MOH Budget Speech (Part 1)

17 Mar 2004

By Mr Khaw Boon Wan

Venue: Parliament

AFFORDABLE HEALTHCARE

"Let's Stretch"

Mr Chairman

1. Dr Lily Neo, Mr Gan Kim Yong and many others spoke on healthcare cost. We had a short discussion on this just recently in this House.

2. People, all over the world, worry about rising healthcare cost. They want to be sure that (a) good healthcare services are available, should they fall sick, and (b) they will have quick access to these services, whether they are rich or poor.

3. This is totally understandable. With advances in healthcare, patients have become accustomed to thinking that death can be avoided, if only good medical services are rendered in time.

4. Last week, I read some press reports on "doctor bashing" in one Chinese Province. Some doctors had received death threats from angry relatives of patients who had died. One doctor was slashed by a woman relative with a chopper! Some doctors have had to engage body guards. As one doctor put it, "they think we are gods, that we can cure anything". So when such expectations were not met, the relatives got mad with the doctors.

5. While this is an extreme example, the global trend is one of rising expectations for the best possible medical care to provide a good outcome, regardless of the illness. This is especially troublesome when it is not matched by an equal willingness to co-pay for the care.

6. As a result, Health Ministers all over the world are expected to do the impossible: provide the highest standard of medical care but at the lowest fee, preferably free.

7. Many politicians do make such a promise. Some voters believe them, only to be disappointed when the promises are not fulfilled. Meanwhile, public healthcare services deteriorate.

8. In Singapore, we make no such promise. Right from the beginning, we persuaded Singaporeans to accept co-payment and shared responsibility in healthcare. This philosophy is institutionalized in our 3M framework of Medisave, Medishield and Medifund.

9. Our 3M framework is far from perfect, but it is probably the best healthcare financing model in the world today.

10. Last week, my Ministry published a paper comparing the utilization of medical services in Singapore with several developed countries. Singapore has done well. We have lower hospital admissions per capita. Our patients generally do not overstay. Some media commentaries have pointed out that this may be because healthcare here is so expensive that Singaporeans cannot afford to seek treatment for their ailments. The logical extension of this argument is that Singaporeans, deprived of proper healthcare, are generally sickly and dying prematurely. But if this was so, our life-expectancy would not be one of the highest in the world today, having improved from 76.2 years in 1994 to 78.9 years in 2003. We should certainly not get complacent, but I think we can take heart that we have achieved a high standard of health, with lower resources, as compared to others.

11. But there is scope for improvement. I have some ideas on this and will use the next few months to discuss them with Singaporeans.

12. Today, let me just highlight the key strategies and in that process, address the points raised by Members.

HOSPITALS: STRETCH THE BUDGET DOLLAR

13. First, our hospitals have to stretch their budget dollar. They have to learn to do more with less. Among other things, they have to make better use of IT and technology to help cut cost, as suggested by Mayor Zainul Abidin. They should use generic instead of patented drugs where possible, without compromising patient safety.

14. Last year, when I launched Singapore-Medicine, I spoke about how we should strive to be the Toyota in healthcare: to produce the Corollas in healthcare, at low cost, with high reliability and zero defects.

15. So I was pleasantly surprised to read in last month's issue (Feb 14) of Hospitals & Health Networks (a US magazine), an article about how some US hospitals are adopting the Toyota Production System in their hospitals.

16. These hospitals are going all out to eliminate waste, the Toyota way. Why is waste seen as the root of all evil? For hospitals, wasteful steps add to cost, increase the time to respond to patients, and multiply the opportunities for errors. For patients, waste means long waits, having to move from pillar to post, unnecessary suffering and higher cost.

17. The article went on to describe what some of these "Toyota-hospitals" are doing to improve the situation to achieve the "lean turnaround". One key strategy is standardization. As one Chief of Cardiac Surgery put it "We are crazy about standardization. We standardize everything and then standardize our standardization."

