CareShield Life subsidies same for all S’poreans based on age, financial status

MOH's Reply

The Straits Times, 10 Jul 2018 

CareShield Life subsidies same for all S’poreans based on age, financial status

We refer to Ms Salma Khalik's commentary, which suggested that policyholders who are currently insured under ElderShield 400 will be given more subsidies than those who are under ElderShield 300 when they join CareShield Life (CareShield Life a good move, but subsidies are rather skewed; July 7).

This is not so.

Singaporeans born in 1979 or earlier who opt in to CareShield Life will receive the same participation incentives based on their age, and premium subsidies based on their financial status, regardless of whether they are currently insured under ElderShield 400, ElderShield 300 or are uninsured.

As an example, a woman aged 54 in 2021 who is currently insured under ElderShield 400 will see a premium of $800 per year when she opts in to CareShield Life in 2021.

She will receive a participation incentive of $1,500 and, if she falls under the middle-income bracket, enjoy $160 in premium subsidy. Her net base premium in 2021 is estimated to be $490 per year. Another woman of the same age and financial status but insured under ElderShield 300 will see a premium of $900 per year in 2021. The additional $100 in premiums is the catch-up component, to bring her on a par with the ElderShield 400 policyholder who has paid more premiums in the past.

After receiving the same participation incentive of $1,500 and premium subsidy of $160, her net base premium in 2021 is $590 per year.

As CareShield Life provides higher lifetime payouts that increase over time, both policyholders can receive payouts of $790 per month (or $9,480 a year) for life if they become severely disabled at 67 years old or later, if we assume that payouts increase by 2 per cent per annum.

For Singaporeans who are unable to pay for their CareShield Life premiums even after the incentives and subsidies, the Government will provide additional premium support.

No Singaporean who joins CareShield Life will lose his coverage due to financial difficulties.

Lim Siok Peng (Ms)
Director, Corporate Communications
Ministry of Health

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Commentary

The Straits Times, 7 Jul 2018 

CareShield Life a good move, but subsidies are rather skewed

You are in your 60s and want to be covered by CareShield Life?

You should expect to pay at least $10,000 for this - and that's if you are already on ElderShield400 and have been paying premiums since the age of 40.

The actual premiums, which can be paid over at least a 10-year period, are yet to be announced.

But early indications suggest that many of those in their 60s, who are already covered by ElderShield, should brace themselves for five-figure top-ups. Those with no coverage will have to pay far more.

CareShield Life is a new government-run long-term care insurance scheme that will be launched in 2020 and will be compulsory for people who are 40 years old or younger, then. It will be opened to older cohorts in 2021 and they are being encouraged to join the scheme.

Currently, people are automatically enrolled in ElderShield400 on their 40th birthday, but may choose to opt out. This scheme is run by three insurance companies.

The main difference between the two schemes is that CareShield Life pays at least $600 a month for life to people who are severely disabled, while ElderShield400 pays $400 a month for up to six years.

An older scheme called ElderShield300 pays $300 a month for up to five years. More than half a million people are on this.

One reason the Government decided to offer CareShield Life was on account of constant complaints that the existing schemes offer too little for too short a period.

Those on ElderShield will be able to upgrade to CareShield Life by topping up the premiums they have been paying to ElderShield. All premiums can be paid for with Medisave monies and how much more people have to pay will be announced later.

The Ministry of Health (MOH) said premiums for CareShield Life are actuarially calculated. This is why women will be asked to pay more, as they live longer and more are expected to become disabled.

The scheme is not-for-profit. Should actual payouts be lower than projected, the money would be reimbursed, either as premium discounts, higher payouts or even a cash refund.

So far so good.

But it will be decades before we know if the actuarial calculations are accurate.

Will paybacks by then benefit the early cohorts, some of whom might already have died? Or will they benefit only future cohorts?

Furthermore, the calculations used are not based on existing data, but on projections. They assume:

• half the people who are healthy at the age of 65 will become severely disabled in their lifetime;

• half of them will live for more than four years with severe disability; and

• three in 10 will live with severe disability for at least 10 years.

