Health Care Seminar 2006 (Video of proceedings available)

28 Nov 2006

By Mr Khaw Boon Wan, Minister for Health

Venue: Auditorium at 29 Heng Mui Keng Terrace

Prof Michael Porter, Harvard Business School

Prof Kishore Mahbubani, LKY School of Public Policy

Distinguished Colleagues

As a health minister, I welcome the participation of serious academics, like Prof Michael Porter, in the review of the healthcare sector.  Worldwide, national healthcare systems are under siege: rising public expectations, rising healthcare costs, rising consumer discontent.  The US is spending 16% of its GDP on healthcare.  But what is most worrisome is that there isn't any apparent ceiling or limit to this consumption.  Everywhere, health inflation consistently exceeds the general Consumer Price Index.  Hence, there is much anxiety.

People are searching for solutions, while lost in the maze, awaiting the arrival of wise guides.  Whether they will come from the Harvard Business School, the LKY School of Public Policy, or from politics, only time will tell.  More likely, inter-school and cross-border collaborations will help us achieve collective enlightenment.  Hopefully, serious policy research would lead to corrective actions, before the health systems collapse under their own weight.

In Singapore, we too worry a lot about health care cost.  This is not a recent preoccupation, but has been our priority for decades.  We were, and still largely are, a young population.  But we can see the demographic changes coming our way and the stresses they would exert on both our people and our society.  Unlike other countries with oil and minerals, we have to live within our limited means and cannot afford to have healthcare displacing resources from other productive sectors of the economy.  As a result, we strive and think a lot harder than others and plan a lot further ahead.  In politics, we learn from doctors that prevention is better than cure, and we know that pre-emptive healthcare policies have to be put in place well before the problems become obvious to most.  If we try to tackle the problems only when they have become huge, it would often be too late and almost impossible to reverse, as some countries are finding with repeated failed attempts at healthcare reforms.

Over the past 41 years, we have evolved our own model of healthcare financing, which we brand as the 3Ms framework, comprising Medisave, MediShield and Medifund.  On top of a subsidized healthcare service available to all Singaporeans, we require every worker to save for a rainy day through Medisave.  This is necessary as we require healthcare services to be co-paid by patients.  They can do this through their personal Medisave Accounts.  In addition, we encourage all Singaporeans to subscribe to a low-cost, high-deductible medical insurance plan called MediShield.  It is not compulsory but through an opt-out enrolment scheme, we have achieved good subscription.  Finally, we provide an ultimate safety net called the Medifund to help any who fall through the gaps.  This way we better manage healthcare demand and at the same time ensure universal access to good basic healthcare by all.

It is not perfect and I am sure Prof Michael Porter would be able to find areas for improvement in our system.  We are aware of some of these weaknesses and we make regular refinements, but we think the key principles behind our system are sound.  The final test is that Singaporeans enjoy a high level of health and we achieve this at a relatively low cost: our total health expenditures made up 4% of our GDP.  But we know it would not stay 4% indefinitely and is bound to creep up with ageing of population and new medical technologies.

In my view, the main problem behind healthcare woes is that we have unnecessarily mystified healthcare and some economists have further endorsed the myth by concluding that the market fails in healthcare.  While the observation is not wrong, it has unfortunately given healthcare providers many excuses that their activities are unique and they are different from other economic sectors.  This perception has given politicians and many interest groups justification to intervene, often for their own interests, and along the way, to further distort the healthcare market.  It becomes a self-fulfilling prophesy.

While the healthcare market can never become a fully perfect market (few economic sectors are perfect markets, by the way), the current level of market imperfection is not the natural order of things.  The healthcare market fails because we collectively, unwittingly allow it to fail.

First, if patients do not know the choices available to them and the prices and quality of these services, how can we expect them to make informed choices and reward the efficient providers? 

Second, if the bills are paid by a third-party with very little direct payment by the patients, why should patients bother to search for lower-cost solutions?

Third, if the providers themselves do not know or bother to know what their true costs are, and that of their competitors, how can we expect them to improve on their performance, to deliver better services at lower cost?

Fourth, if both providers and consumers do not regularly measure the clinical outcomes of their services, how can we know whether the services provided are optimal and desirable?

Finally, if prices are distorted by subsidies, how can we expect to achieve an optimal distribution of supply and demand, with minimum wastages and maximum productivity?

