MOH Budget Speech (Part 1) - Gearing Up for 2020

06 Mar 2007

By Mr Khaw Boon Wan, Minister for Health

Venue: Parliament

This is my 4th Health Budget.  Having dealt with the more immediate issues for 3 years, I will from now on focus on gearing up Singapore for its 2020 healthcare needs.

Introduction

2. I will be 68 by then, with my wife equally silver-haired.  My daughters should be married and hopefully we will have a hall full of grandchildren.  My family and I will need much more healthcare than we do now.  Hence, I am most mindful that 2020 is only 13 years away.  We must not let it slip by casually.  The questions posed by Mdm Halimah and Dr Lily Neo are pertinent.  We must have answers to those questions over the next few months and continue to refine them over the next few years.

3. The socio-demographic changes to come are well-known.  Still it is worth highlighting the key factors that will significantly impact our future healthcare demand.  Most Singaporeans will be better educated, have higher expectations, want high-quality care and, I hope, be able and willing to pay for it.  For the bottom 20%, striving to cope with global competition, money will be tight and healthcare cost will be their key concern.

4. The number of people above 65 will increase; fortunately most will be healthy and well.  Many will however be health-conscious and will seek medical attention without hesitation, to address any discomfort or just to be assured.  The number of "old-old", exceeding 80 years of age, will increase many-fold.  By this age, many will have some medical problem.  Many will be financially comfortable, but there will be a sizeable number who will be tight financially.

5. Scientific discoveries, medical technologies will accelerate and make available diagnostic and treatment modalities that we can only dream of today.  But many of these will be costly and the companies that invent and produce them are not going to give them away for free.

6. Clearly, one size will not fit all.  As Health Minister, my duty is to put the big pieces in place so that by 2020, we have a healthcare system that offers the full spectrum of care that meets the needs of the young and the old, the rich and the poor and the large numbers in between, and we have the financial resources to pay for them.  So let me start with funding.

(a) Financial Resources

7. In the musical cabaret, Lisa Minelli sang "money makes the world go round", and Jack Neo made "money no enough" part of our psyche.  Well, money does not make the world go round, people do.  And we will have enough money for healthcare if we save for it, have the right expectations and do not waste.

8. What are the realities of healthcare?  Everyone will need it, most towards the latter part of life when we are not at our peak in earnings.  Social welfare and comprehensive insurance are seductive ideas -  no need for co-payment and nobody needs to worry about healthcare cost.  But they both lead to the "buffet syndrome" of abuses and over-servicing and financial disaster.  When the healthcare system is overwhelmed, the poor suffer as unlike the rich they cannot afford other alternatives.  The truth is that healthcare demand is unlimited but supply is, because not many people will willingly pay more tax or insurance premiums wihch are needed to expand supply.

9. The rational approach is to require some co-payment by patients.  A meaningful co-payment makes a dramatic difference to patient behaviour and even doctors' behaviour.  So that everyone can afford the co-payment, we get everyone to save through Medisave for a rainy day.  On top of that, we pool the risks through a basic insurance plan, MediShield, as the backup.  Finally, we provide sensible social welfare through Medifund as the ultimate safety net.  This is how we tackle the financing challenge, with 3Ms providing multiple layers of safety nets.  Each layer does not cover all cases, but together we cover everyone.  Dr Muhammad Faishal asked that we explain our healthcare financing schemes more thoroughly to Singaporeans.  I fully agree.  We must keep the schemes easy to understand, because healthcare can sometimes be complex.  We will improve our public communication efforts.  Let me use this opportunity to reiterate our model.

10. For minor treatment and healthcare needs at GPs and polyclinics: use cash.  Our GP services are very competitive, inexpensive and affordable for most people.   For larger medical expenses that require hospitalisation, our Medisave scheme is working as designed, especially after we have fine-tuned it in recent years.  I have now extended Medisave to cover outpatient treatment of 4 common chronic diseases.  Its full impact will be felt over the years when the scheme matures.  I am optimistic that, if participating chronic patients co-operate with their Family Physicians and actively change their lifestyle and comply with medication, their health will improve.  This will avoid future complications and save patients money and suffering.  Mr Low Thia Khiang asked that we remove or lower the cash co-payment; I think that will be unwise.  Remember that Medisave was not designed for outpatient care.  We must not unwittingly deplete it for purposes not originally planned as then the contribution rate will not be enough and we would have to raise it.