Premiums that need to be paid were based on these assumptions and the MOH should share how it arrived at them.

People are more health conscious now and may stay fitter in their later years. Those on ElderShield need more information to decide whether it makes sense for them to switch to CareShield Life.

After all, ElderShield, which was launched in 2002, has collected $2.7 billion in premiums but paid out only $114 million in claims by the end of 2016.

Of course, most people on the scheme are still relatively young, so not too much should be read into this gap.

But it does show that, after 16 years, we still don't have robust data on how prone people are to getting severely disabled.

ElderShield400 pays $400 a month for up to six years. But the MOH projection is that half of those who become severely disabled die within four years.

For this group of ElderShield400 policyholders who become disabled, it means that the maximum added benefit from CareShield Life is an extra $200 a month for 48 months, or $9,600 in all.

But the MOH has also projected that three in 20 people who are healthy at the age of 65 would live with severe disability for 10 years or more. For this group, the CareShield Life payout would come in really handy.

Is the additional five-figure premium worth paying for these added benefits?

This is something individuals have to decide for themselves.

Given the structure of the scheme, it will be more worthwhile for younger people to join in. This is why the MOH will auto-include people who are now aged 39 to 48, who are on ElderShield400, since the majority would likely opt in.

But the older the person is, the less attractive the scheme becomes, since the top-up sum he will need to pay increases with the age of joining.

Similarly, people who have bought supplements to ElderShield for higher and/or longer payouts cannot have the premiums they have already paid ported over to CareShield Life.

Older people must consider two additional points. One is the incentive of $500 to $2,500 that the Government will give to people born before 1979, to encourage them to join the scheme within the first two years that it is opened to them. Those born before 1960 get the maximum $2,500.

Then, people who come from middle-to lower-income households - that's two in three households - will get additional help.

Between 20 per cent and 30 per cent of their top-up premium from ElderShield400 to CareShield Life will be paid for by the Government. There will be more help should they run out of money before they finish paying the premiums.

Although the younger people get lower incentives to join, the help they get would be significant should they be entitled to premium subsidies. This is because the premium subsidies they get include the premium for ElderShield that they would otherwise have to pay in full until the age of 65.

For them, the Government will pay up to $52.50 of the $175 premium for men who had joined ElderShield400 at the age of 40 - until they reach the age of 65. Those who do not opt to upgrade to CareShield Life will not enjoy this subsidy.

But CareShield Life is less attractive for those who do not qualify for the subsidy. Seniors coming from households with low per capita income will not get any subsidy if they live in a residence with an annual value of $21,000.

The MOH may want to reconsider this, as some of these seniors may not want to move out of homes they have lived in for decades, but may not be cash-rich. At the same time, long-term care can be a big drain on their finances.

Look at it another way. People with low household per capita income living in residences valued at $13,001 to $21,000 get 10 percentage points less in subsidy.

Perhaps those in residences valued at above $21,000 could be given subsidies that are 15 percentage points less - in other words, subsidies of 5 per cent to 15 per cent depending on their household income. It's a point worth considering.

The MOH also plans to provide subsidies for the unpaid portion of ElderShield premiums for those aged 42 to 64 who join the scheme in 2021. Should it consider providing even higher subsidies for cohorts that have paid their ElderShield premiums in full?

Another point is that the 26 per cent of people aged 40 years and older who are on ElderShield300 will not get any help upgrading to ElderShield400 - a necessary condition before they can upgrade further to CareShield Life.

In contrast, those on ElderShield400 will get a subsidy for the ElderShield portion of their premium. Is this fair?

A major reason many did not upgrade from ElderShield300 to ElderShield400 could be that they found it expensive. Not to help them upgrade, again, seems hard on them.

The wealthy can probably do without CareShield Life, since the $600 a month payout might not mean much to them. Those for whom it would be of great benefit should be given the help they need to get onto the scheme.

Being on CareShield Life would give them peace of mind, and let them benefit from all the help schemes that the Government has been putting in place to allow seniors, even those with severe disability, to continue living in the community for the rest of their lives. 

Salma Khalik (Ms)
Senior Health Correspondent