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09 Mar 2010
By Mr Khaw Boon Wan
Venue: Parliament
1 Earlier, Dr. Lam Pin Min referred to a recent positive commentary on our healthcare system by the Washington Post (Mar 3). It described Singapore as “the only rich nation that boasts universal coverage with health outcomes better than ours (i.e. the US) while spending one-fifth as much per person on health care”.
2 Our system is not perfect. Indeed, we still have many problems to iron out, including the current shortage of hospital beds on certain days. But it is among the most cost-effective in the world, delivering a high clinical standard without inflicting too much financial hardship on patients or taxpayers.
3 Over the years, many have come to study us. My most recent visitor was a delegation from Armenia, formerly in the communist bloc. Armenia is a small landlocked country, with talented people. We used to have an Armenian community here in Singapore. They told me that there are still about 100 living here. There is an Armenian Church and as Members would know, our world famous Raffles Hotel was set up by three Armenian brothers a century ago. The delegates who came to study us were serious and bright. They asked critical questions. But for most of the last century, they were bogged down by the communist system of central planning. 20 years after the fall of the Berlin Wall, they are at a cross-road. They know that their current system of free healthcare and centralised delivery is not sustainable. They read about us and its Health Minister led a team here to probe. I shared with them abundantly, and my parting comment was that health reforms would take decades. And even then, it would always be work-in-progress. Earlier, we discussed our healthcare delivery system. This afternoon, I will discuss how our financing model can be improved further.
4 In the new financial year, our budget to subsidise patients will increase by 10% to $2.2 bil. I am grateful to the Finance Minister for his support. In fact, the increase is more as the Finance Ministry has also topped up Medisave accounts, Medifund and Eldercare Fund by $710 mil. These top-ups are in fact subsidies, as they help Singaporeans pay for their future healthcare needs.
Level One Protection: Government Subsidy
5 Such government subsidy for healthcare is the first layer of protection for Singaporeans, which ensures universal access to basic healthcare by all. Because the 3Ms label does not include this item, government subsidy is often taken for granted. I have been trying very hard to see how we can slip in the ‘S’ into the 3Ms. But in fact the ‘S’ is a big ‘S’, not a small ‘s’. In fact, our government health subsidy is huge. It differentiates our healthcare funding model from that in the US, Japan and many European countries, where hospitals and clinics charge all their patients at full cost.
6 In Singapore, 80% of the patients in our hospitals choose Class B2 or C wards. In these wards, the bulk of the cost is picked up by the government. For example, a Class C patient going for a hip replacement surgery, which is a major surgery, costs the hospital on average $17,500. 80% of the cost, or $14,000, is paid by my Ministry through our annual subvention to the hospital. The patient co-pays the remaining 20% or $3,500, which are largely covered by MediShield and his Medisave savings.
7 Mdm Halimah spoke about knee replacement surgery. She raised this issue last year and we have fixed the problem by revising the claim limits. On average, the cost of treating such a patient in Class C is about $16,000. My Ministry subsidises about $11,500 with the patient co-paying the remaining $4,500. With Medisave and MediShield, many do not have to pay anything out of pocket, unless they insist on some fanciful but costly implants.
8 This is our approach to subsidising care. As medical advances and hospital operating costs go up, we increase our subvention to the hospitals so that patients remain subsidised in accordance with the prescribed subsidy policy. We actually miss the target sometimes. For example, Class B2 subsidy is 65%, with patients co-paying 35% of cost. In reality, B2 patients currently co-pay 30%, which is 5%-points below target. We will have to close the gap eventually, but let me assure Members that it will be gradual and will not inflict unnecessary hardship on our patients.
Level Two Protection: Medisave
9 After government subsidies, Medisave forms the second layer of protection. As Mdm Halimah put it, it is a key pillar of our healthcare system. Medisave turns 26 this year. Collectively, we now have more than $45 bil in Medisave. At the individual account level, all salaried employees have healthy Medisave balances for themselves and their dependents. There are many statistics to prove this point, but let me just highlight one. By age 50, the average Medisave balance of all salaried employees would have exceeded $27,000. This is good for 18 hospital admissions if he chooses Class C. And even if he chooses Class A, it can cover 6 hospital admissions. This assumes he has no insurance coverage . But 90% of all Singaporeans have MediShield coverage, which would reduce the patient’s share of the bill substantially. For these Singaporeans, their Medisave balances can cover even more hospital admissions.
