Minister COS Speech 2: Healthcare Financing

SPEECH 2: HEALTHCARE FINANCING (PREPARING FOR THE FUTURE)

INTRODUCTION

Healthcare Finance Framework has served us well, but we need to future-proof

1. Madam, over the years, we have done well in ensuring quality care and keeping the population generally in good health. Our healthcare financing system, comprising subsidies and the 3Ms – Medisave, MediShield and Medifund, has helped us keep healthcare affordable, especially for the lower and middle income Singaporeans, while ensuring long term sustainability.

2. As our population ages rapidly, and life expectancy continues to rise, our healthcare needs and expenditure will inevitably grow. This is why we have looked ahead to restructure our healthcare financing system to ensure that it continues to meet Singaporeans’ needs, and is even more robust than what we have today.

3. Sustainability is important – not just for today’s Singaporeans, but also for our children and future generations. Key to this is to encourage individuals to take charge of their own health. The concept of co-payment reinforces this discipline, but this also needs to be carefully calibrated to ensure affordability.

Greater Collective Responsibility

4. We can never foresee when we might be struck by illness and require medical care. When we do, the cost can be highly variable and uncertain, depending on the illness, and the treatment.

5. To ensure that we do not need to face life’s uncertainties alone, we need to better share such risks, within the family, and across our community, even as we continue to encourage personal responsibility for our own health.

6. I had the opportunity to talk to many Singaporeans during last year’s Our Singapore Conversation sessions. They had reflected their concerns about healthcare affordability. I was heartened that this also stemmed from a strong desire of self-reliance as well as a sense of responsibility of taking care of their loved ones.

7. To address these concerns, my Ministry outlined three major shifts as part of the fundamental review of our healthcare financing approach, which started last year – (i) increase Government share of national healthcare expenditure, (ii) gradually expand Medisave use, and (iii) increase risk-pooling. These shifts will improve healthcare affordability and give Singaporeans better peace of mind, by reducing their cash outlay for healthcare.

PART ONE – INCREASING GOVERNMENT SHARE OF HEALTHCARE EXPENDITURE

8. Today, I will provide an update of this review, covering the changes that we have made and will be making in the coming year and beyond. Let me start with outpatient care.

9. Many welcomed the significant changes to the Community Health Assist Scheme – CHAS – I announced last year.

10. We expanded the coverage of CHAS to more chronic diseases and recommended screenings. We removed the age floor so that younger Singaporeans can now enrol in CHAS and enjoy its benefits. Since Oct 2013, close to 260,000 more cards have been issued, bringing the total CHAS membership near 600,000 currently. CHAS will be further enhanced for our Pioneer Generation, which I will talk about later.

Enhanced Subsidies for Outpatient Services and Drugs

11. As announced at Budget, my Ministry will be enhancing subsidies for services in the Specialist Outpatient Clinics (SOCs) in public hospitals. Let me elaborate.

12. Today, subsidised patients in the public hospital SOCs enjoy 50% subsidy on average for SOC services. These patients are able to enjoy these subsidies, after they have been assessed to require specialist care and are referred to the subsidised SOCs by a polyclinic doctor, or, if they hold a Health Assist or CHAS card, by a CHAS GP. The subsidies will be enhanced for the lower- to middle-income and span services from the consultation to the scans, tests and allied health services such as physiotherapy, that are needed to diagnose and manage their conditions. They will enjoy higher subsidies of 70% and 60% respectively, and may see their bill reduced by up to 40%.

13. For the convenience of patients, the means-testing framework will be aligned with that of CHAS, which means that current subsidised SOC patients who already have the CHAS Blue or Orange cards will automatically enjoy these higher subsidies. We will reach out to the remaining subsidised patients in the SOCs to be means-tested so that those eligible can also enjoy the higher subsidies. SOC patients who are higher-income, and those who decline to be means-tested for a variety of reasons, will continue to receive the current subsidy and will not be worse off. These changes will be implemented in September 2014.

