Battling Economic Tsunami Together

09 Feb 2009

By Khaw Boon Wan

1. Many Members have noted the extraordinary circumstances which we are now in. The global recession is raging; we are battling an economic tsunami. Our priority is to help Singaporeans tide over this difficult period.

2. As Health Minister, my job is to ensure that healthcare remains affordable to Singaporeans, even if they should lose their jobs or face wage cuts. Of course, any measures put in place must be consistent with our core principles that have served us well. This way, our healthcare system will remain relevant beyond the current difficult times.

Healthcare Reserves Put Singapore In Strong Position

3. We are in a much stronger financial position for healthcare as compared to all other countries. This is because we have prepared for rainy days like these over the past 25 years. There are more than $46 billion in our “healthcare reserves” in Medisave, Medifund and ElderCare Fund. With our healthcare reserves, Singaporeans do not have to forego essential healthcare treatment during the recession.

4. We have carefully constructed this year’s Health Budget.  There will be special schemes to help patients tide over the recession.  But our eyes will also be on the future when the economy recovers.  We are paying particular attention to opportunities which are emerging as a result of the recession.  We will seize these opportunities to further strengthen our healthcare system.  We need to do so as the challenges for healthcare all over the world are tremendous.  Ageing of the population alone will stress our healthcare system drastically. Technological progress will further raise healthcare costs.  We must be alert to these challenges and respond to them with effective strategies.

5. For this afternoon, let me first elaborate on the strategies which we will implement to cope with the immediate healthcare issues that the recession has brought.  Tomorrow, we will discuss the longer term strategies.

6. To battle the recession, my Ministry has already implemented a number of initiatives during the past few months.  I spoke about those initiatives last month and I will not repeat them.  Instead, let me focus on the new initiatives that we will undertake during the new Financial Year.  They will benefit the healthcare sector directly and some will have a positive impact on the rest of the economy as well.

More Money

7. First, we have increased the Health Budget substantially, by nearly $1 billion, to $3.7 billion.  This is a significant increase of 34%.  I am grateful for the support of the Finance Minister. The increase comprises additional operating budget of $700 million and additional capital budget of $300 million.  These are very substantial increases. 

8. Government subvention to our restructured hospitals and institutions will hence grow from $2.0 to $2.7 billion. Of this, $2.2 billion will directly subsidise the patients’ medical bills. The remaining $0.5 billion will help the hospitals recruit and train more doctors, nurses and allied healthcare professionals.

9. The additional capital budget will help us expand our healthcare capacity in the form of new general hospitals, community hospitals, nursing homes and enhanced IT capabilities. The total new capital commitment is about $4 billion, which we have planned to take 5 years to complete.  But because of the recession, we are bringing forward some of the projects to take advantage of the softening construction cost.

More Jobs

10. Second, we will use the expanded health budget to hire and train more professionals to enhance patient care.  This is something we have wanted to do incrementally over the medium term.  But given the current recession, we decided to bring part of the plan forward.  Over the next two years, we shall add 4,500 more jobs. In reply to Dr Fatimah Lateef’s query: half of these jobs will be for nurses, a quarter for doctors & allied health professionals, the remaining one quarter for administrative & ancillary staff. This is a significant expansion with long term implication as it will raise the annual manpower cost of the hospitals permanently by more than $500 million per annum.  This is a major investment on our part and is in response to the patients’ demand for better services and longer consultation time.  It will have to be jointly funded by Government and the patients, but the Government will foot the bulk of the increased cost as we will continue to subsidise 80% of Class C bills and 65% of Class B2 bills.

11. Mr Gautum Banerjee asked if the public sector has been competitive in recruiting and retaining our doctors.  The restructured hospitals have expended a lot of effort and resources to ensure that they have their fair share of talent.  Besides regular wage adjustments to narrow the gap with the market, we also focus on training and research opportunities for our professionals, so as to enhance the value proposition of a career in the public health sector. They have been quite successful: the number of doctors in the public sector has grown by 1,000 from 2,800 in 2004 to 3,900 in 2008. Attrition rate is manageable at 6% last year. Similar efforts apply to our nurses, pharmacists and key allied health professionals. Their headcount numbers have also grown by 4,000 from about 11,000 in 2004 to 15,000 in 2008. 

12. But let me add a word of caution here. These efforts will increase healthcare cost significantly, if we merely use the extra manpower to reduce the workload for each staff.  While this is one objective, it cannot be the sole objective.  We must also use the extra resources to do those things that we were not able to do before, to help us transform the delivery of healthcare, and not merely to do the same things, but with more staff.  For example, to re-engineer our processes, to change the way hospitals and doctors work, to support better treatment of chronic diseases, to forge greater integration of services, to right-site patient care, to make IT work better for our patients.