10 This is a remarkable achievement. Medisave is one major reason why sophisticated but costly healthcare services are within the reach of all Singaporeans, including the lower income group. In the current health reforms debate in Washington, serious economists are advocating health savings account (HSA) as a necessary solution for the American healthcare system. Medisave is a health savings account; we pioneered it long before economists developed this insight and coined this term.
11 The idea came from MM Lee. Dr Goh Keng Swee sketched out a rough outline. SM Goh fleshed out the details, persuaded Singaporeans to accept this idea and got it successfully implemented. We have all three to thank for this innovation, which has now become an integral part of Singaporean life.
12 Mdm Halimah asked about the existing Medisave contribution rates. This is tied in with the overall CPF contribution rate and is a factor in employment cost and overall competitiveness. I have no grave concern on the adequacy of the existing Medisave contribution rate. But I must add one caveat on the self-employed who form 12% of CPF members. Many are careful and contribute regularly to their Medisave. They too have an average Medisave balance close to the salaried employees of similar income band. My worry is the 140,000 self-employed members who have an average of less than $10,000 in their Medisave balance, some just a mere few thousand dollars. Out of this group, only 40% had made some contribution to their Medisave last year. Even then, it is usually just nominal. They would get into problems if they or their dependents fall sick. And it would be worse if they also do not subscribe to MediShield or ElderShield. We must help get them into Medisave, MediShield and ElderShield, so that they can enjoy the same protection as the salaried employees.
13 Mdm Halimah asked about the adequacy of the Medisave Minimum Sum (MMS). She asked if it is adequate to meet the needs of an ageing population. The current MMS is at $32,000 and is not bad for those opting for Class B2 or C wards and have MediShield and ElderShield coverage. We will continue to adjust it annually to take into account medical inflation, so as to preserve the purchasing power of the account holders. My concern is that currently, most are not able to achieve MMS by the time they reach 55. The top 40% of income earners are alright, but not those in the lower income group. That is why we have to be careful in not over-liberalising the use of Medisave for other purposes, which it was not originally designed for.
14 I have the unpleasant task of being the gatekeeper to Medisave. I heard Ms Sylvia Lim. Yes, Medisave is your money, but if it runs out prematurely, you will be in trouble. I am trying to prevent such an outcome. That is why we have stringent Medisave withdrawal rules and limits. This will help to balance current consumption against future needs, and ensure that Singaporeans have enough Medisave to look after their medical needs during retirement.
15 Ms Sylvia Lim spoke about the Chronic Disease Management Programme (CDMP) and the deductible of $30. She observed that the utilisation rate of the programme is low, at 15%. That is a surprise to me. When we look at the total number of patients we must base it on disease incidence. And we must know that probably half of those with chronic illness do not know they have it. And among those who know they have the disease, not all come forward. And even when they come forward, not all comply with the doctor’s advice to change their lifestyle or medication. Thus when we look at the 15 % of potential users, it is not a bad figure. I had thought we could not even cross 10%. But of course we should still aim higher and encourage more people to join the programme. I’ve spoken to some people on CDMP and they told me they are not using Medisave. For some, their bills are paid for by employers hence there is no need to use their Medisave. For others, they know that Medisave pays interest rate and so they choose to pay by cash if they have enough. My point is that there are all sorts of reasons why people do not wish to use their Medisave for chronic disease management and I don’t think we should be discouraged by the 15%.
16 However, the deductible is a problem that can be easily overcome. I have spoken to GPs and polyclinics, and what they do is that they offer a package deal. For all the various visits, GPs charge a lump sum with the same $30 deductible applied. The rest of the bill can then be paid by Medisave. This is one way we can overcome the deductible issue and also secures compliance by the patient.
17 Recently, there was some public discussion on the use of Medisave for health screening. Dr Lam Pin Min and Dr Fatimah Lateef have suggested that we consider expanding Medisave for health screening, subject to certain limits and guidelines.
18 I am sympathetic to the call as I believe in prevention. Regular screening and early detection followed by medical intervention and lifestyle changes can avoid future complications and costly medical treatment down the road. There is a case for allowing some Medisave withdrawals for health screening. The question is what kind of health screening? There is a wide range of health screening tests; not all are fully justified or necessary. More screening is not necessarily better. Some accrue benefits more to the provider than the consumer. We must be mindful of such pitfalls. As Dr Fatimah put it, we may be opening a Pandora’s Box. A mindless liberalization of Medisave for health screening may not improve health outcomes, but instead prematurely deplete Medisave balances.