18. The article ended with this vision: "Imagine our health care organizations with errors near zero, where everyone has quick access to diagnosis and treatment, where year-by-year costs are stable or even decreasing, and where revenues are rising. Sounds like a fantasy? The early pioneers in lean manufacturing envisioned a similar 'fantasy'. Those who were bold enough to embrace the lean revolution early (like Toyota) have their competitors behind."

19. I urge our hospitals to get inspired. It is probably difficult for healthcare to match the automobile industry, for the simple reason that patients are not identical, unlike motor-cars. But I am sure there are valuable lessons that hospitals can learn from the efficient car manufacturers.

SINGAPOREANS: STRETCH THE MEDISAVE DOLLAR

20. Second, we should help Singaporeans stretch their Medisave dollar.

21. One of the best things to have happened to Singapore healthcare is Medisave. Each day we work, we save a few dollars of our income, for our future hospital bills.

22. After 20 years of Medisave, we have collectively saved a total of $30 billion in our Medisave accounts. And it is growing. Each year, about $2.5 billion of Medisave contributions are collected while $800 million are withdrawn to help pay hospital bills and insurance premiums. Collections exceed withdrawals because we are still a young society, but we are saving for our future needs.

23. Although $30 billion sounds like a big amount, the individual balances of most accounts are not that big. For example, one in five (17%) of all Medisave Accounts have less than $1,000. One trip or two to a Class B2/C ward and everything could be wiped out. It is for this reason that MOH is very reluctant to allow Medisave to be used for home care, as suggested by Dr Chong Weng Chiew. These home care services are generally affordable after Government subsidies, and Singaporeans should really preserve their Medisave for more expensive hospitalisation.

24. Even the larger Medisave accounts are not that big. This is because we cap the Medisave balance per account at a maximum of $30,000, which is pegged to Class B2/C rates of hospitalization. But a significant portion of Singaporeans in the upper and middle class prefer private or Class A/B1 type of medical services. They will find their Medisave balances insufficient for their needs.

25. I would like to help Singaporeans stretch their Medisave dollars.

26. One effective way is through insurance. Every year, only one in ten Singaporeans needs hospitalization. But we do not know whether we will be among that 10%. If we were to individually make provisions for this risk of hospitalization, the cost to each one of us and Singapore as a whole would be large. But if we all chip in to pay for insurance to collectively cover the risk of 10% of our population needing hospitalization, our individual burden can be reduced considerably. This is the concept of risk pooling.

27. Currently, we do allow some pooling of risk via Medishield. Every year, among the 10% who are hospitalized, a small proportion of the patients develop catastrophic illnesses, like cancer, organ failure, which require long hospital stay and expensive treatment. Hospital bills for such illnesses, even at Class B2/C level can be catastrophic.

28. So 14 years ago, we introduced Medishield to allow Singaporeans to share the risk of catastrophic illnesses. It has worked well.

29. However, many Singaporeans do not quite understand the concept of catastrophic illness insurance. As pointed out by Mr Nithia, some Singaporeans think that Medishield would cover all hospitalisation, including non-catastrophic one. So when they find that Medishield does not cover their short hospital stays, they are unhappy.

30. My Ministry is studying how we can extend risk pooling beyond Medishield to cover insurance for non-catastrophic illnesses, with use of Medisave allowed for such premiums.

31. This is an idea which several MPs, particularly Dr Lily Neo, have been advocating in this House for several years. If implemented, it can be tweaked to make employer medical benefits portable, an issue advocated by Mr Yeo Guat Kwang, also for several years. I hope to be able to turn this old idea into reality. This will benefit all Singaporeans, upper, middle and lower income groups.

32. Non-catastrophic medical insurance is not new. It is common in US, Europe, Australia and Japan. But the experience has often been catastrophic, as noted by Dr Gan See Khem yesterday.

33. Last year, the former Californian Governor, Gray Davis lost his job partly because of medical insurance. Medical insurance premiums in the US have been growing rapidly, at 12, 13, 14% pa for several years. Employers are crying out as it adds to their cost and affects their competitiveness. So they are passing on some of the increases to the employees. Naturally, the employees are crying out too.