14. To further improve the affordability of outpatient care, my Ministry will also enhance subsidies for drugs in the SOCs and polyclinics. Currently, MOH provides subsidies for standard drugs that have been assessed to be cost-effective and essential. They are mostly capped at a price of $1.40 per week, or subsidised at 50% of the retail price. From January 2015, all lower- to middle-income patients will enjoy a 75% subsidy for all standard drugs so that they pay less for their medication – a reduction of up to half.

15. We will also extend subsidies to more drugs. From April 2014, we will add another 13 drugs to the Medication Assistance Fund and Standard Drug List.

PART TWO – EXPANDING MEDISAVE USE

Medisave Use for Chronic Conditions

16. Let me now move on to Medisave and how we will allow greater flexibility for patients. A/Prof Fatimah Lateef asked about the co-payment for chronic disease Medisave claims. As I mentioned earlier, co-payment is important to encourage prudent consumption. Nevertheless, to reduce cash outlay and encourage timely treatment, we will remove the $30 deductible from July 2014. With this change, patients no longer need to pay the first $30 of each bill in cash and they can tap on Medisave from the first dollar, reducing their cash outlay.

17. Ms Lee Li Lian asked how we can help cancer patients who need newer types of treatment, such as TKIs (tyrosine kinase inhibitors). Medisave and MediShield can already be used for such treatments. For patients who still face difficulty paying for the remaining cost, targeted subsidies are also available through the Medication Assistance Fund if they do not respond to less costly alternatives.

Medisave for Outpatient Scans

18. Patients also can use Medisave to pay for scans needed in the course of their cancer treatment today already. However, many Singaporeans have given feedback that scans needed for other illnesses can also be costly. Therefore, from the first quarter of next year, we will allow Medisave use of up to $300 a year to cover non-cancer related scans that are deemed necessary for diagnosis and treatment. With the enhanced SOC subsidies and Medisave coverage, scans will be significantly more affordable.

Flexi-Medisave

19. Dr Lam Pin Min and Mr Gerald Giam had also suggested allowing more use of Medisave for outpatient treatment.

20. Many elderly Singaporeans who need outpatient care have shared with me their worries over depleting their cash savings and burdening their children financially. Many of them want to be self-reliant, and have asked to tap on their Medisave more easily.

21. And we hear you. While we remain concerned about depletion of Medisave balance, we can consider more flexibility especially for the older Singaporeans. We plan to introduce a new Flexi-Medisave scheme that will allow the elderly to use their Medisave more flexibly, for outpatient medical treatments at the SOCs, polyclinics and CHAS clinics. This would enable elderly patients who see their CHAS GPs for a cough or cold to tap on Medisave to reduce their out-of-pocket payments. Flexi-Medisave will also supplement the $400 annual limit for chronic disease treatment, which A/Prof Lateef mentioned

22. We intend to start by allowing up to $200 of Flexi-Medisave use per year. We will work out the details over the next few months and share more in due course. We hope to have this ready by the first half of next year.

PART THREE – ENHANCING COLLECTIVE RESPONSIBILITY WITH BETTER RISK POOLING THROUGH MEDISHIELD LIFE

23. Madam, beyond enhancing subsidies and Medisave, we also need to step up risk-pooling to share the burden. This brings me to MediShield – we will be enhancing MediShield to become MediShield Life to provide lifetime peace of mind and better benefits for all Singaporeans, regardless of how their life and health circumstances may change. This includes extending coverage to the very elderly and those with pre-existing conditions.

24. I am glad that many Singaporeans support the shift to provide lifetime coverage and better benefits under MediShield Life for all Singaporeans. MediShield Life is as much about giving all Singaporeans greater peace of mind, as it is about us forging a new social compact – with everyone chipping in to better protect one another from having to face life’s uncertainties alone.