More Training Awards and Scholarships

13. Third, we will help some of the retrenched Singaporeans take up a career in healthcare.  We are creating at least 250 mid-career conversion opportunities for those who are retrenched or have been working in other industry sectors. With the right attitude, they can be trained to become nurses, therapists, radiographers, pharmacy technicians or healthcare assistants. We subsidise the training costs, pay the trainees a monthly allowance and guarantee a job upon their graduation.  My Ministry is prepared to support more trainees if there is greater demand.

14. We will also increase the number of scholarships and bursaries for students in various allied health disciplines by up to 250 this year.

More Infrastructure

15. Fourth, we are bringing forward some capital development projects, to capitalise on softening construction cost.  Khoo Teck Puat Hospital in Yishun is on track to open next year.  Its opening will directly benefit the patients living in the north, besides relieving the pressure on Tan Tock Seng Hospital and Changi General Hospital.

16. The proposed Jurong General Hospital is being planned for 700 beds.  Elsewhere, the Duke-NUS Medical School is almost ready, while the National Heart Centre and the SGH Pathology Building are being built at the Outram Campus.  The Kent Ridge Campus is just as busy with the development of the National University Heart Centre and National University Cancer Institute.  There will also be developments at the Novena Campus, including the new Communicable Diseases Centre.

17. Besides big ticket items like these, we continue to invest and reinvest in existing facilities and upgrade them where appropriate. For example, last year, SGH debated for quite some time and decided to invest $3.5m in a new hyperbaric oxygen treatment facility to further enhance its capability in treating burns patients.  As it turned out, our parliamentary colleague, Mr Seng Han Thong, became a beneficiary of this investment.  Daily oxygen treatment at the facility has speeded up considerably his recovery process.  For those who have visited him more than once, we can see  the recovery with our own eyes.  Our burns unit in the SGH is a major asset that we all can be proud of, and is an example of the excellent healthcare that Singaporeans have access to.

More Liberal Use of Medisave

18. Fifth, I agree with Mdm Halimah, we will liberalise Medisave use to help Singaporeans further reduce their out-of-pocket expenses.  In 2007, we raised the Medisave per diem withdrawal limit to $450 in 2007.  This has helped many patients, especially the middle income Singaporeans in Class A/B1 wards and who do not need any surgery.  This year, I will focus on helping those who require surgery.  

19. Surgeries are categorised into 21 tables, and run from Table 1A, 1B, 1C through to 7A, 7B, 7C, in ascending  order of complexity. Medisave withdrawal limits are set for each surgical table, ranging from $150 for Table 1A to $5,000 for Table 7C.  We will raise the Medisave withdrawal limits substantially, to between $250 for Table 1A to $7,550 for Table 7C.  This would reduce the out-of-pocket expenses of all surgical patients, and will particularly help those in Class A/B1 and private hospitals.

20. For example, an eye cataract operation is a Table 4A operation.  Patients can withdraw up to $1,400 for this surgery, but after the liberalisation, they can withdraw up to $2,150, a savings of $750. As another example, patients who need a knee joint replacement, a Table 6B operation, will now save $1,950, when we raise the withdrawal limit for this operation from $3,200 to $5,150.

21. I will get this done as soon as possible, but some time is needed to reprogramme the computer.  We will get this implemented latest by June.  

22. Dr Fatimah Lateef and Mrs Josephine Teo asked about our Medisave Chronic Disease Management Programme (CDMP).  This programme has helped many patients with any of the 6 major chronic diseases, including diabetes and stroke.  I am pleased with the working of the programme.  We are now confident to further extend it to benefit the mentally ill patients.  Mdm Halimah, Dr Fatimah and several other Members have asked for this extension for quite some time.  Just like the other chronically ill, the mentally ill patients need continuous and often long-term outpatient treatment, where cumulative costs are high. Proper management of psychiatric conditions in the outpatient setting would also reduce the number of cases turning into costly hospitalisations.

23. But we must remember the original purpose of Medisave, which is to help Singaporeans cope with costly hospitalisations at old age.  It was never meant for outpatient care and we must not allow Medisave to be prematurely depleted through inappropriate outpatient services.  To safeguard against premature depletion, we have set a Medisave withdrawal limit of $300 per account per year and imposed the requirements for deductible and co-payment.  These are important conditions and they will also apply to the mentally ill. But unlike diabetes and stroke, the mental illness comprises a wide range of conditions, some of which are not easy to diagnose and confirm, nor with clear consensus yet among the psychiatrists on the treatment regime. We will start cautiously with the major conditions of depression and schizophrenia, which affect the bulk of the mentally ill. MOH will put in place a quality assurance framework with IMH and the relevant tertiary institutions. This way, we ensure that Medisave is put to proper use, with clear benefits for the patients’ recovery.  We will begin detailed discussions with the GPs and the psychiatrists on how best to implement this new initiative.  We will get it done before Oct 09.