19 Let me give one example of health screening which is being promoted in the West: genetic screening to predict the risk of a person getting a particular disease later in life. These are sophisticated and very expensive tests. The clinics love it as it increases their bottomline. Last month, the Journal of the American Medical Association published a timely research finding on the effectiveness of the current gene markers to help doctors predict which women would develop heart disease. The study found that we still do not yet know enough about genetics for health risk prediction. The article concluded that “(i)nstead, cholesterol levels, blood pressure and family history remain the better indicators for determining who is at risk for having a heart attack, stroke or dying from heart disease” (Bloomberg, Feb 16). At the moment, the traditional screening methods are still more reliable and very much cheaper. But they are less glamorous and bring in less revenue for the clinics. I am sure genetic forecasting will become more useful in future, as their scientific promises are fascinating. But meanwhile, the results are still disappointing. As one IHT article (Aug 19) put it: “If you want to learn your odds of getting different diseases, consult your family history. Or visit a fortune teller. For most traits, genetic testing is little better than consulting the tea leaves.”
20 Genetic testing is one example. But there are many other sophisticated screening tests which are also being promoted. All are expensive. The benefits or cost-effectiveness of such tests are often dubious. I call this unethical screening. Health screening is therefore a complex issue and the risks associated with unethical screening are real. We must not fall into the trap of such commercial practices.
21 As a first step, my Ministry will set up an expert group to review the range of healthcare screening available here, and recommend a framework to determine what constitutes appropriate health screening. We will then be in a better position to advise Singaporeans, so that they do not get fleeced. Prof Lee Hin Peng will chair this expert group. He is a senior public health specialist and has a special interest in cancer screening and prevention. We propose to put this group under the auspices of the Academy of Medicine.
22 Separately, we will study the financial implications of health screening so that should we decide to open up Medisave for it, we will know how to prescribe the necessary withdrawal limits. This was the approach we took when we opened up Medisave for outpatient chronic disease management. It is a prudent approach to exploit the benefits of Medisave liberalisation, while minimising the downside risks of over-servicing and over-consumption. Meanwhile, I have noted the various suggestions from Members and will try to incorporate them in due course.
23 Another area of Medisave usage is in the intermediate and long term care (ILTC) sector. Several Members have commented on the need for rational Medisave withdrawal rules to encourage right-siting of patients in the community. I agree. Today, Medisave can be withdrawn for community hospitals, subject to a daily withdrawal limit of $150, up to an annual cap of $3,500. This is largely adequate for patients undergoing rehabilitation. However, we are stepping up the capabilities of the community hospital so that they can also serve sub-acute patients, for example those with hip fractures, and elderly with kidney and urinary tract infections. Traditionally, such patients are kept in acute hospitals where their Medisave withdrawal limits are higher, at $450 per day. But it makes sense for the patients to be transferred to a community hospital where the total cost is lower. However, current withdrawal limits may deter such patients from moving to community hospitals because of higher out-of-pocket payments, as Dr Amy Khor pointed out.
24 To fix this anomaly, we will do two things. First, we will subvent the community hospitals which partner the acute hospitals to provide sub-acute care, more. The daily norm cost for such cases will increase from $271 to $400 per day. So this is quite substantial. Second, we will (a) raise the daily Medisave withdrawal limit for community hospitals from $150 to $250, and (b) raise the annual Medisave withdrawal limit from $3,500 to $5,000. Together with the enhanced nine-tier subsidy framework for community hospitals implemented last year, these adjustments should make it cheaper for sub-acute patients to move from an acute hospital to a community hospital. I thank Dr Amy Khor for this suggestion.
25 Medisave can also be used to pay for day rehabilitation services, subject to a daily limit of $20. We will also be raising this from $20 - $25.
26 We are working with the providers to raise the clinical standard of community-based rehabilitation care. We will involve more skilled therapists in the delivery of care and establish individual care plans and improved outcome monitoring to help ensure patients receive the care they need. With better treatment, costs will go up and hence the Medisave increase will help .
27 These changes to Medisave withdrawal limits will be implemented in June in a couple of months’ time.
Level Three Protection: Insurance
28 After government subsidies and Medisave, health insurance in the form of MediShield, ElderShield and their private supplements, form the third layer of protection. The value of health insurance and the benefits of risk-pooling are well established. Practically all countries have incorporated insurance into their healthcare systems. The Germans under Chancellor Bismarck introduced this innovation a century ago. But we are again unique by insisting on “deductibles and co-payment” in our health insurance framework. We reject comprehensive health insurance based on “first dollar coverage”. Many other countries adopt comprehensive health insurance and are now bogged down by abuses, over- consumption, over-servicing and wastages. They are trying to reform their insurance policies, as in the US, by introducing “deductibles and co-payment” but find it politically challenging. Former Health Minister Yeo Cheow Tong incorporated this important feature into our health insurance policies and we were wise to have avoided these pitfalls.
