If you've been doom scrolling the news lately, you might have noticed that the CPF Basic Healthcare Sum has been raised to $66,000 to 2022.

Of all the CPF thing amajigs we're supposed to understand, the Basic Healthcare Sum is one of the least known and, frankly, the least cared about. But it's really not that complicated, and knowing how it affects your CPF savings gives you just a little bit more control over your financial planning.

Here's what you need to know about the CPF Basic Healthcare Sum and how it affects you.

What is Basic Healthcare Sum?

As you might already know, all Singapore citizens and Permanent Residents have several CPF accounts.

For under 55s, these are the Ordinary Account (OA), Special Account (SA) and MediSave account. Over-55s have a MediSave Account and a Retirement Account, the latter being formed by the merger of the OA and SA.

If you're a salaried employee, a fraction of your salary is paid into CPF and divided between your various accounts. For those who are self-employed, you don't have to make OA or SA contributions, with only MediSave contributions being compulsory.

The thing is, MediSave cannot hold an infinite amount of money. There is a limit, and that limit is the Basic Healthcare Sum.

In other words, the Basic Healthcare Sum is the maximum amount of money you can have in your MediSave account.

For those under the age of 65, the government adjusts the Basic Healthcare Sum every year in order to keep pace with rising medical spending. In 2021 it was $63,000, but in 2022 it will be raised to $66,000.

Once you reach 65, the Basic Healthcare Sum will be frozen in place and will no longer rise for you.

So, if you're turning 65 in 2022, your Basic Healthcare Sum will be frozen at $66,000. At any point during the rest of your life, your MediSave account will not be able to hold more than $66,000.

What happens when you reach the Basic Healthcare Sum?

Even if you hit the Basic Healthcare Sum, your compulsory CPF contributions will remain the same. However, since your MediSave account will be "full" at that point, the money will flow into a different account.

For under 55s, any excess amounts will be paid into your SA instead. (The SA sum also has a limit, called the Full Retirement Sum. If that is reached, any excess will spill over into your OA.)

For those aged 55 and over, any excess amounts will be paid into your RA for your retirement needs.

How to check my Basic Healthcare Sum?

The Basic Healthcare Sums for the current and previous years are published on the CPF Board's website.

For those who are too lazy to click on that link, here's the Basic Healthcare Sum according to age.

If you are 65 and above, your Basic Healthcare Sum will be the one for the year in which you turned 65 rather than the one in the current year.

Basic Healthcare Sum vs MediSave

The Basic Healthcare Sum is a ceiling for the balance in your MediSave account.

And the money in your MediSave account can be used to pay for certain medical costs.

But beware, there's no chance that you'll be able to withdraw the money to pay for an MC when you can't wake up for work, as MediSave use is subject to strict categories and limits.

Can I top up or withdraw my CPF Basic Healthcare Sum?

You can voluntarily top up your MediSave account if you want. This isn't a completely stupid idea, as MediSave rates are a sky high 4 per cent right now-at the moment, no high interest savings accounts will give you anything close to that rate.

From Jan 2, 2022, the maximum you can top up your MediSave account will be:

Basic Healthcare Sum ($66,000) minus your current MediSave balance = Amount you can top up

So, if you are 38 years old and have $14,000 in your MediSave account right now, you can top up another $52,000. The MediSave top up method used to be way more complicated: CPF Annual Limit of $37,740 minus mandatory CPF contributions made for the calendar year.

Before you rush to transfer your life savings to MediSave in order to reap that sweet 4 per cent interest, be warned that any money that goes in cannot be withdrawn. The only way it can be used is for approved expenditure, which will be covered in the next section.

How to use CPF Basic Healthcare Sum?

These are the broad categories in which you can make MediSave withdrawals:

• Hospitalisation & surgery
• Non-acute hospital stays
• Outpatient treatments
• Chronic disease management
• Health screenings
• Vaccinations
• Having a baby
• Senior care
• MediShield + Integrated Shield premiums
• CareShield + Supplement premiums

The above is just an outline of the key categories you can use MediSave in.

But in practice, MediSave limits are very low, so your MediSave savings should be used as a last resort after private hospitalisation insurance (if you have it) and MediShield Life have already been used.

Let's see how this works.

For instance, let's say you get into an accident and end up getting warded in hospital. If you have hospitalisation insurance in the form of an Integrated Shield Plan, the bulk of your bill will be paid for by your IP and by the basic government health insurance scheme MediShield Life. (By the way, your MediShield Life premiums and part of your IP premiums can be paid by MediSave.)

After all these claims, there is likely to still be a cash portion to pay (these are called the deductible and co-payment). That is where MediSave comes in. You can pay for the deductible and co-payment portion using MediSave, up to the withdrawal limits. Once you bust the withdrawal units, any excess must be paid in cash.

To find out more about how you can use your MediSave money, click here.

It pays to know what you can use MediSave for!

For starters, Integrated Shield Plan (IP) premiums can be paid in part with MediSave. We highly recommend getting one as medical care in Singapore is not cheap and relying on MediShield Life and MediSave alone is risky.

If you don't already have hospitalisation insurance, compare IPs on MoneySmart.

This article was first published in MoneySmart.