Show All | Hide All

The 3M Framework

1. As the Government spends more on healthcare, we also need to strengthen the 3M framework (Medisave, MediShield and Medifund) to better help Singaporeans pay for the remaining healthcare cost after Government subsidy. While Medisave helps with payment for hospitalisation bills and treatment for certain chronic conditions, MediShield aims to cover large bills. It helps Singaporeans stretch our Medisave monies by pooling a portion of it, to help us when we fall seriously ill and incur large bills.

The other two “M”s alongside MediShield Medisave can be used to pay for hospitalisations, expensive outpatient treatments like chemotherapy, selected chronic outpatient care, vaccinations, screening and premiums for MediShield and Integrated Shield plans.  Part of employees’ and employers’ CPF contributions goes into the Medisave account, and this is supplemented by regular Government top-ups for low-wage workers via the Workfare Income Supplement Scheme (up to $1,650 per year) and eligible elderly via the GST Voucher (up to $450 per year) respectively. In addition, the Government also provides ad-hoc top-ups which have averaged $270 mil per year since 2005.  Medifund is a safety net to help those who cannot pay their bills in spite of subsidies and Medisave/ MediShield.  Another $600 mil was injected into the endowment fund in Apr 2012, increasing annual patient assistance from $80 mil to $100 mil.
























How MediShield Works

2. Like other insurance schemes, the following are some basic features of MediShield: 

• To provide peace of mind for patients should they fall ill, by covering them as early as possible, to take advantage of risk-pooling;
• To avoid “buffet syndrome” where patients may over-consume healthcare because a third party (the insurance policy) pays, by setting limits on payouts and requiring patient co-payment (co-insurance); 
• To focus on larger bills, by having deductibles¹; and 
• To have affordable premiums, due to it being a self-sustaining, not-for-profit scheme. Working-age members pay ahead of their needs and receive rebates when older to ease their cost. 

Table 1. Basic Features of MediShield

Features
Deductible: To avoid first-dollar coverage and help MediShield target only large bills	Class B2: $1,5002 Class C: $1,000
Co-insurance: To guard against over-consumption	10 – 20%
Claim limits, e.g. daily ward limit, policy year limit, lifetime limit: To address excessive claims	Normal ward limit: $450 per day ICU ward limit: $900 per day Surgical claim limits: $150 to $1,100 Implant limit: $7,000 Policy Year limit: $50,000 Lifetime limit: $200,000

3. In any given year, only a minority of us may need hospitalisation. Most of us would be able to afford our hospitalisation expenses by tapping on our Medisave savings. However, some may incur large bills. The MediShield scheme can remain affordable and yet enable us to have greater peace of mind, by collecting premiums from most Singaporeans to help cover the small number who face large bills.




¹  The deductible is the amount a patient would need to pay for claim(s) made in a policy year, before there is a payout from MediShield.




²  For policyholders aged 81 and above, the Class B2 and Class C deductibles are $3,000 and $2,000 respectively.




An example of how MediShield works

4. This is an example of how MediShield helped Mr Chin pay for his knee replacement surgery in a Class B2 ward. After Government subsidy of $6,200, his bill was $6,675, which is large and higher than 95% of all Class B2 bills. With MediShield payout of $4,375 and by drawing on $2,260 from his Medisave, his cash payment was $40. Government subsidies and the 3Ms framework worked together to bring a bill of more than $12,000 to a cash payment of $40 for Mr Chin. (Mr Chin’s experience is not an uncommon one. 8 out of 10 Class B2/C bills in 2010 incurred cash payments of less than $100 for their families. More examples are provided in the Annex.)

MediShield Helps with Large Bills Mr Chin* had to undergo a knee replacement surgery at age 56 and was hospitalised for 4 days in Class B2. His bill after Government subsidy was $6,215. MediShield covered $4,375, and after using $2,260 from his Medisave, he paid only $40 in cash.