25. As this is a major step in transforming our healthcare financing framework, we have appointed the MediShield Life Review Committee to review and recommend the key parameters for MediShield Life, such as benefits, claim limits, and co-payments – issues which Mr Giam mentioned – taking into account feedback from the public and key stakeholders. Two weeks ago, the Committee shared their preliminary recommendations on how to improve benefits under MediShield Life, including removing the lifetime claim limit, and enhancing payouts through raising claim limits and lowering co-insurance rates. We welcome these recommendations as they will help to reduce patients’ share of larger bills to address their concerns about affordability, as highlighted by Dr Lam.

26. Dr Lam had also asked if we would consider pre-funding for MediShield Life. Many have supported the idea of pre-funding at the Committee’s Focus Group Discussions. With pre-funding, policyholders pay more premiums when they are working and earning income, which are set aside to provide premium rebates when they grow old. This improves their premium affordability at old age. Pre-funding is not about the younger generation cross-subsidising the older generation, because such cross-subsidy across generations would be unsustainable as our population ages. The Committee is currently reviewing the extent of pre-funding in MediShield, and will provide an update when ready.

27. Mr Png Eng Huat and Mrs Chiam also asked about insurance coverage for patients suffering from pre-existing conditions or who have recently recovered from cancer. With the move towards universal coverage under MediShield Life, all Singaporeans with pre-existing conditions, including those who have cancer or who have just recovered from cancer, will be covered under the scheme.

28. The private insurance schemes such as Integrated Shield Plans, or IPs, are different from MediShield. They provide options for better benefits above the basic protection offered by MediShield. So those who are covered by IPs will still be covered by MediShield, but the additional coverage will be over and above MediShield. As insurance is about risk-pooling across members, members have to be in good health at the point of joining the insurance schemes. To protect policyholders, we require the insurers offering IPs to guarantee renewals so that once policyholders take up the plan, they cannot be dropped from coverage even if they develop illnesses and incur high claims subsequently. But should they not be able to be insured by private Shield plans, they will continue to be insured by MediShield, and MediShield Life when it comes into effect.

29. More generally, as insurance buyers, we need to plan for our healthcare coverage wisely and purchase an appropriate plan that is affordable not just when we are young but also in old age. Because in private plans, the premiums will rise as you grow older, and they will rise significantly. If we plan to seek treatment at public hospitals, a more expensive insurance plan covering the cost of care in private hospitals may not be necessary. Both the Committee and MOH have received feedback on the affordability of IPs, and will be reviewing to see how we can provide appropriate options for upgrading coverage beyond MediShield Life.

30. Let me now focus on the issue of MediShield Life premium affordability, which some members have expressed concerns about. With better coverage and benefits under MediShield Life, premiums will also need to increase.

31. With this shift to MediShield Life, I want to assure Singaporeans that the Government will ensure that premiums remain affordable, especially for the low-income and elderly. As suggested by the Committee, the cost of bringing in the currently uninsured should be shared across those with pre-existing conditions, the existing insured policyholders and the Government. However, the Government intends to support most of the initial costs of universal coverage under MediShield Life. We will also introduce permanent subsidies for the lower- to middle-income groups. The Review Committee is still discussing the key features of MediShield Life and studying the impact on premiums. But let me share with the house the approach we intend to take to keep premium increases affordable when we shift from MediShield to MediShield Life as follows.

32. Firstly, for a typical Singaporean household – comprising a working-age couple with two school-going children – MediShield Life premiums will take up no more than half of their annual Medisave inflows (including top-ups and Workfare where applicable).

33. In fact, for such typical households in the lower- to middle-income groups, we aim to keep their net premiums to the current level or lower, after taking into account the permanent subsidies that the Government will provide, additional Medisave contributions and the top-ups.

34. Whereas for the older individual Singaporeans aged 55 to 64 and currently on MediShield, those up to median income will see no net premium increase, taking into account permanent subsidies and Medisave top-ups. For those aged 65 and above this year, the PG package announced earlier would provide sufficient support for MediShield Life.

35. There could still be those very needy who are unable to pay their remaining share of premiums even after the permanent subsidies and Medisave top-ups. I would like to reassure them that they will be provided additional financial assistance, such as through Medifund. Our intent is that no Singaporean will drop out of MediShield Life because of their inability to pay for the premiums.

