COS Speech By Minister for Health Gan Kim Yong - Better Health for All (Part 2 of 2), 12 March 2013

Madam Chairman, several Members – Dr Lam Pin Min, Mr Lim Biow Chuan, Ms Jessica Tan, Ms Janice Koh, and Mrs Lina Chiam – have raised a concern shared by many Singaporeans, that is, how to keep healthcare affordable.

2.         How do we help Singaporeans pay for their healthcare costs?  Today, we have a financing framework comprising four pillars – subsidies, Medisave, MediShield, and Medifund; what we usually call 3M and Subsidies. In 2002, we introduced ElderShield.  Let me now explain briefly how these work together to help our Singaporean patients.

3.         First, government subsidies.  All Singaporeans can enjoy significant subsidies at our public healthcare institutions – up to 80 percent for inpatient care and 50 percent for specialist outpatient care, as well as up to 75 percent in our polyclinics.  Let me give an illustration. For example, the median bill size for C Class wards at SGH is about $4,300 before subsidy.  After subsidy, this is brought down to about $1,100.

4.         Patients can then use Medisave to cover up to the full amount of the balance, while MediShield helps Singaporeans cope with the larger bills.  With MediShield and Medisave, for 8 out of 10 subsidised hospitalisation bills, patients only need to pay $100 or less in cash.  Those who still have difficulties after subsidies, MediShield and Medisave, they can tap on Medifund. While the framework has served us well, we need to move forward as our needs change in years to come.

5.         I therefore initiated a major review of our financing framework last year.  We have also held two sessions of “Our Singapore Conversation” and engaged many Singaporeans, including patients, to hear their views.  Let me elaborate on four areas of feedback that we have received. 

Key Concerns of Singaporeans

6.         First, Singaporeans are concerned over rising healthcare costs.  Today, we spend about four percent of our GDP on healthcare, or about 1,700 US dollars per person.  This is similar to what Hong Kong spends.  Over time, we can expect national healthcare expenditure to continue to rise, as our population ages.

7.         So what drives healthcare costs?  First, cost of the same treatment goes up over time, due to rising cost of manpower, supplies, and so on.  This is inflation.  Next, as we age and our health deteriorates, we will spend more on healthcare.  On average, annual expenditure on hospitalisation, after subsidy, for a 65 year-old is three times that of a 45 year-old.

8.         The third reason, and a key one, is that healthcare is getting significantly better and more accessible.  We have adopted more advanced medical treatments and technologies that achieve better outcomes for patients, and these have become more common than before.  However, they are also more costly.  For example, ten years ago, a heart attack patient would have been given an injection to dissolve the clot in the heart arteries.  Nowadays, it is standard practice for a similar patient to be treated with ballooning or angioplasty, which improves patient survival rates and long-term outcomes, but at twice the cost or more.

9.         A second concern of Singaporeans is with how much out-of-pocket cash they have to pay.  Dr Lily Neo and Dr Lam Pin Min have highlighted this.  Expenses for outpatient care, including diagnostic tests such as MRI, on-going medication and long term care can become large cumulatively over time. 

10.      Ms Tin Pei Ling, Ms Lee Li Lian, and Mr Patrick Tay have asked for more flexibility in the use of Medisave in the outpatient care setting, or for long term care.  Some Singaporeans have asked for more subsidies, especially in these areas, to further reduce their out-of-pocket bills.  I will discuss our thinking on these areas later.

11.      A third area of concern arises when we hear stories of Singaporeans who incur exceptionally large healthcare bills and wonder – “what if this happens to me?”  While such large bills may be rare in the subsidised public institutions, it is natural for us to worry about them.  We need to provide Singaporeans with more assurance on this.  We will carefully explore how we can provide Singaporeans with greater assurance against very large out-of-pocket payments and we will take into consideration the various suggestions made by Members.