34. The reason why premiums are increasing is that costs and volumes have run wild. Because of the way they structure their health insurance system, there is little incentive for patients or doctors to save. As a result, over-consumption by patients and over-servicing by doctors are common.

35. I am not making this up. In 1995, Taiwan introduced a National Health Insurance, providing comprehensive coverage, including for outpatient care. But the scheme has now run into problems of wastage and over-consumption. For example, outpatient visits per person per year is almost 15 in Taiwan, three times the level in Singapore. Outpatient expenditures alone account for two-thirds of total claim amounts. The programme soon went into deficit. In 1998, payouts exceeded premiums collected by NT$2 billion. This deficit increased to NT$16 billion in 2002. South Korea implemented a similar programme and is also facing perennial funding deficits today.

36. So before we rush into non-catastrophic medical insurance nation-wide, we should debate these downside risks thoroughly and make sure we have good mechanisms in place to reduce such risks. That is why I need the next few months to carefully study the problem and discuss it with Singaporeans extensively. We should take a leaf from motor-car repair insurance which many of us have personal experience with.

37. For today, let me lay down the key principles underlying what I think a well-designed non-catastrophic illness insurance plan should look like.

38. First, it must have a deductible component. For motor car repairs, insurance does not cover from the first dollar and we have to pay the first, say $1,000, before insurance kicks in. Similarly, we should not allow first dollar coverage for healthcare insurance. In this way, we cut out frivolous claims.

39. Second, it must have a co-payment element. Patients must co-pay part of the hospital bill. In this way, we cut out abuses like prolonged hospital stays or demand for costly implants when cheaper alternatives are available.

40. Third, its premiums must be affordable. As pointed out by several MPs, large insurance pools are generally cheaper to fund than small insurance pools because of economies of scale. To minimize administrative cost, a compulsory national scheme is best as pointed out by Dr Lily Neo. It ensures full coverage with lowest premium. It ensures maximum equity and efficiency. But if there is no consensus for a national compulsory scheme, then we will have to find compromises which hopefully do not stray too far from the ideal.

41. Fourth, it must be financially viable. Premiums collected must more than cover claims, not just for one or two years, but for the long term. Insurers have to build up reserves. This is especially so for a young society like ours. We have an experienced insurance industry in Singapore and we should see how we can leverage on the industry to formulate and operate the schemes.

42. Fifth, it must offer choices. Different people have different needs. Some are satisfied with Class C services. Others may prefer private hospital services. While we should have a national basic medical plan to which all Singaporeans subscribe, we should allow enhancement schemes, as riders to the basic medical plan, for Singaporeans with higher needs.

43. Sixth, it should cover only hospitalization and its equivalent, such as day surgery. We should learn from the experience of Taiwan and Korea, and avoid an extended framework covering minor ailments like coughs and colds which are easily abused. This would be consistent with our basic approach to the use of Medisave, since the intention is to allow the use of Medisave to cover the premium and Medisave is primarily only for hospitalisation.

44. Last week, I met a few players from the insurance industry over lunch. When I shared these views with them, one senior insurer stressed the need to discourage over-charging and over-servicing by doctors and over-consumption by patients. He was speaking from experience in motor car insurance, and I value such insights.

45. I welcome more debate and more discussion on this important subject. Let us settle the larger picture of this national medical insurance plan, before we address other details like Mr Yeo Guat Kwang's query on how existing employer-based medical insurance could accommodate the proposed national health insurance plan, without duplication, or Dr Lily Neo's proposed insurance to cover complicated pregnancies, or Mr Chay Wai Chuen's proposed insurance for home nursing.

46. But one thing is clear. We should not leave out the self-employed. If they stay out of the 3M Framework, they are storing up big problems for themselves and their loved ones. CPF Board will be enforcing Medisave contributions by the self-employed and I hope Singaporeans will accept this need for strict enforcement. Small regular payments via GIRO have helped many taxpayers pay their taxes; the self-employed should use GIRO for their Medisave contributions too.

