Tan Lip Hong & Leong Yan Hoi
The Government has taken a step in the right direction by implementing MediShield Life, a national health insurance scheme that is both universal (covers everybody) and comprehensive (covers all illnesses). No longer will anyone be denied coverage due to old age, pre-existing illness, congenital conditions or mental illness.
However, one of the main inadequacies of MediShield Life is that it does not adequately cover large medical bills. In other words, it under-insures us, requiring us to still pay out large sums of money in the event that we fall ill, despite being insured. This is clearly evidenced by the fact that each of us is still required to maintain a huge Medisave balance for use in case of illness.
Below is a representation of the portion of a medical bill that is covered by MediShield (in green) versus the portion that is paid by patient, either out-of-pocket or via Medisave (in blue):
Note that of the total bill, MediShield Life only covers the green portion. The blue portion is paid out by the patient. Note also that the claim limits – for each day’s stay in hospital, for surgery, procedures, medicines and ICU stay – are based on subsidised B2 class bill sizes.
As can be seen from the above diagram, the two main factors contributing to the problem of under-insurance as regards MediShield Life are the high deductibles and low claim limits. In cases with small medical bills, the high deductible forms a relatively large portion of the final bill and poses a significant barrier to patients from low-income households, thus limiting healthcare access.
On the other hand, in cases with multiple complications, or multiple or severe illnesses, the overall bill can become very large, and the portion above the claim limit becomes very significant. In this case, the portion (in green) paid out by MediShield Life remains capped, and the portion paid by the patient (in blue) gets proportionally greater the larger the bill size. This is especially true if the person is means tested to receive less subsidy, or if the person stays in a B1 or A class ward.
In the MOH’s own example of a fully subsidised low-income patient admitted to a B2 class ward for a heart attack the total bill after government subsidy comes to $8,100. Of this, MediShield Life pays $5,645, and the patient has to pay $2,455, which is 30% of total bill size! This is a very large proportion and amount for a nationally insured, low-income person to pay.
The unsubsidised (B1 or A class) bill would come to at least $18000. Of this, MediShield Life pays a maximum of $$5,645 (31%), and patient pays at least $12,355 (69%).
And for bill sizes in excess of $50,000 – $100,000, the out-of-pocket payment will wipe out all savings in one’s Medisave account, and that would still be insufficient.
It can be seen that MediShield Life is not structured to insure patients against large medical bills. What then is its purpose?
Large Sums Remain in Medisave Accounts
Due to the severe inadequacies of MediShield Life, each of us remains poorly insured against large medical bills.
This is the reason that we are all compelled to continue to keep large amounts of money in our Medisave accounts. The Minimum Sum for each citizen was $43,500. This has been increased to $49,500, and re-named the Basic Healthcare Sum. This is a huge sum for the majority of Singaporeans, and yet it remains barely sufficient to cover the co-payment of large medical bills even with the implementation of MediShield Life.
The government has also been touting MediShield Life premiums as being ‘affordable’, with annual premiums of around $400 for middle income working adults, and about $1,000 for the elderly. However, this ‘affordability’ is meaningless when the majority of citizens are severely under-insured against large bills by MediShield Life, and all working adults have to continue paying large amounts of money, equivalent to 7 – 9.5% of one’s monthly wages (at least $260 per month or $3,120 per year for a median income earner of $3,700), into one’s Medisave account.
In total, there is $71 billion (as at 2014) sitting in members’ Medisave accounts, largely sitting idle. And the total Medisave balance has been steadily rising over the last 5 years (see chart below).
Instead of locking up our monthly Medisave contributions in individual accounts, the money should be pooled together towards a proper National Health Insurance scheme that adequately covers all medical bills, with affordable co-payment.
Over-charging for coverage – huge profits made by CPF Board
In any health insurance scheme, there are methods to prevent the health insurer from over-charging the insured for health insurance. In America, under ObamaCare, private profit-making health insurance companies are restricted in the amount of profit they can make out of health insurance schemes. This calculation is based on the total money paid out for claims versus total premiums collected in a year. The ratio above is known as the Medical Loss Ratio (MLR).
ObamaCare mandates by law that the total pay-out for claims has to be at least 80% of the total premiums collected:
Total Claims paid out
––––––––––––––––––––– > 80%
Total Premiums collected
This ensures that not too much premium is collected so that the insurance companies do not make too much profit (in this case a maximum gross profit of 20% before expenses).
The table below shows the MLR and ‘profit’ that MediShield has made over the past few years:
It can be seen that MediShield has only paid out an average of 64% of the total premiums it has collected yearly in the years 2008 to 2013, the rest (36%) being profit before expenses. In this way, the CPF Board has managed to accumulate huge (untouchable) reserves from our MediShield premiums.
In 2013, the percentage of claims paid out reached an astonishing low of only 43%. This means that less than half of the premiums collected was paid out in claims! When this issue was brought up in parliament, the government, instead of acknowledging this over-charging of premiums by MediShield, justified this over-collection by citing a different ratio: Incurred Loss Ratio, used by profit-making entities.
Until this government commits to putting in place measures like the capping the MLR to ensure that we do not overpay for MediShield Life, there remains no assurance that huge profits will not continue to be made in the name of national health insurance in Singapore.
Structure and Transparency
MediShield Life continues to be structured as a profit-making scheme with loading and risk stratification to reduce risk to the insurer (CPF Board). Pay-outs are capped at the expense of the insured, and profits by the insurer are not controlled. Additional complicated ‘premium subsidy’ schemes make the entire enterprise less transparent.
Other Major issues in Healthcare Financing not addressed
The government has also not addressed the other major healthcare issues we face in Singapore:
1. Underinvestment by the government in healthcare in
(a). Infrastructure and manpower – long queues, over-crowded hospitals operating at over-capacity, long waiting times
(b). Running cost – thus requiring citizens to have to pay out huge lump-sum payments
2. Inequity of provision of service – A class patients get immediate attention while B or C class patients have to wait months
3. Ballooning healthcare costs
There has been a huge ballooning of healthcare cost in Singapore over the last few years. The table below shows available figures released by the government for healthcare cost and spending from 2011 – 2015:
The government has said that it will spend about 40% of THE. This makes the THE for 2014 about $17.75 billion, and that for 2015 in excess of $20 billion.
This is a frightening increase in numbers. Part of it is due to the catching-up as a consequence of under-investment in the past by the government, and part of it is due to the sudden increase in population. A significant portion is due to the aging population.
However, a large part of it is due to the increase in the cost of healthcare itself.
In this situation, it is irresponsible of the government to only talk about limiting Government healthcare spending, and not deal with the elephant in the room – the extraordinary increase in the total cost of healthcare in Singapore, and to continue to encourage and lead the way in making huge profits from the provision of healthcare.
What is needed is a thorough review of ways to contain the cost of healthcare.
If this is not done, then we are leading ourselves into a perfect storm of spiralling healthcare cost and unaffordable healthcare, where the leaky green umbrella of MediShield Life will be of no help to anyone at all.
Dr Tan Lip Hong & Dr Leong Yan Hoi are members of the SDP Healthcare Advisory Panel.
The SDP Healthcare Advisory Panel presented the SDP National Healthcare Plan in 2012. The report is divided into 2 equal parts, dealing with: (a). A detailed plan of how we can set up a truly universal, comprehensive, equitable and affordable National Health Insurance Scheme that provides adequate coverage for all. (b). The measures we can and should take to contain the ballooning cost of healthcare in Singapore.