11. Collectively, there are $36 billion in our Medisave Accounts today and this is still growing at more than $1 billion a year.  This is healthy but only because we are still a very young society.  Medisave is our savings for the future when we will all grow old.  The only structural problem now is that some Singaporeans, a minority, are not saving.  They are naturally worried about healthcare cost.  The solution is not to make healthcare free but to get them to save.  Workfare and Government top-ups will help them build up their Medisave for the future rainy day.  But they must themselves make some effort. 

12. For larger medical expenses requiring intensive and prolonged hospitalisation, we have MediShield.  After the reform in 2005, it is now working better.  We will continue to refine it to reduce the co-payment by patients but we must not make it a comprehensive medical insurance scheme without any need for co-payment.  Some insurers sell MediShield riders to eliminate co-payment.  This is not wise and we do not encourage this.  That is why we do not allow Medisave to pay for the premiums of such riders, as proposed by NMP Cham Hui Fong.  But if Singaporeans want to buy such riders out of their cash savings, I cannot stop them. 

13. I have a couple of ideas to enhance MediShield further.  MediShield coverage among active workers is not bad, at 90%.  But 390,000 Singaporeans below 20 years of age are not insured.  The premium at their age is inexpensive, only $30 per year.  And young parents can use their Baby Bonus to pay the premium.  So cost is not the issue.  Many parents already do so; in fact about half of our youths are covered by the enhanced MediShield promoted by private insurers.  Some parents who did not do so told me that they know MediShield is good but inertia is the reason for their lack of participation.

MediShield Auto-Cover for Children

14. I will make it easier for these parents to sign on their children for basic MediShield coverage.  We will introduce an opt-out scheme for infants to be automatically covered under MediShield from the time their births are registered.  Premiums can be deducted from their fathers' Medisave or alternatively their mothers'.  Parents who do not want such coverage can opt out any time by informing the CPF Board.  We will get this done later this year. 

15. For those who are already born but below 7, we will work with MOE to provide this opt-out service at the time of Primary One registration.  For older students, we will work with MOE to see how we can get them in as a one-off exercise.  I thank Mr Yeo Guat Kwang for his support of the measure and I hope parents will support it too.  It will be good for their children.  To keep basic premiums affordable for the majority, MediShield will continue to exclude coverage of congenital illnesses.  But for the vast majority, MediShield coverage from young will give parents the peace of mind that, should their children develop any illnesses as they grow up, they will have insurance coverage for such illnesses and the subsequent treatment.

16. After I have brought the children into MediShield, I will see how best to bring in the 100,000 or so housewives who are still outside MediShield.  I will study Mr Yeo Guat Kwang's suggestion of an opt-out scheme for husbands to sign on their wives.

Medifund-Silver

17. Medifund provides the ultimate safety net to catch anyone who drops through the Medisave and MediShield nets above.  We aim to build up Medifund to a capital sum of $2 billion.  This year, Government has topped up with $200 million, making it $1.5 billion.  Every year, we make use of the interest income to help those who fall through the nets.  Our hospital Medifund Committees work hard to prevent any Singaporean from falling through the cracks.  They are good-hearted, busy and successful people who volunteer their time and expertise to help us manage this piece of social welfare in a wise and compassionate manner.

18. Last year, Medifund handed out $40 million to 290,000 applications for financial assistance.  About one-third of these beneficiaries are over the age of 65.  With ageing, we know such demand will only grow.  We need to build up Medifund when our economy is doing well and whenever there are budget surpluses.

19. Some elderly patients are worried if their Medifund needs will be squeezed out by the needs of their younger applicants.  We get such feedback occasionally.  We have reassured them that all cases would be assessed based on needs and that we do not bias our decisions towards the young or the old.

20. However, if it will give our senior citizens added peace of mind, I am prepared to think about carving out a portion of Medifund and ring-fence it as a "Medifund for the Elderly".  We can call this "Medifund-Silver", protected for the use of needy senior citizens above 65.  It can have a capital sum of $500 million, about a third of the entire Medifund.  This way, we can address the needs of the elderly patients in a more targeted manner. 

(b) Physical Resources

21. With financial resources through the 3Ms system, we can then work to match supply of physical resources with demand.  Just to maintain 2007's standard of care in the year 2020, we will need more hospital beds, more clinics, more doctors and more nurses than what we have today.  That is why we are building a new general hospital of 550 beds in Yishun.  When it fully opens in 2010, our acute hospital beds in the public sector will hit 6,500 in total.  Between now and then, we will add beds where there are opportunities to do so.  This year, for instance, we will add 120 beds in TTSH, CGH and NUH.