12.      Finally, many Singaporeans have told us while there are many help schemes, they do not know how to get the help that they need.  As Ms Tan Su Shan mentioned in the Budget Debate, we need better outreach and communication to the public, to reassure Singaporeans that help is available, and that everyone will have access to good healthcare.

13.      I should add that it is not just the elderly who are concerned about the cost of healthcare, but also the sandwiched generation, who are helping to pay for their elderly parents’ healthcare and retirement needs, while raising young families.  While we want to encourage family support, there are limits to this approach.  And Ms Lina Chiam raised this point. We need to calibrate our policies to ensure that reliance on future generations is within reasonable limits.

14.      We also want to help the middle-income with the cost of healthcare, as Mr Vikram Nair suggested in the Budget Debate.  This is why many of our schemes, such as CHAS for GP care, the Medication Assistance Fund (MAF) for drugs, and subsidies for long term care have been extended to the middle-income, and we will do more for this group. 

Need for Review

15.      There is a strong desire among Singaporeans for greater peace of mind – the assurance that I will be able to afford healthcare when my family and I need it, whether now or when I grow old.  We take these concerns to heart.  We want Singaporeans to be confident that they can always afford the care they need.

16.      Part of this involves managing costs in our system.  We work with our hospitals to identify and introduce clinically proven and cost-effective treatments and provide sound advice to patients on the choice of treatment.  This ensures good outcomes for patients, at the most reasonable cost possible.  To enhance productivity, we are making strong efforts to up-skill our workers, leverage on technology and automation, and redesign jobs and work processes.  Right-siting of care is also crucial in keeping costs low.

17.      While we manage costs and ensure that we are effective in the way we deliver care, we also enable patients to pay for their portion of the cost.  The subsidy and 3M framework has served us well so far.  But we need to further strengthen this, as the healthcare needs of our population evolve over time.  The review of our healthcare financing system will be extensive, and will involve fundamental shifts.  Therefore, it will take more than a year to complete.  Let me take this opportunity to share some of our initial thinking.

Policy Shifts to Help Singaporeans Cope with Rising Healthcare Costs

18.      Even as we seek to give Singaporeans greater assurance today, we must not inadvertently create a problem for future generations of Singaporeans.  If we get it wrong, we leave a heavy burden of debt for our children and grandchildren.  This is why it is important to retain some key principles that have served us well.   

19.      The starting point is for every Singaporean to take ownership of his health, to live healthily, seek treatment early, and make informed choices in seeking treatment.  I was heartened that in our dialogues, including the OSC sessions, participants understood this well.

20.      For this reason, it is important to preserve the principle of co-payment, but we will also have to ensure that co-payment is affordable.   With this in mind, let me elaborate on how we intend to shift the balance of the way we pay for healthcare.

Greater Government Support for Singaporeans

21.      The first major shift is to increase Government’s share of national spending, to provide Singaporeans with greater assurance that care will remain affordable and accessible.  Government spending will not only rise in tandem with the increase in national healthcare spending.  We will in fact take on a greater share of national spending, from the current one-third to about 40 percent and possibly even further, depending on various factors such as demographics, and our ability to manage healthcare costs and target our subsidies.  This will help to reduce the impact of rising healthcare costs on Singaporeans, especially the lower- and middle-income Singaporeans.

22.      However, how we spend the additional money is crucial.  Today, the bulk of our subsidies go towards hospitals, where the cost per episode is high.  As our population ages, delivery of healthcare will increasingly extend beyond hospitals.

23.      Many Singaporeans, including Dr Chia Shi-Lu, have given feedback on the cost of outpatient care.  We have enhanced CHAS to make primary care at GP clinics more affordable, and raised subsidies for drugs to help lower- and middle-income patients. 

24.      In our review, we will explore how we can provide more financial support in a targeted way for specialist outpatient care, primary care, preventive healthcare, dialysis and long term care, to reduce the share that patients have to bear.