While medicine is regarded as a science, there is actually much that the medical science is unsure of.  Just last month, there was a heated international debate among cardiologists on whether to stent or not to stent.  To the layman, this debate suggests that there is some guesswork in this field.  If so, it is a rather expensive guesswork as each stent costs the patient or his payer a few thousand dollars.

The world is searching for better answers to many of these systemic problems.  As I see it, the more we can make the healthcare market behave like a normal market, the closer the world will be to having more efficient and effective healthcare systems.  Singapore is very much interested to be a player in this global search for a better healthcare system.  We ourselves will continue to experiment with innovative models. 

Let me highlight some of our recent efforts which have shown promise.

First, we corporatised our public hospitals to give them more room to manage their resources.  While still Government-owned and not driven by profit motive, the hospitals have clearer picture of their costs and revenues than the typical public hospitals in other countries.

Second, we have identified the 70 most common illnesses which account for the bulk of hospital admissions and we publish the hospital bill sizes incurred by such patients in our hospitals.  Public hospitals routinely report their data and every month, we update and publish the statistics.  It has led to some immediate actions by providers whose statistics are outliers, to the benefit of their patients.  Private hospitals also participate in this initiative, though in a voluntary way.  We will require private hospitals to publish their bill sizes systematically and comprehensively, when they submit patients' claims to Medisave, as soon as they have overcome the operational problems.

Third, we are going beyond cost data to also publish data on clinical outcomes, e.g. effectiveness of IVF, surgical complication rates for the common surgeries, hospital-acquired infection rates.  This effort is more complicated as such data collection is more costly.  The objective is clear - to bring clarity to what exactly are patients receiving.  This will help focus the attention of the hospitals on what ultimately matters to the patients, which is to just get well.

Fourth, we are leveraging on globalisation to average down our cost.  We are now sending routine X-rays and scans to Bangalore (soon to be known as Bengaluru) for reporting by American Board-certified radiologists there, with good results: faster turnaround at lower cost.  There must be scope for more to be done in this area of cross-border outsourcing; perhaps, telepathology?

Fifth, we welcome graduates from more medical schools from around the world to practice here.  As a principle, all the top medical schools should be on our list of recognized medical degrees.

Sixth, we are learning from others, outside of healthcare.  The Toyota Production System has been adopted in one public hospital here with good results.  I read a recent article about some UK hospitals learning from Formula One racers, to see if they can help eliminate human errors when nurses change shift and patients get transferred from one department to another.  Clearly, we have much to learn from the other professions.

Finally, we are piloting nation-wide chronic disease management programmes, starting with diabetes care.  We are pushing best clinical practices among GPs, promoting compliance by diabetic patients, and monitoring the health outcomes of such patients.   This is not new but applying disease management nation-wide has not yet been tried elsewhere.  From next January, we are extending such programmes to three other common chronic diseases: stroke, high blood pressure and high cholesterol.  In due course, we will publish the effectiveness of different providers' disease management programmes so that everyone can learn from each other.   The objective is better health for these chronically ill, with fewer medical complications that require costly hospitalization.

Prof Michael Porter has brought valuable insights to the study of national economic competitiveness and has contributed to the valuable work by the WEF in ranking national economies.  Singapore has worked with him for many years and I believe our relationship has been mutually beneficial.

I am glad that Prof Porter has recently devoted his attention to healthcare issues. I hope that he will also bring his intellect to bear on the ranking of national healthcare systems, a largely neglected field of study.  The World Health Organisation made an attempt in 2000 and ranked 191 countries, based on certain criteria.  It was an important first step.  I hope that more academics will come in to refine the analysis and make it more robust.  The objective is not to rank for ranking's sake, but to benchmark and collectively learn from best practices, so that over time, our own people can enjoy good healthcare at optimal cost.

This morning, we look forward to engaging Prof Porter on his insights, on value-based competition on results.  I am sure he will offer many useful inputs to the continuing search for a better healthcare market.

Ultimately, each society has to find its own solution, based on its political and cultural realities.  Unlike academics, politicians have to manage within their respective political constraints.  For example, in the latest issue, the Economist argued rationally for the trading of organs as a solution to the perennial shortage of donated organs for transplants.  But politicians would have to judge if their people are ready for such a cause.

In Singapore, we try to ground our health care system as far as possible on market principles.  We will continue to do so and push the boundaries, while rallying public opinion behind us.  I am confident that Prof Porter will find good examples of applications of his theory here and more in the future.  We look forward to a fruitful dialogue.