29 Even the Germans who pioneered health insurance are now trying to reform their national health insurance system as abuses are causing massive deficits. Employers have been shouldering the rising premiums but this has affected their business competitiveness. They are saying “enough is enough” and are demanding that employees should shoulder future premium increases. Last week, an article in a German business weekly, Focus Magazine (Mar 1), discussed this issue. The article was titled “Saving Money With Singapore” and its sub-headline read: “The Government is looking at an Asian health regime as a model for the reform of the statutory health insurance system”. The article said that they “are looking into one health system in particular – that of Singapore”. I do not know if our 3Ms is implementable in Germany as our politics are different, but clearly we must be doing something right.
30 MediShield and ElderShield are not compulsory; but through an opt-out approach, we have achieved good coverage. MediShield coverage has exceeded 93% for all working adults, and the ElderShield per-cohort coverage is about 90%. As noted by Dr Lily Neo, there is room for further expansion, but the current picture is not bad.
31 I have done several enhancements to MediShield and there is scope to do more, for example, to extend it to cover mental illness and congenital illnesses, when the economic condition is conducive. Mdm Halimah and Ms Denise Phua raised these two ideas several time back. I have not forgotten.
32 I have also enhanced ElderShield, but I think further enhancement is necessary. ElderShield now pays out $400 per month for up to 6 years. This is just about sufficient for the lower income group who qualifies for heavy subsidy in nursing homes, but it will not be enough for the higher income group. They should top up their basic ElderShield with ElderShield supplements. Some do. About 14% of ElderShield policyholders subscribe to ElderShield supplements. It will be a better picture, if another 30 or 40% also join in.
33 In response to Dr Lily Neo, we are looking to further enhance the basic ElderShield by raising its payout to say, $800 per month. But this will require some premium adjustment. I am trying to see how we can avoid this, and I am studying the alternative of bringing forward the entry age from 40 to say 35 or 30, which should mean lower premium adjustments. Effectively, this will allow Singaporeans to spread the larger premium payments over a longer period of their working life, instead of the current 25 years, in return for higher payouts should they become severely disabled.
Level Four Protection: Medifund
34 The final layer of protection is Medifund. This is the ultimate safety net to catch anyone who falls through the top three layers. We have been building it up since its launch in 1993. With the proposed top up of $200 mil, it will reach $2 bil.
35 Medifund is again unique in Singapore. We consciously set aside budget surpluses during good time, so that our ability to help the vulnerable during bad times is not diminished by the adverse economic climate.
36 Last year, when we anticipated more patients asking for financial help, we increased the Medifund disbursement to $75 mil. It was helpful. While the economy this year should be better, I will nevertheless further raise this year’s Medifund budget allocation to institutions to $80m. This will be funded, as usual, using the interest earned by the endowment fund.
37 Separately, I have been thinking about how to help lower income Singaporeans cope with expensive drugs, over and above our current subsidy policy. Last month, I disbursed an additional $8.5 mil to Medifund Committees to enable them to help more patients, especially those requiring HIV medications. This year, I will inject a further $10 mil from MOH’s operating budget to help deserving patients cope with 7 high cost medications used for diseases such as breast cancer, colorectal cancer, ovarian cancer, COPD and asthma. This should be helpful to many patients suffering from these diseases. We will leverage on the Medifund mechanism to help disburse this additional financial assistance to deserving patients. This includes means-testing and some co-payment by patients as the hospitals deem fit. If the idea proves useful, we can increase the budget allocation to this new Medication Assistance Fund (MAF).
Conclusion
38 Mr Chairman, our multi-layered protection framework, code-named 3Ms, builds upon and enriches our government subsidy framework which we inherited from the British. It allows us to combine the best of the British taxation model with the best of the market-based American insurance model. It is not perfect but it has served us quite well. I fully agree with Dr Lily Neo that “we need to continually tweak (it) so as to cater to the growing needs and expectations of our people”. With the support of Members, I will continue to do my best to ensure that all Singaporeans can afford basic healthcare services. This is my pledge.