GOVERNMENT: STRETCH THE SUBSIDY DOLLAR

47. The third strategy is for the Government to stretch its subsidy dollar. As Health Minister, I will do my best to secure the largest possible budget allocation from the Finance Ministry. But realistically, government money is not unlimited.

48. So my Ministry will have to stretch the subsidy dollar. How? Means-testing.

49. Many Members have commented on this subject. Several, including Dr Wang Kai Yuen and Dr Chong Weng Chiew have expressed support for it in principle. Dr Michael Lim pointed out that the number of well-off Singaporeans opting for B2/C class wards should be small, and asked if it makes sense to put in place a system to catch this small minority. Mdm Halimah also questioned if the social cost of means-testing justifies the benefit. Mr Yeo Guat Kwang asked for more details. All advised me to be cautious

50. This is clearly a complicated issue. Like non-catastrophic medical insurance, I would take my time to think through the issue, consult and hear all views, so that we can come out with a practical scheme.

51. Dr Lily Neo and Mr Chay Wai Chuen stressed that medical insurance should be in place before implementing means-testing, so as to avoid distressing the affected group. I think that is a valid point.

52. Mdm Ho Geok Choo and Mr Gan Kim Yong said that the criteria for determining affordability should be multi-dimensional and not solely dependent on the income level. Family size should be taken into account. At the same time, however, Dr Lily Neo, Dr Ong Seh Hong and Dr Chong Weng Chiew pointed out the current formula used in nursing homes seemed to penalize small families. Dr Chong has two years of ground experience with means-testing. That probably explained his confidence and why he recommended that I move faster on means-testing. But he too noted that current scheme was not perfect and should be refined.

53. From the various comments, I have distilled several key principles behind what, I think, would be a practical means-test scheme.

54. First, it must be simple to implement. I agree with Dr Ong Seh Hong and many others that we should not end up with a "bureaucratic monster". We will therefore need to simplify and inevitably use proxies to determine wealth or income. The scheme should cause minimal inconvenience to patients and not delay their treatments. It should not be costly to administer.

55. Second, it must provide choices. Some Members called for Class C wards to remain opened to all Singaporeans. I agree. Rich or poor, patients should continue to have the freedom to choose any class of ward. There is nothing wrong about the rich choosing Class C and we should not be judgmental about their decisions. Dr Lily Neo and Dr Chong Weng Chew reminded us to ensure an adequate supply of Class B2/C beds, which I agree.

56. Third, it must be fair to all. The aim of means-testing is not to reduce government subsidies because of the current deficit, as suggested by Mr Gan Kim Yong. The aim is to better target our subsidies to those who need them most. Dr Lily Neo and several MPs - Dr Ong Seh Hong, Mr Nithiah Nandan - have spoken about the potential squeeze on the middle income group. I share their concerns which we will take into account when devising the means test criteria. We will calibrate subsidy levels appropriately to ensure that the hospital bills remain affordable to all Singaporeans.

57. Fourth, we must be gentle in implementation. With simple rules, there will inevitably be deserving cases which fall through the cracks. Mr Andy Gan made the point that the patient's circumstances prevailing at the time of admission should be taken into account. We must be able to come in promptly when alerted, to sieve out deserving cases and free them from unnecessary distress. Let me assure Mayor Zainul Abidin that our means-test will not be mean. As Mdm Halimah pointed out, means testing should not be a demeaning process but should be handled sensitively.

58. Fifth, it must be transparent. Mr Gan Kim Yong and Mr Michael Lim called for transparency in the implementation of means testing. I agree. The scheme must make sense to everyone, such that Singaporeans are able to compute their own subsidy eligibility status.

59. As this is a complicated subject, let us

continue to discuss and suggest more ideas over next few months. I have created a special section in MOH web-site to specifically gather feedback and suggestions. I also intend to work together with the Healthcare Feedback Group to advance this project.

60. Mr Steve Chia objected to means-testing. He felt that this would further squeeze the middle income group. He wanted me to give an assurance that the middle income group will not face rising healthcare cost. But how can I give such an assurance, whether it is for the middle income group, or any other income group? Unless we have robots to replace doctors and nurses, their rising income in tandem with economic growth must translate into rising healthcare cost. But if we do the 3 stretching exercises that I've been talking about, we can ensure that good healthcare remain affordable to all.

