The issues about healthcare financing are clear

January 8, 2014
Singapore Democrats

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Tan Lip Hong

At the recent healthcare forum organised by The Online Citizen, some participants expressed the view that the problems regarding healthcare in Singapore are very complex and do not seem to be able to be solved in our lifetime.

I could also detect the same frustration, angst and hopelessness amongst the attendants at the forum.

However, for people who have spent some time thinking of healthcare financing (such as Dr Jeremy Lim and Mr Lawrence Lien), it is clear where the future of healthcare financing lies. These are the same issues that the SDP has highlighted in our healthcare policy paper:

One, there must be comprehensive & universal healthcare insurance.

Two, the co-payment component, if present, must be affordable.

A major concern about healthcare is the utter uncertainty of a catastrophic event – an expensive illness that can strike anyone and can bankrupt even a well-to-do individual.

To spread this risk, experts agree that a form of healthcare insurance is needed.

This insurance must be comprehensive and universal i.e. cover all illnesses (not leave out pre-existing illness or big bills (where help is most needed) like Medishield currently does – a $200,000 bill may only be covered up to $20,000 (out-of-pocket $180 000) and all people, that is, not make insurance so cheap for the young ($30 per year) and so expensive for the old ($2,000+ per year) that the old cannot afford to be covered.

Although the details have not been worked out, the biggest clue that MediShield Life will not be a truly comprehensive national health insurance scheme is the fact that PM Lee Hsien Loong has announced that “contributions to Medisave will have to increase”.

In picture form, the Government’s proposed scheme will look something like this:

Will this be the only “national insurance scheme” in the world where the “co-payment” component is 10 times the “insurance” component.

A true comprehensive health insurance scheme, should be the opposite, looking something like this:

The co-payment component must be affordable. It makes no sense to design a scheme where the insurance premium alone is “affordable”, but excess and exclusion mean that “out-of-pocket” payment remains unaffordable.

Conversely, if the insurance coverage is comprehensive, is there a need to set aside so much money to deal with co-payment?

There is currently $60 billion locked up in individual Medisave accounts, all sitting there doing nothing. Yet, when one is struck down by a major illness, the maximum $36,500 in each Medisave account is barely sufficient to deal with the cost of the illness.

Ideally, we should contribute most of our money into a ‘pool’ rather than leave it in individual Medisave accounts. This way, the ‘pool’ will be large enough to cover all illnesses comprehensively.

Three, the total healthcare expenditure (THE) is currently about $12 billion (4.2% GDP). Of this, government spending (Government Health Expenditure or GHE) has hovered at around $4 billion ($4.8 in 2012; 1.2% – 1.4% GDP), and private health expenditure (PHE) is at around $8 billion. 

                              

 

At status quo, if we were to move to a full insurance scheme i.e. no co-payment, all PHE goes into premium payment, the premium would average $2000 per year for everyone (equal to per capita PHE). This $2000 premium will pay for all illnesses, including expensive, rare treatment without the need for any co-payment (no exclusions).  
 

However, if the Government increases the GHE to $10 billion (3.5% GDP – still below OECD or WHO norms), the table looks something like this:

 

 

 

 

 

 

 

We can see that a comprehensive health insurance will cost an average of $500 a year in premiums – quite affordable.

Four, there are alternatives. After much consultation and calculation, we have proposed a detailed, affordable, comprehensive national health insurance plan.

The maximum premium a year would be $600. Co-payment will be 10% across the board (all GP visits, hospital stays etc, except for minor self-limiting illnesses like cough and colds, which will be subsidised at $10 per visit). There is a maximum co-payment cap of $2000 a year.

I might point out that almost all of the financing conundrums, most the questions brought up during the forum are addressed in our 87-page report.

I have attached three condensed articles on the SDP plan: an executive summary, an article on facts & figures, and the last dealing with issues of moral hazard & cost containment

We have also dealt with ward classes, preventive healthcare, screening tests, private healthcare, long-term care, etc in our report in a comprehensive way.

I really do think that our healthcare financing problems are not large. We are not the US or the UK or even Taiwan. We are not a big country or even a state or county. We are a city. Nearly all our tertiary care is provided by government hospitals (whatever else the government like to call them). GP clinics are present everywhere. With full internet penetration and audit programmes, there is no way any healthcare institution can get away with any abuse.

Singapore is ideally suited for a National Healthcare Insurance scheme.

All the confusion, frustration and angst that we feel is created by the Government with their profit-making schemes (Medishield makes a profit of 35% a year on average for the CPF board (excluding investment gains) – all this goes into the CPF reserves), and all the effort to make things as non-transparent as possible.

I believe our healthcare financing problem can be solved in this lifetime. Only the political will remains.

 

The full report of “SDP’s National Healthcare Plan: Caring for All Singaporeans” is available for download here.

 


Dr Tan Lip Hong is a member of the SDP’s Healthcare Advisory Panel.