Total Bill before Government Subsidy $12,890 Government Pays $6,215 Bill After Government Subsidy $6,675 (96th percentile) MediShield Pays $4,375 (66%) Medisave (for co-insurance and deductible) $2,260 (34%) Cash (for co-insurance and deductible) $40 * Patient details have been modified




5. Over the years, coverage of MediShield has improved, with more than 90% of Singaporeans enrolled in 2011. For Singaporeans who prefer treatment in private wards or private hospitals, private insurers offer Integrated Shield Plans which provide additional coverage, over and above the MediShield payouts.


Strengthening MediShield

6. MediShield is reviewed from time to time to ensure meaningful and sustainable coverage for Singaporeans. It was last enhanced in 2008. We need to update its benefits and parameters to keep pace with evolving medical practice and payout experience. At the same time, we intend to take the opportunity to enhance MediShield coverage for vulnerable groups. Premiums will also have to be updated.


Increasing payouts for MediShield policyholders MediShield is a not-for-profit insurance scheme, and its premiums have to be adjusted from time to time in line with payout experience, so that it can continue to support policyholders’ claims in the future. The average payout per policyholder increased by about 12% per year from 2009 to 2011, due to: • Rising number of claims – there is a rising proportion of bills qualifying for payouts today, due to the erosion of deductibles as healthcare costs rise, and rising utilisation. Overall, the number of claims per policyholder increased by 9% per year. • Rising cost of treatment with improved treatment and technology, leading to better medical outcomes. • Medical inflation of about 3% per year.




7. To support MediShield’s focus of providing adequate protection for large bills, we will enhance the policy year limit from $50,000 to $70,000 and lifetime limit from $200,000 to $300,000. This better protects policyholders who face exceptionally large bills.

8. The MediShield deductibles were last adjusted in 2005 to maintain MediShield’s focus on large bills. However, with larger bill sizes in the last 7 years, almost half of Class C bills are now covered under MediShield. To maintain MediShield’s focus on large bills, appropriate adjustments to the deductibles are necessary - from $1,000 to $1,500 for Class C and from $1,500 to $2,000 for Class B2³. Medisave is sufficient to help cover the increased deductible, with average Medisave balances having risen from $12,000 to $18,000 from 2005 to 2011. By excluding smaller bills that can be adequately covered by Medisave, MediShield premiums can be kept affordable. Singaporeans who need more help continue to have access to Medifund and other assistance schemes available at the hospitals and in the community.

9. We will extend MediShield coverage to include treatment in short-stay wards in the Emergency Departments.

A More Inclusive MediShield

10. Meanwhile, we intend to enhance coverage for certain vulnerable groups, namely to cover those aged 86 to 90 and those with mental illness. We are also considering extending coverage to congenital and neonatal conditions.

11. The maximum age for MediShield coverage was last raised from 80 to 85 in 2006. With more Singaporeans living till age 85 and beyond, it is now feasible to extend the maximum age for MediShield coverage from 85 to 90 years. The elderly aged above 90 can continue to tap on Medisave to pay for their medical treatment. MOH will also assist them in other ways, including through annual Medisave top-ups under the GST Voucher Scheme for eligible Singaporeans and through Medifund Silver.

12. To help Singaporeans with mental illnesses, we hope to encourage timely and appropriate treatment of mental illnesses by extending MediShield to cover newly diagnosed patients who require inpatient psychiatric treatment. As bills for subsidised inpatient psychiatric treatment are generally lower, we propose to extend coverage with a daily claim limit of $100. To encourage patients who are well to be discharged promptly, policyholders will be able to claim up to a maximum of 35 days of hospital stay per year.

13. Parents have shared their desire for insurance coverage for newborns who require inpatient treatment for a neonatal condition or congenital anomaly. Extending MediShield to such conditions will relieve the financial burden on parents, who currently rely only on government subsidies, and Medisave or cash savings to pay for their bills (see box story).