22. In parallel, we will continue to expand day surgeries to move away from unnecessary hospitalisation.  Last year I mentioned the Jurong Medical Centre idea.  It has now materialised.  I visited it and am pleased with its progress.  AH, which runs it, has started to systematically transfer their day surgeries and outpatient follow-ups for their patients living in Jurong.  This brings good specialist services closer to their homes.  The patients I spoke to were happy with the change.

23. The private hospitals will also need to expand to cope with rising demand.  They are important partners, serving the middle and higher income groups, or about 20% of the national patient load.  They provide Singaporeans with more choices.  As our medical standard is high and our fees internationally competitive, naturally we attract many foreign patients. In the last few years, the growth of foreign patients has been high, averaging 20% per annum.  It could actually have been higher but the private hospitals had under-invested in the past and are now missing out on opportunities.

24. EDB's feedback is that private hospitals are now ready to invest and expand their capacity.  There are also international investors who are interested in setting up in Singapore.  The Government intends to launch two land sites for private hospital use in the second half of this year: one near the Novena MRT station by URA, another within One-North by JTC.  Both sites can add about 400 beds to the private hospital bed capacity.  We are also preparing other sites for possible release in the next few years.

Step-Down Care (Intermediate and Long-Term Care)

25. The beds described above are acute hospital beds.  But healthcare is more than that.  As emphasised by Mdm Halimah and Dr Lily Neo, with ageing, there will be increasing demand for longer-stay, lower-cost, lower-tech facilities in the step-down care sector.  There will be needs for more community hospitals, nursing homes and hospices and day-care facilities for rehabilitation and home-nursing services. 

26. We have not had to pay much attention to this sector as our population is still young.  But by 2020, the needs for step-down care will be significant.  To gear up for 2020, we have to ramp up supply and systems from now on.  Briefly, we need to do four things for step-down care.

27. First, we need to expand capacity.  We are reviewing the requirements for community hospitals and nursing homes, and will facilitate investments at the appropriate time. 

28. Second, we need to widen participation in this sector by all providers as the needs of the elderly are diverse, from the higher-income to the indigent.  Today, our step-down care facilities are largely run by charities which do a pretty good job.  But higher-quality nursing homes to serve the needs of the middle-income elderly are still in the early developmental stage.   We must widen the range of choices, at different pricing levels and at different service standards. It costs much more to run Ritz-Carlton than Hotel 81.  If Ritz-Carlton were to charge less than Hotel 81, there would be a long queue outside Ritz-Carlton and Hotel 81 will be empty.  But because hotel pricing is sensible and undistorted by Government subsidy policy, both businesses are full with their respective clientele.  I know some might not agree that the economics of healthcare should be the same as the economics of hotel services.  But the reality is that healthcare services need to be financially viable in the long run, and there is no other way - even if the Government pays for it, it is still with taxpayers' money.

29. Third, we need to attract more allied health staff to this sector, with better skills and higher education level, to service the rising demand for a higher level of care.  We will need more physiotherapists, speech therapists, occupational therapists, podiatrists, counsellors and psychologists, and also doctors and nurses with skills in geriatric medicine, as highlighted by both Dr Lily Neo and Dr Fatimah Lateef.  We will also push up the skills of our nurses so that they can take over those routine tasks from doctors, as advocated by Mr Zainudin Nordin.  We call them Advanced Practice Nurses.  We discussed this in this House when I moved the Nurses and Midwives (Amendment) Bill two years ago. I have noted the point about liability issues and we will look into it.

30. Fourth, we need to address the financing of this sector.  The needy will need some subsidy by Government or charities.  But with healthy competition among providers, the majority of patients should be able to self-fund either through savings and/or long-term disability insurance, like ElderShield.  ElderShield as a product is rather new to Singaporeans.  I agree with Mr Yeo Guat Kwang that we should educate the public more on the various types of insurance products.  For example, there is still confusion between MediShield and ElderShield.  MediShield is for acute hospitalisation with payouts based on reimbursements.  ElderShield is a cash supplement for step-down care in the community, often at home or in a nursing home.