Making Medisave Work for Singaporeans

25.      The second major shift is on Medisave.  We have been expanding Medisave use progressively since 2006, to include outpatient treatments for chronic diseases, as well as selected vaccinations and screening.  Now, Singaporeans can use up to $400 per Medisave account to pay for these each year.

26.      Medisave has been sized primarily to pay for subsidised care in the inpatient setting.  As we grow old, we are more likely to require hospitalisation, and each hospital stay is longer.  If we allow unrestricted use of Medisave, many of our elderly may not have sufficient Medisave for their needs in the future.  But I hear the concerns expressed by several MPs and we do exercise flexibility on the ground for cases with exceptional circumstances.

27.      If we calibrate carefully and put in place some safeguards, I believe we can allow greater flexibility in the use of Medisave to reduce out-of-pocket costs, without jeopardising the future.  We will review Medisave policies to see how to have greater flexibility in the use of Medisave.  We raised the cap on use of Medisave for chronic diseases from $300 to $400 last year.  Can we raise it further?  Should we expand the Chronic Disease Management Programme to include more diseases as some of the MPs suggested?  Should we allow Medisave to be used for outpatient treatments beyond the CDMP?  How do we prioritise the different needs, to ensure that Medisave will not be depleted prematurely?  How do we ensure that providers focus on necessary and cost-effective treatments, so that each Medisave dollar is well spent?  These are issues that need to be addressed in the review.

28.      The Government will continue to provide additional help for the lower-income and the elderly to save more through Medisave top-ups under the Workfare Income Supplement (WIS), and the GST Voucher for Medisave.  In the Budget, DPM Tharman announced higher WIS payouts for lower-income workers, and doubled the GST Voucher Medisave payout this year, for eligible elderly.  In addition, $200 will be provided to all citizens 45 years old and above.  We will study what else we can do to help Singaporeans build up their Medisave balances, so that we can allow more Medisave to be used.

Enhancing Insurance Coverage to Give Singaporeans Greater Assurance

29.      The third shift is on the role of insurance as Dr Chia Shi-Lu mentioned, we need to calibrate the balance between personal savings, Medisave and the role of MediShield by risk pooling.  For us to stretch the health dollar and to give Singaporeans greater peace of mind, we need to enhance the role of insurance like MediShield and ElderShield.  But we need to do this carefully to guard against over-servicing and over-consumption, both of which will lead to rising costs and higher premiums for all of us.

30.      We will study how we can shift the balance towards greater insurance coverage, without driving up demand and consumption, and allow insurance to carry a larger share of healthcare funding.  Together with an enhanced Government share I mentioned earlier, this can help to reduce the need for individuals to pay more from Medisave or cash.

31.      We recently enhanced MediShield to include congenital and neonatal conditions and gave each Singaporean baby a hongbao of $3,000 in his own Medisave account.  This is a significant step towards making MediShield coverage universal for the younger generation.  We will next need to look into how to help older Singaporeans stay insured under MediShield, a point which Dr Lily Neo raised.

32.      MediShield is designed to be a catastrophic insurance primarily for larger inpatient bills.  As we review how we can strengthen insurance coverage, we will also examine whether it should remain so, or if we can expand it so that it can offset a higher proportion of costs, while keeping premiums affordable.  We will also have to address Singaporeans’ concerns about exceptionally large bills that go beyond the current cap on MediShield claims.

Taking Care of the Elderly

33.      Let me now turn to address the specific concerns of our elderly today.  Budget 2013 will deliver an additional package of one-off Medisave top-ups for the elderly.  But in addition to these ad-hoc top ups, we will need to review how best to support the healthcare needs of our elderly, especially the very old today.  Many of these pioneers may not have accumulated enough Medisave by the time they retired.  We need to take care of their healthcare needs and this is a priority area that we will be looking into in our review. 

34.      Dr Chia Shi-Lu and Mr Heng Chee How raised the issue of ElderShield.  As the care needs of our seniors expand and become more complex, there is a need to revisit the coverage of ElderShield.  We have started the review of Eldershield, but rather than to review ElderShield on its own, we need a more fundamental review of the roles of government subsidies, insurance and individual share of healthcare costs, and how aged care fits into this big picture.  We will review ElderShield as part of the overall review of our financing framework.