24. Dr Fatimah Lateef and Mrs Josephine Teo asked about the proposal to allow Medisave to be used for elective hospitalisation treatment overseas. The unionists asked for this extension when I last met them at a public dialogue.  Good competent care for routine treatment is now available in the neighbouring countries, at cheaper cost, given their lower cost structure.  I agree with NTUC and several Members that we should help our patients stretch their savings and reduce their cost if they opt for elective treatment in the neighbouring countries.  My concern is how to ensure safety and adequate standards, while guarding against fraudulent claims.  We are thinking through the implications of this proposal and I will share our analysis with Singaporeans in due course.  

More Assistance for Lower Income Singaporeans

25. Finally, we will further strengthen Medifund, to make it a robust safety net for the lower income Singaporeans. Last year, we raised the amount of Medifund assistance by half to $74m.  This year, we will raise it further, by another 10% to $80m.  Medifund assistance is now double the amount of assistance provided 3 years ago. 

26. For the step-down care sector, our subventions for the elderly will also grow, by at least $25 million this year. I am grateful to MOF for topping up Medifund and ElderCare Fund by $100 million each.

Battling Together

27. My Ministry will do its best to help Singaporean patients cope with the recession.   The others have their part to play too, namely our patients and their healthcare providers. 

Patients’ Battle Plan

28. As noted by Mr Zainudin Nordin, Singaporeans can stretch their healthcare dollar by choosing the right class of ward.  Our restructured hospitals provide financial counselling to ensure that their patients have the proper information to do so. Last week, ST reported one Ms Wee who decided to switch from a private hospital to deliver her second baby in a subsidised ward in KKH.  The move, she was reported as saying would save her about $1,800 in cash.  This is her way of coping with the current recession and I said: well done, here is a smart lady!  Our subsidised ward does not provide a personal choice of doctor but the clinical care is of a high standard. 

29. Means testing is now available in public hospitals.  This enables the Government to be more targeted in our subsidies to lower income Singaporeans. I am glad that those who could not get the full subsidy form less than 10% of the admissions.  It shows that by and large, Singaporeans do choose wards that are appropriate to their income levels.  But we will continue to monitor the situation.

30. As for medical insurance, I thank Dr Lam Pin Min and Mr Yeo Guat Kwang for highlighting its importance. MediShield is essential for all Singaporeans to take care of major illnesses which may lead to large hospital bills. Now that MediShield coverage has reached 84% of our total population, we are shooting for a higher target of 90%. I agree with Mr Yeo Guat Kwang that Singaporeans should get insured as early as possible, preferably soon after birth. We introduced opt-out MediShield coverage for children in December 2007, and 98% of parents did not opt their new-borns out of the scheme.  I thank the parents for their support.  We are now working through the schools to catch up with those who were born before 2008. It will take some years but eventually we will catch up with all. Currently, nearly 70% of Singaporeans below 21 years old are covered by MediShield. 

31. As for the adults, 90% of women aged 20 and above have MediShield coverage.  This is not bad, though the coverage is 93% for men in the same age group. Let’s raise both rates up to 95%, as the immediate target.  We are working with NTUC to make workers sign up for their non-working spouses. Mdm Halimah is helping me on this, and I thank her for this.

32. Dr Lam Pin Min asked about MediShield’s coverage of large hospital bills.  After our reform last year, MediShield now pays up to 80% of large Class B2/C bills.  This is a significant improvement from 60% previously. Claim limits for cancer treatment were also raised in the 2008 MediShield reform. However, coverage for congenital conditions remains a gap in our current medical insurance scheme.  MediShield and the private insurers do not cover congenital conditions.  The reason is one of cost.  Including congenital conditions will result in a large increase in the MediShield premiums which the rest of the population may not be willing to shoulder.  We will continue to study this problem but I do not see a quick resolution of this problem as this is clearly not the time to raise premiums.  Until then, we will continue to rely on Medifund to help the lower-income patients with congenital conditions.

33. Mrs Josephine Teo has wisely advised all Singaporeans to continue to contribute to Medisave and maintain MediShield coverage even in bad times. I echo her call.  3Ms is important and effective, and all should stay within 3Ms.  Do not leave the 3Ms protection.  You will be exposed and be vulnerable.  Basic MediShield premiums are very affordable.. Given that Singaporeans have substantial Medisave balances, most would have no problems with maintaining basic MediShield coverage. In cases where the individual has insufficient Medisave balances, I hope the immediate family members can chip in to take over the premium payment to ensure continued coverage.  Family members should take care of one another, especially in times of hardship.

