Gordon Brown has told the country to dig deep to pay for the NHS, but anyone wanting private health care will find that the Government isn't alone in its need for extra cash.
Private medical insurers also want more of your money, and premiums for private medical insurance have been rising rapidly recently. Inflation generally may be down to below 2 per cent, but policyholders will find that their premium increases are almost certainly in double figures.
'The average for the industry for the past three to four years has been 12 to 15 per cent a year,' says Stephen Walker of Brighton-based adviser Medical Insurance Services.
One reason is that, as the Government has also found, modern medical technologies and treatments are expensive. As our table shows, a routine knee replacement undertaken privately costs £7,000-£10,000. Even a vasectomy is hardly a snip at around £400. The high cost of medical treatment is only part of the explanation, however, since some premium increases in recent years have been introduced to help insurers improve their profitability, which had slipped in the years up to 2000.
Not surprisingly, the numbers opting for private medical insurance have been falling. Analysts Laing and Buisson say that 2.09 mil lion people were signed up in 2000, down 15 per cent in 10 years.
'People like the concept of private care, but then they find how much it's going to cost,' Walker says. 'We're getting the same number of inquiries as previously, but the conversion rate into sales has dropped quite significantly.'
Fortunately for the private medical sector, the numbers of people covered by employer schemes has risen over this period. Older people who enjoyed the perk of free private health cover at work can be particularly hard-hit after retirement, when they try to meet the premium costs themselves.
A couple aged 60 wanting top-of-the-range protection will be lucky to find cover for under £2,500 a year, and could if they choose badly be asked to pay £5,500 or more. Younger people may pay less, but will also need to take into account the effect on their income next year of the 1 per cent national insurance increase.
But there are ways to make the costs of private health care more manageable. Barry Summers of specialist intermediary HIFAC PMI says many go for the familiar names and fail to shop around. 'I don't think the public has too much idea how many providers there are,' he says.
His company operates the www.healthinsurance.co.uk website, which offers an easy way of comparing equivalent premium costs for private medical insurance, based on an individual's age, geographical location and family circumstances. A similar website is <A HREF="http://www.moneysupermarket.com."
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Anyone buying private medical insurance for the first time needs to choose with care since, unlike with most types of general insurance, switching later on can be problematic. When buying PMI, the cost of treatment for pre-existing complaints is excluded from the cover, so if you switch you will no longer be covered for any medical condition that has developed since you first took out a policy.
If, however, your health has remained good, moving to another insurer may be worth considering. 'Many existing policyholders who have no past claims history are missing the opportunity of switching insurers and potentially saving 50 per cent of the monthly costs,' Summers says .
When buying or switching to a new policy it is advisable to check that the hospitals you would wish to use are on the list of facilities approved by your chosen insurer.
PMI premiums increase in a series of tiered steps as you grow older. Walker points out that a small number of insurers, including Exeter Friendly and Norwich Union Medios, offer to maintain premiums at the age you were when first joining. 'You get the inflationary increases, but if you join at 40 you will always pay the rate of a 40-year-old. That can save an awful lot of money,' he says.
There are other ways of keeping premium costs down. The first is to opt for a less comprehensive policy, which excludes or restricts the benefits paid out for outpatient treatment, and for such things as physiotherapy, radiotherapy, dentistry and complementary medicine. Such a policy will ensure that you have private medical care as a hospital inpatient. You may, however, have to depend on the NHS, or on your own resources, for initial diagnostic consultations with specialists.
What is covered under each type of policy differs between providers, and there is no short cut past the small print. However the market is conventionally divided into three categories: platinum, gold and silver. Choosing a 'silver' policy can bring big savings.
Premiums can also be reduced if you accept an excess on your policy. An agreement to meet the first £500 of a claim can reduce premiums by about 20-25 per cent, and can represent a good compromise between risk and outlay. If you accept a larger excess - in some cases, as much as £5,000 - the savings will be greater although arguably the value of having insurance will fall.
Insurers like the idea of sharing some of the financial pain of medical treatment in this way. WPA has now gone a step further with its Flexible Health product launched this month. Policyholders undertake to pay a quarter of their medical costs up to a limit of £1,000, £3,000 or £5,000, with WPA responsible in full beyond these thresholds. In exchange, premiums are reduced by 30, 40 or 50 per cent respectively.
The ultimate way around excessive PMI premiums is to forgo insurance and - if you don't fancy depending on the NHS - to meet the cost of private health care on a pay-as-you-go basis (see below).
Underwrite thyself
Observer reader Jim Patterson (not his real name) has had private medical insurance for 37 years, ever since his two-year-old son was seriously ill with meningitis and Jim spent the equivalent of a month's pay on private treatment at London's Great Ormond Street Hospital. But this year, Jim tore up his premium renewal notice and has vowed to pay for any future private care himself.
The premium this year for him and his wife was £2,812 - plus £169 if paid by instalments. This was an increase of over 25 per cent on 2001. Jim, 67 and a retired IT sales manager, worked out that if such increases continue, he will be paying almost £8,000 by 2008: 'If I live as long as my father, who is 91, the premium in 2026 will be £237,541!'
Jim has joined the growing numbers of people who effectively underwrite themselves against medical expenses. This can be an astute approach, though it is better to choose it knowingly. The money that would have been spent on premiums can be kept in, say, an interest-bearing account with easy access.
This approach requires self-discipline, and the risk remains that expensive medical treatment may be necessary sooner rather than later. One way of reducing this risk is through a low-cost supplementary policy. WPA, for exam-ple, offers Self-Pay Protect insurance, which will reimburse 30, 50 or 75 per cent of private hospital costs, up to £50,000 a year. WPA says premiums are on average less than a fifth of the cost of traditional medical insurance.
Self-payers have complete flexibility over where they have their treatment. Costs vary widely, so they can look for the hospital offering the best value.