Strengthening our Safety Nets for Needy Patients

35.      While we carry out this review which will take some time, we will make a few immediate changes to strengthen our safety nets, to keep healthcare affordable.

Enhancing Medifund to Help the Needy

36.      First, on Medifund, Medifund plays an important role as a safety net, to help provide peace of mind for both lower-income patients, as well as middle-income patients with larger bills.

37.      We introduced Medifund Silver in 2007 to take care of our needy seniors, and we recently announced the establishment of Medifund Junior to help needy children.

38.      MOF will be topping up the Medifund capital sum by $1 billion. This will increase the annual Medifund assistance by about 20 percent to $120 million, to help more needy patients with their healthcare bills.

39.      We will use some of the additional Medifund monies to close existing gaps in Medifund coverage.  Mr Patrick Tay expressed concern about the high cost of dental treatment.  From 1 April 2013, we will extend Medifund assistance to patients at the National Dental Centre.  In addition, Singaporean mothers who face difficulty paying for their antenatal care and delivery can also be assisted by Medifund.  By June 2013, we will also extend Medifund to the polyclinics, including dental services there.  This will provide some relief for needy patients.  We will continue to see how we can make our safety net more effective in giving Singaporeans greater assurance.  Dr Chia Shi-Lu mentioned rare diseases.  We will explore how we can help this group.

More Drugs Subsidised to Benefit More Patients

40.      The cost of drugs is also a concern for many Singaporeans. We provide subsidies through the Standard Drugs List (SDL) and the Medication Assistance Fund (MAF) to ensure that drugs are kept affordable for our subsidised patients.  From 1 April this year, we will add 17 new drugs onto the SDL and MAF. These drugs include second generation insulin products and insulin penfills, to help lower the cost to diabetic patients.  I previously mentioned that Atorvastatin, which is a drug for high cholesterol, was being reviewed.  This drug will now be placed on the MAF.  A patient who requires this drug to treat chronic high cholesterol can enjoy potential savings of up to $375 a year, and pay just $125 instead of $500 a year for this drug, depending on his dosage and subsidy level.  These enhancements are estimated to cost the Government $5 million per year.

Waiving Medisave Transaction Fee for Patients

41.      Finally, let me address a topic that many Members have raised over the years, and which was also raised by Ms Tin Pei Ling, Dr Lam Pin Min, and which Dr Chia Shi-Lu asked about just now – transaction charges for Medisave claims.  This is a fee of about $3 for each Medisave claim that patients make.  As I explained last year in a PQ reply to Mr Ong Teng Koon, this charge goes towards the costs of operating the Medisave scheme.  However, I understand that this fee may pose a burden on patients, especially the lower-income, or those who need to use their Medisave frequently to pay for chronic disease treatment.  My Ministry has reviewed this and I am happy to let members know that with effect from 1 April, MOH will absorb the transaction fees fully. 


42.      Let me sum up. Over the years, we have established a healthcare financing system that has served us well. We have made changes to our financing policies and revised them regularly to respond to the needs of our patients and their families.  

43.      Looking ahead, the landscape is shifting rapidly, demographics are changing, and there is a need to strengthen our framework, to give Singaporeans better peace of mind.  There will be key shifts in government subsidies and the 3M framework.  The review will take more than a year to complete, but I hope to be able to give the House an update and introduce some of the changes by the next COS.

44.      While everyone has to play his part to live a healthy life and to save ahead for his own future needs, the Government will increase its funding share, and put more money in prevention, primary care and aged care.  Insurance will be further expanded, to enhance risk-pooling across the population.  The Medifund safety net will be strengthened and made more accessible.  Ultimately, the purpose of this review is to give Singaporeans better health and greater peace of mind. 


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