36. However, government support is necessarily targeted at those groups who need help with premium payments. Those who have the means should still pay our own share. In this way, we look after one another.

37. Nonetheless, to further help with the shift to MediShield Life and cushion the impact on premiums, the Government will provide additional transitional premium subsidies for all Singaporeans, regardless of income.

38. More details on the finalised parameters of MediShield Life benefits, premiums and subsidies will be announced after my Ministry has studied the final recommendations from the Committee. The Committee is expected to complete its review and submit the recommendations to the Government in the middle of the year.

PART FOUR – PIONEER GENERATION PACKAGE AND STRENGTHENING LONG-TERM CARE FINANCING

Pioneer Generation Package

39. Let me now move to the Pioneer Generation Package. Prime Minister and Deputy Prime Minister have also announced the special healthcare package for our Pioneer Generation, who are a special group that built Singapore at a time when there were fewer social safety nets. They may not have had sufficient income nor time to save up adequately for their healthcare in old age. The Pioneer Generation package will help to ensure that they are well covered and need not worry about healthcare during their old age.

40. The PG package is comprehensive. In the subsidised SOCs and polyclinics, they will receive a further 50% off their subsidised bills, on top of the enhanced subsidies I mentioned earlier for SOC services, and standard drugs. What this means for a lower- to middle-income PG elderly is a subsidy of over 80% in the SOC and polyclinics. All PGs will also be placed on CHAS. As DPM has mentioned, we have brought forward the CHAS benefits for the Pioneer Generation to September this year. PG who are already on CHAS will enjoy additional subsidies above what they receive today for each visit.

41. Altogether, subsidy enhancements at the SOCs will benefit some 500,000 subsidised patients, including 200,000 Pioneer Generation patients. The enhancements at the polyclinics, together with the CHAS benefits for the Pioneer Generation will benefit over 600,000 patients. These initiatives will cost the Government over $200 million in the first year.

42. With MediShield Life, the Government will help the Pioneer Generation with their premiums through a special premium subsidy, starting from 40% at age 65 and rising to 60% at age 90. They will also receive additional Medisave top-ups from July 2014 onwards. The Government's intent is to help PG aged 80 and above today fully cover their premiums, through a combination of premium subsidies and Medisave top-ups. For the younger PGs who are on MediShield today, the aim is to help them through premium subsidies and Medisave top-ups, so that their share of MediShield Life premiums will be about half of their current MediShield premiums. For the younger PGs who are not on MediShield today, they should pay less than current premiums.

43. For PG elderly with moderate to severe functional disabilities, we will provide more support through a new Pioneer Generation Disability Assistance Scheme, from September 2014 onwards. Under this scheme, elderly with moderate to severe disabilities or their nominated caregivers will receive additional cash assistance of $1,200 a year. This is in addition to the payouts from existing schemes including ElderShield insurance, the Interim Disability Assistance Programme for the Elderly, or IDAPE, and the Foreign Domestic Worker Grant.

44. This Package will help not just the Pioneer Generation, but also younger Singaporeans who support their elderly parents. More than financial benefits, this Package reflects the Government’s intention to recognise our pioneers. I hope that this will encourage a whole-of-nation effort to celebrate the Pioneer Generation and all that they have done for us.

Strengthening Long-Term Care Financing – ElderShield Review

45. In addition to addressing acute care needs, we also need to continue strengthening long-term care financing to prepare for the future. Ms Lee Li Lian and Mr Heng Chee How asked about the review of ElderShield. We introduced ElderShield to help those who are severely disabled and need long-term care. The cash payouts from ElderShield can be used to pay for caregiver support or formal care services such as nursing home bills. The flexibility allows the elderly and their families to opt for the type of care that best suits their circumstances, including ageing-in-place at home, as well as informal caregiving.

46. As part of our overall long-term care review, we are relooking the key design parameters of ElderShield to provide greater protection and support for Singaporeans. This is a complex exercise as enhancements to ElderShield will affect premiums for policyholders. We therefore need to study and weigh carefully the benefits of any enhancements and how much they will cost the policyholders, before making any major changes. In the meantime, the PG Disability Assistance Programme will complement the existing ElderShield and provide immediate help even as we review ElderShield.