SINGAPORE MEDICINE

61. Dr Michael Lim spoke about exporting our medical expertise to the region, especially China and India. I agree with him. He asked how I intend to change the mindset of my colleagues in MOH to support such a development. I have already made one major mindset change to incorporate regional medical hub as an MOH priority. Please allow MOH to digest this change first.

62. In any case, as the Health Minister, my priority is to serve the medical needs of Singaporeans first, followed by foreign patients who come here for treatment. If I have some time to spare, I will think about how to serve the medical needs of foreigners in their home countries. Meanwhile, I leave it to the experts like Dr Michael Lim to tap that market, championed by IE Singapore. I will cheer them on the sideline.

63. Dr Michael Lim also urged a greater relaxation of advertising rules to allow our doctors and hospitals to market themselves better in the region. He described our current regulatory regime as the most conservative and probably outdated, though he did not use these words. My instinct, honed after MTI for 7 years, is for light regulation. Every regulation has a cost and should be put in only after careful thought.

64. But in healthcare which affects life and death and which has major cost implications, it is better to be slightly conservative. In US magazines, prescription drugs like Viagra and Zoccor are widely advertised to lay public. I am not exactly sure if this is a good thing. Earlier we heard comments on how we should educate patients to accept generic drugs so as to save on cost. Such advertisements by patented drug manufacturers must lead to patients demanding their doctors for such prescriptions.

65. It is therefore better that we move carefully, evaluate the impact, and then take further steps. Meanwhile, rules governing advertisements by hospitals will be loosened. Draft rules are in our MOH website for public consultation and we will move as soon as we have studied the feedback.

PRIMARY HEALTHCARE

66. Finally, let me respond to Dr Tan Cheng Bock's passionate call for a greater role for primary healthcare. He felt that primary healthcare is the key to moderating healthcare cost and that if we remain too hospital-biased, we are barking up the wrong tree.

67. I share Dr Tan's passionate sentiments. That is why, shortly after I joined MOH, I appointed a primary healthcare workgroup, with representatives from both the private and public sector. Their job is to identify gaps in our current systems and come up with innovative ways to manage disease holistically and transform primary healthcare services in Singapore.

68. Our GPs and polyclinics are the unsung heroes and heroines of our healthcare system. They will always get my personal support. I believe firmly that every Singaporean should have a good family physician. He knows you and your family well, will respond to your night calls when warranted, and will offer you sound advice on which specialist or which hospital to go, if you need secondary or tertiary care. A good family physician can help you save money, besides nagging you on your diet and exercises. If you do not yet have one, better get one soon.

69. A good family physician can also be a good gatekeeper to the rest of the healthcare delivery system.

70. Dr Tan lamented over the erosion of this role. I share his observation but I don?t think it is because of cluster formation. In fact, one of the objectives of cluster formation is to help bridge primary healthcare with secondary and tertiary healthcare. I am pushing lifelong EMR for every Singaporean: one patient, one medical record, multiple clinics, multiple hospitals. Cluster formation will in fact, facilitate this initiative.

71. The key is bringing together like-minded stake-holders and leverage on technology, to achieve an integrated ecosystem of healthcare services from primary to tertiary and back to step-down care. The concept is easy. Operationalising it is the challenge. I have plans for a pilot project to try out this idea. Later when I respond to the next group of cuts, I will elaborate more on this and will definitely want to tap on Dr Tan Cheng Bock to help bring primary healthcare to the next level of excellence.

72. As for Dr Tan's comment on disease outbreak like SARS, post-SARS MOH is no longer the same as before. We have learnt a lot in fighting SARS, we have many battle scars to show for it, and while we must not be complacent, we are now more fighting-fit. But Singaporeans must continue to help us out, by doing the simple things right: wash your hands, use serving spoon, don't touch your eyes, and of course, stretch your bodies and exercise your heart.