How MediShield for congenital and neonatal conditions can help families The birth of a child is usually a cause for celebration and not something that brings a lifetime of worry. Lisa*, however, was born with a rare and unexpected congenital condition known as congenital hypomyelination neuropathy. It affected her nervous system and left her with severe muscle weakness and breathing problems. She was hospitalised for more than 100 days, resulting in a bill of more than $100,000, which was offset by government subsidy of $90,000. Due to the large bill, her parents faced difficulties paying for her bill. They used their Medisave to pay for about $20,000 and their cash savings to pay for about $2,000. They received $9,000 assistance from the KKH Endowment Fund to cover the remainder. If Lisa had been able to benefit from MediShield coverage, she would received a payout of more than $20,000, relieving the burden on her parents’ savings. MediShield would also cover her future hospitalisations, relieving her parents’ worries. *Patient details have been modified

14. Hence, MOH is considering an extension of MediShield to cover congenital and neonatal conditions, and would like to seek public feedback on this. This will enable coverage for all future Singaporean babies from birth throughout their lifetime, so long as they do not opt out. For coverage to be viable, we need the support of parents, as a high opt-out rate would reduce the benefit of risk-pooling and result in escalating premiums. Extension of coverage will cost about $12 per year (or about $1 per month) for the younger ages.

Premium Increase

15. To support the enhancements in benefits, parameters and coverage, and the increase in payouts, MediShield premiums will need to be updated accordingly⁴. Policyholders aged 65 and below (90% of all policyholders) will face premium increases of $10 or less per month.

16. To offset the increases in MediShield premiums, the Government is providing a one-time Medisave top-up of up to $400 for all insured Singaporeans, which will help to offset the part of or the full premium increase for two years (i.e. until 2015). In addition, eligible Singaporeans aged 65 and above will receive annual Medisave top-ups under the GST Voucher Scheme.

17. For younger Singaporeans aged 65 and below, the impact of the premium increase will be no more than $5 per month in the next two years due to additional Government support given as part of Budget 2012. For the elderly, their premiums will be largely offset by the annual and one-time Medisave top-ups, and they will see a decrease in premiums payable. Overall, MediShield premiums will continue to remain affordable even for the lower-income.




Table 2. Range of Possible Premium Increases and Government Assistance
Age Group	Current Annual Premium ($)	Indicative Revised Premium ($)	One-Time Medisave Top-up5 ($)	Annual Medisave top-ups6 (AV ≤ $13,000) ($)	Indicative Revised Premium Payable for next two years (After half of one-time and annual Top-Ups)
					Annual Payable ($)	Increase Per Month ($)
1-20	33	50	50	-	25	Drop by ~1
21-30	33	66	50	-	41	~1
31-40	54	105	50	-	80	~2
41-50	114	220	100	-	170	~5
51-60	225	345	200	-	245	~2
61-65	332	455	300	-	305	Drop by ~2
66-70	372	540	300	250	265	Drop by ~9
71-73	390	560	300	250	285
74-75	462	646	300	250	371	Drop by ~8
76-78	524	775	400	350	400	Drop by ~10
79-80	615	865	400	350	490
81-83	1,087	1,123	400	350	748	Drop by ~28 to ~29
84-85	1,123	1,150	400	350	775
86-90	-	1,190	400	350	765	-
* Those aged 71 years and above (as at next birthday) may receive premium rebates of up to $224 per year from MediShield, depending on how old they were when they enrolled.




MediShield remains affordable, even for low-income families Mr Tan is a 51-year old earning $1,500 per month and supporting his non-working spouse, two children and an elderly mother aged 75 (10th percentile of household income). His Medisave contribution is $1,800 per year, including assistance under the Workfare Income Supplement scheme. After the premium increase, he will pay up to $1,426 per year in premiums for his whole family of 5, within his annual Medisave contribution. However, with Government assistance, the amount payable will be lower, well below $1,000. This is because his mother will receive an annual Medisave top-up of $250 each year under the GST Voucher Scheme, and the whole family will receive a one-time Medisave top-up of $800 (assuming half of the top-ups are used to offset the premium).


³ There will be no changes to the deductible for age 81 and above as these have been reviewed more recently in 2008.

⁴ Premiums are calculated according to actuarial principles used in insurance schemes.

⁵ The one-time Medisave top-up is intended to offset part of or the full premium increase for two years. Only 50% of the top-up amount (shown in this column) is used to offset the calculations in the two rightmost columns.

⁶ Older Singaporeans aged 65 years and above and living in properties with Annual Value (AV) not exceeding $20,000 will qualify for the Medisave top-up under the GST Voucher Scheme. About 85% of all elderly Singaporeans will benefit from the top-up.