31. I am reforming ElderShield to make it work better for Singaporeans with their needs in 2020 in mind.  I shared my thoughts on this during my recent Ministerial Walkabout.  I will continue the public consultation and welcome feedback and suggestions.  We will get the reform implemented this year. 

(c) Human Resources

32. Beyond financial and physical resources, human resources are the key to a good healthcare system as noted by Mdm Halimah and Mr Zainudin Nordin.  Our doctors, nurses, allied health professionals and other support staff work very hard in public hospitals and polyclinics.  To keep healthcare cost low, we run our facilities at high occupancy rates.  Our doctors and nurses see more patients than their counterparts elsewhere.  If not for their sense of public duty, many would have quit to have an easier time.

33. Yes, we may have service lapses at times.  But most of the time, our healthcare workers do a competent job, and often go beyond the call of duty.  They do not expect gratitude, although we do receive many complimentary letters that cheer them up and keep their morale high.  Please give them your moral support.  They are the unsung heroes and heroines of our excellent healthcare system.  They deserve our appreciation and our understanding. 

34. Medical specialists take a long time to train.  It is especially difficult to get manpower planning right in Singapore as we have a significant foreign patient load which fluctuates from year to year.  I have noted Mdm Halimah's comment on SingaporeMedicine and foreign patients and their impact on local patients.  I will address them in my next speech.  Meanwhile, we are recognising more good medical degrees and we are recruiting more foreign-trained doctors.  From about 85 a year in 2003, we took in 180 foreign-trained doctors last year.  This is good, but we remain particularly short of certain specialists who are also in huge global demand, like renal physicians, neurologists and cancer specialists.  We have to devise more effective schemes to attract such specialists from abroad to augment our team.

35. As I said earlier, we will also pay attention to the allied health professionals.  The positive news is that many more excellent students have been entering nursing, pharmacy, radiography, therapy and other courses in recent years.  They are bringing up the profile of our allied health workers.  Many existing staff are also upgrading themselves.  We encourage and facilitate this through many scholarships and overseas attachment programmes.  Our healthcare team is getting stronger.

36. Students and mid-career Singaporeans are discovering the satisfaction of a healthcare career.  We must be doing something right in our hospitals.  We will press on.  Recently, I suggested to NTUC Sec-Gen Lim Swee Say and WDA's CEO that we work together to get more mid-career workers to work in hospitals.  We have a successful scheme for nurses.  Let us now promote other professions like physiotherapists and speech therapists.  At the same time, we will work hard to retain staff.  This requires us to keep our wages competitive.  This is also the reason why medical fees need to be raised periodically as manpower cost is a major component of medical cost. 

Conclusion

37. Let me conclude.  Gearing up for 2020 does not mean that we can simply do more of the same, because patients' expectations are changing.  Patients Google the latest information on illnesses and treatment options, and want to engage the doctors in our treatment choices.  This is good but it means a longer consultation time.  Such patients will not be satisfied with a 10-minute consultation.  But if everyone demands a 20-minute consultation, we will have to double our doctor-patient ratio, double the number of doctors we have today and double the unit cost. 

38. We will maintain our current subsidy policy of Class C patients paying 20% of cost, polyclinics 50% of cost and so on.  But when unit cost goes up in line with a higher standard of care, the dollar co-payment by patients will have to go up accordingly.  These are the types of adjustments that Singapore will need to make over the next 13 years, if we want the medical standard of Singapore at 2020 to match the expectations of Singaporeans and to stay ahead of our neighbours.  In practice, let me assure Mdm Halimah that we will weave in such adjustments gradually, compassionately and pragmatically. 

39. We will pace the adjustments according to what Singaporeans can afford.  A couple of hospitals can perhaps move ahead slightly faster than others.  All hospitals will receive the same unit subvention from my Ministry for the same illnesses and all patients will receive competent medical care.  But the hospitals which can offer shorter waiting times because they have a higher doctor-patient ratio, will need to cover their higher operating cost with slightly higher fees.

40. My mission is to ensure that our healthcare services remain affordable to Singaporeans in general, particularly the lower half of the population.  It requires careful planning and co-operation from all the stakeholders.  It requires all of us to have realistic expectations.  My Ministry will do its best to expand our capacity and our service levels to meet up with the rising demand and expectations.  That is why the Finance Minister in his Budget Statement talked about a health budget rising from about $2 billion to $3 billion within 5 years.  This is a substantial expansion in the Government's commitment to healthcare.  My job is to make sure that the additional funds are used wisely.