47. We have also taken steps to enhance affordability for long-term care in recent years. Members will recall that subsidies for Intermediate and Long Term Care patients were increased across the board in 2012, with all lower- to middle-income households now eligible for subsidies.

48. Ms Lina Chiam and Mr David Ong have also called for the 3Ms to cover long-term care and to be more flexible. We have expanded Medifund since 2012 to cover non-residential long-term care services, in addition to nursing homes and community hospitals where Medifund was already available.

49. But we must be careful in extending Medisave to long-term care as it may risk rapidly depleting our Medisave accounts, which are still needed for MediShield premiums and acute hospital stays.

How these changes affect a typical family

50. What do all these changes I announced today mean to Singaporeans? They will help many lower- to middle-income Singaporean families reduce their healthcare expenses. Let me illustrate. Take Mr and Mrs Tan, a middle-aged couple, both working and supporting two school-going children and Mr Tan’s elderly parents.

51. As Blue Health Assist card holders, the couple now enjoy free screening tests at their neighbourhood CHAS GP clinic and subsidies for their screening follow-up consultations. The Tan children are also now able to enjoy the same CHAS benefits that their parents and grandparents already enjoy. These changes will potentially save the family more than $200 each year, assuming one follow-up consultation for each adult, and four visits to the CHAS GP for each child.

52. For Grandpa Tan, who suffers from chronic back pain, the higher subsidies will greatly help with his out-of-pocket costs for his visits to his orthopaedic specialist in the public hospital, his medication and when more expensive tests like an MRI scan need to be done. He would first see his annual subsidised bill reduced by 40% from $460 to $280. As a Pioneer Generation elderly, he will see a further 50% reduction in his bill to $140 – a savings of $320. He can use his Medisave to further reduce the co-payment for his MRI scan, which further reduces his overall out-of-pocket payment from $140 to about $35.

53. If Grandma Tan unfortunately becomes disabled and requires long-term care at home, she would receive monthly payments of $300 from insurance, or $3600 a year, if she is covered by ElderShield. With the new Pioneer Generation Disability Assistance Scheme, she will receive an additional $1,200 per year, which will help her family pay for the long-term care expenses.

54. When MediShield Life is introduced, this will mean that the entire Tan family is covered for life. This includes Grandma Tan, who was not insurable due to kidney failure, but can now look forward to benefiting from MediShield Life coverage.

55. Overall, with these new initiatives, the Tan family can expect to receive more than $500 in additional subsidies a year off their medical bills, and close to $2,000 if one of them requires long-term care. More flexible Medisave use will further reduce their cash outlay. With MediShield Life and premium subsidies, the family would enjoy even more savings, together with enhanced coverage under MediShield Life.

PART FIVE – HOW TO PAY

56. As part of this shift in healthcare financing, we have committed to increasing Government’s share of healthcare spending and also increasing collective responsibility for each other’s healthcare costs. Government’s direct spending on healthcare is projected to increase to $7.5 billion in FY2014, up from $4 billion in FY2011 – almost doubling in a short span of 3 years. If we include Medisave top-ups into Singaporeans’ Medisave accounts to help with their future healthcare needs, Government’s total expenditure in FY2014 is estimated to be $8 billion, and will continue to increase in future. As a proportion of national healthcare expenditure, government’s share will increase, from 33% in FY2012 to 40% or more going forward, depending on the pace of increase of healthcare costs at the national level.

57. With rising life expectancy, we will also need to set aside more Medisave for our old age needs. To support this, we will increase employer Medisave contribution rates by 1%-point as announced at the Budget. This will help ensure that current and future generations of working adults have sufficient Medisave for their future healthcare needs, and also support more flexible use of Medisave.

PART SIX – MANAGING HEALTHCARE COST

58. To ensure that healthcare remains affordable in the long term, we need to carefully manage healthcare costs, as Mr Heng Chee How and Mr Low Thia Kiang have noted.

