrawal of CPF savings at the age of 55 or your CPF monthly payouts from age 65 onwards.

There is no minimum amount for MediSave savings.

2. The Basic Healthcare Sum is $63,000 in 2021

The Basic Healthcare Sum gets adjusted upwards until the year you turn 65, after which it remains fixed for the rest of your life.

For Singaporeans and PRs who are turning 65 in 2021, the current BHS of $63,000 will apply to their MediSave accounts for the rest of their lives.

Here’s a table from the CPF website showing us the historical trend for BHS over the past few years:

Since 2016, the Basic Healthcare Sum has been rising by four+per cent to five per cent every year.

From here, you can extrapolate what your BHS might be when you reach age 65. But that’s really only a guess. BHS might increase more sharply than 5per cent in response to medical inflation.

3. Should we try to hit the Basic Healthcare Sum?

You are free to top up your MediSave Account up to the BHS if you wish.

Making MediSave top-ups will let you enjoy MediSave interest rates, which are currently a pretty attractive, almost risk-free four per cent. You also get to enjoy tax relief for making voluntary MediSave top-ups.

Other than the interest and tax relief, are there any other reasons to top up your MediSave account?

It can make sense to do so if your routine MediSave-payable healthcare costs (eg. Integrated Shield Plan premium payment) have reached the point where they are gradually depleting your MediSave funds.

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You might want your MediSave funds to generate enough interest to remain at a stable or rising amount in spite of routine spending.

So, if you’ve unexpectedly had to withdraw a chunk of cash from MediSave to pay for healthcare costs, you might want to make a voluntary top-up to ensure your MediSave balance is able to stay stable in the midst of routine deductions.

However, there isn’t much point in trying to hit the BHS, unless you just want to max out your interest. So Type A personalities who like to exceed expectations can take it easy.

Note: If you want to top up your CPF Ordinary Account (e.g. to make it easier to buy an HDB flat), you are required to top up all three accounts at the same time: Ordinary Account, Special Account and MediSave Account. Such top-ups are not tax-deductible.

ALSO READ: MediSave limits in 2021: When can you use MediSave to pay?

4. What happens if you exceed the Basic Healthcare Sum?

Once you have reached the BHS, any excess amounts in your MediSave account will end up in your Special Account instead.

When your Special Account has the Full Retirement Sum, excess contributions will be sent to your Ordinary Account.

Be that as it may, having the BHS does not excuse you from making mandatory MediSave contributions. It merely changes the account the contributions end up in.

So, you should see no difference in the amount of salary being deducted every month or mandatory MediSave contribution amounts for self-employed people.

5. What can you use MediSave to pay for?

MediSave can be used to pay for certain healthcare and healthcare-related costs. I’d have to write a novel here to list everything, but that’s already been done. Click here to see all the ways you can use your MediSave funds.

To summarise very briefly, MediSave can be used to pay for the following (subject to caps):

• Cost of hospitalisation and surgery
• Non-acute hospital stays
• Outpatient treatment
• Management of certain chronic diseases
• Certain types of health screening
• Certain vaccinations
• Having a baby
• Senior care
• MediShield and Integrated Shield Plan health insurance premiums
• CareShield Life and supplement premiums

That’s a decent list of healthcare costs, but the catch is that the caps on how much you can use are quite low.

To remedy that, you can buy an Integrated Shield Plan (using your MediSave funds to pay for part of the premiums) so you can let the insurer take care of the bulk of your hospital bills, rather than have to rely on MediSave.

ALSO READ: CPF interest rates: Minimum 4% on Special, MediSave, and Retirement Accounts extended till 2021

This article was first published in MoneySmart.