Healthcare Providers’ Battle Plan

34. The second group pertains to the healthcare providers.  They play an important role in helping patients save money.  Saving patients money is an important responsibility of healthcare providers both during good and bad times, but it is especially critical during bad times.  They have to help deliver better health outcomes at lower cost.  Singaporean healthcare providers have largely been productive and cost efficient.  But there is still scope for greater efficiency and higher productivity. 

35. Let’s look at the computer industry.  For years, they focus on adding more features to their products, tempting consumers to buy higher price products, never mind if they may not really need the bells and whistles.   This strategy of paying more for added capabilities is under now severe stress in the current downturn.  The electronic sector is hardest hit. Consumers are now demanding that manufacturers go back to basics and offer lower priced products, without the frills. They are demanding new technologies that do the same for less money, rather than more for the same price.  They prefer computers to get cheaper, rather than more powerful.  Small, low-cost laptops, called netbooks, are “good enough” for many consumers.  The “good enough” approach is also being demanded in the software and many other industries.  The Indian manufacturers are particularly innovative on this front: they are shooting for radical breakthroughs like a US$20 laptop and a 1 lakh (US$2,500) car.  And not just in manufacturing.  Indian ophthalmologists have years ago pioneered the provision of cataract surgeries at less than US$100 per eye when it cost more than US$1,000 per eye elsewhere, including Singapore.

36. We need more of such disruptive innovations in the healthcare sector.  Four years ago, I published hospital bill sizes to show the wide variation in cost among our hospitals, with a view to push our hospitals on this effort to “do more with less”.  And indeed there were some successes as lasik prices dropped by more than $1,000 per eye and the price wars continue to this day, at great benefit to consumers. But the “lasik effect” does not seem to extend to other surgeries.  There are still many surgical procedures where prices vary widely. For example, the median bill size for cataract surgery varies from $2,900 to $4,200 at the high end.  For the subsidised patients, the variation is from $875 to $1,000.  The same thing with hip replacement.  The median bill size for Class B2 varies from $4,100 to $5,100. 

37. These bill sizes are updated monthly on our website and easily accessible by patients but regrettably, we do not experience the same “lasik-effect”. Why do patients continue to go for higher-cost providers when competent lower-cost providers are available?  If patients are indifferent, then why should hospitals try hard to reduce cost for their patients?  I think this is partly because the “lasik effect” has been blunted by third-party payment.  Unlike lasik consumers who pay their own bills, most other patients have their bills paid by their insurers or employers and hence they have no incentive to shop around.  But surely, the third party payers will have an incentive to require the patients they sponsor to shop around?

38. As a major third-party payer for subsidised patients, my Ministry has a strong incentive to economise.  We will want to create the right regulatory framework and conditions for providers to compete and innovate like in the case of lasik operators.  For surgeries with well-defined conditions and measurable outcomes, like delivery of babies, cataract surgeries, knee joint replacement, hip replacement, I will tweak our Government subvention to reward the low-cost providers and pressure the high-cost providers.  We will try this out for several common surgical procedures, and see if it is effective in getting our hospitals to work harder to save money for their patients.  This recession is a good time to apply this pressure, and will position our hospitals well in terms of offering cost-effective treatments when the economy recovers.

39. Prof Clayton Christensen, Harvard Business School’s guru on disruptive innovation has devoted his latest book “The Innovator’s Prescription” to a thorough discussion on applying disruptive solutions in the healthcare sector.   He is emphatic that the solution to the US and indeed the global healthcare challenges is a complete reform of the traditional healthcare system and a disruption of the business model centred on the general hospital.  His book makes for both optimistic and pessimistic readings.  It points a way forward that will improve quality, accessibility and affordability by changing the way hospitals and doctors work.  In other words, healthcare can be better and also cheaper.  Who will not want that?  But it also highlights the many obstacles and the ingrained self interests of the various stakeholders to preserve the status quo.  They will fight to avoid or delay the transformation.  Maybe President Obama can do the miracle and lead the world in healthcare transformation.  We will see, even as we attempt our own disruptive innovations here.

Conclusion

40. Mr Chairman, the economic tsunami is with us and we cannot wish it away.  But there are opportunities to transform our healthcare system, even as we implement measures to battle the recession.  If we apply our mind, we can help Singaporeans tide over the recession and also make our healthcare system even better when the economy recovers.  My Ministry will play its role diligently, Singaporeans and our healthcare providers have equally important roles to play.

41. I thank Members for their advice and their support of our economic tsunami battle plan.  This will enable Singaporeans to continue to enjoy healthcare that is amongst the best in the world.