59. I am glad that in the MediShield Life Review Committee’s consultations, many Singaporeans have also recognised the risk of driving up overall healthcare costs as we expand the role of Medisave and MediShield.

60. We must continue to ensure we pay for quality and effectiveness, bearing in mind that spending more does not necessarily bring better health outcomes.

61. As Mr Laurence Lien and Mr Giam have suggested, we need to spend each healthcare dollar smartly, and pay providers to deliver quality care. Our current funding approach is designed to drive providers to adopt a patient- and outcome-centric approach in delivering care. In the home care sector, we are in fact piloting the idea of providing a fixed amount of funding per elderly per month, and Senior Minister of State Amy Khor will touch on this later. For inpatient admissions, the public hospitals are funded to deliver a bundle of services required for a patient for a particular condition. This is then aggregated and provided as a block budget, which encourages the clusters to improve productivity, and provide high-quality and cost-effective treatments to improve outcomes. A blend of aggregated block funding and some fee-for-service component achieves a balance of incentives – managing overall costs while retaining incentives for higher productivity.

62. To complement the funding approach, MOH drives quality improvement using the National Standards for Healthcare (NSHC) framework. This ensures that healthcare services are appropriate for patients’ needs, based on current evidence and clinical knowledge. The framework is also used to help assess the providers’ own performance and prioritize their quality improvement efforts.

63. The Government also provides additional support for Regional Health Systems’ initiatives that involve the management of patients outside of acute care in the hospital setting. An example is Khoo Teck Puat Hospital’s (KTPH) Ageing-in-Place initiative, as I had shared earlier. We will carefully study how various funding approaches can be adapted to these new care models to drive cost-effectiveness.

64. We will continue to maintain strong clinical protocols amongst public sector healthcare providers. Drugs are subsidised if their clinical efficacy and cost-effectiveness are proven. We are also introducing Health Technology Assessment for medical devices and implants to ensure they are cost-effective. MOH also has in place a framework to assess new costly technologies, based on their track record in terms of treatment outcome and cost-effectiveness.

65. Mr Heng had also asked about drug procurement. To lower costs, our public healthcare institutions procure standard drugs as a group. This has resulted in savings of $180 mil since 2001, which have been passed on to patients. We will study how to build on this to achieve even lower drug prices for Singaporeans.

66. Mr Low Thia Kiang asked whether we can increase transparency in doctors’ charges. I agree that this is essential in order to empower patients and allow market forces to work more efficiently. All clinics are required to display their charges, and hospitals must provide financial counselling at the point of admission to help patients make informed decisions. The MOH website also provides comparisons of total hospital bill sizes.

67. To provide additional transparency on the bill component attributed to doctor charges, MOH is working towards publishing information on the amounts charged at our public sector hospitals under this component for common procedures. This enhanced transparency will provide more information to help patients make informed decisions.

68. On an individual level, we still need to preserve the focus on personal responsibility. Staying healthy is the best way to keep healthcare cost down. I also agree with Mr Lien that while seeking to enhance affordability, we still need to guard against over-consumption, by focusing on providing basic and essential healthcare for all Singaporeans. Even as we shift towards greater collective responsibility, co-payment will remain a very important cornerstone of our healthcare financing framework.

CONCLUSION

69. The transformation of our healthcare financing system through higher government subsidies, greater Medisave flexibility and MediShield Life will help reduce the burden of healthcare cost on the patients and keep healthcare affordable for all. But beyond the numbers and the schemes, more importantly, this shift reflects the Government’s commitment to help Singaporeans, especially those who are more needy and vulnerable, and build an even more inclusive and caring society. It is the Government’s assurance that we will keep healthcare affordable for Singaporeans, and I am confident that with all stakeholders playing their part, we will be able to forge a closer social compact. We will be better able to cope with future challenges, and strengthen the foundations of our healthcare system for generations of future Singaporeans to come. This way, we can help Singaporeans not only to live long, but live well and with peace of mind.