Opening Speech by Mr Gan Kim Yong, Minister for Health, for Parliamentary Debate on MediShield Life Review Committee Report, 8 July 2014

1.            Madam Speaker, I beg to move:

        a.    That this House endorses Paper Cmd. 4 of 2014 on “MediShield Life Review Committee Report” as the basis for designing Medishield Life, to provide every Singaporean with better lifelong protection against large medical bills through better collective support, in a scheme that is financially sustainable, affordable to all, and strengthens our social safety net.

2.            At last year’s National Day Rally, the Prime Minister announced the shift from MediShield to MediShield Life – to provide Better Protection. For All. For Life.

3.            As MediShield Life is a significant move, we wanted to seek as many Singaporeans’ views as possible on the new scheme.  We appointed the MediShield Life Review Committee in November 2013 to review and study the proposed parameters, and consult widely with the public and key stakeholders. Over the last 8 months, the Committee has worked very hard to engage Singaporeans, and made significant and valuable recommendations for the new MediShield Life scheme.

4.            Last month, the Committee submitted its report to the Ministry of Health.  We have accepted all its recommendations on the design of MediShield Life.  The Committee has also made many good recommendations and useful proposals in related areas, and we will study these in greater detail.

5.            Committee Chairman Mr Bobby Chin and some of his committee members are with us today in the Chamber.  I would like to place on record my deep appreciation for their contributions. I would also like to thank the many Singaporeans who gave their views and suggestions.

6.            The introduction of MediShield Life is a major shift in our healthcare financing framework. Before going through the details of the Committee’s recommendations, it is important to put in context the shift to MediShield Life as part of the broader changes in how we help Singaporeans pay for our healthcare.

Shifts in Healthcare Financing Framework

7.            Many Singaporeans enjoy good health, but we worry about healthcare costs, for ourselves and for our parents. Spending on health and aged care will continue to grow with our rapidly ageing population.  Families are also getting smaller.  What used to be shared among several siblings is now shared among few, and sometimes none.

8.            Our healthcare financing framework, consisting of heavy government subsidies together with the 3Ms – Medisave, MediShield and Medifund – has served us well so far. However, it is not perfect and will need to constantly evolve to meet future needs arising from changing demographics.  Social safety nets will also need to be strengthened, to give greater peace of mind.

9.            We announced three significant shifts in healthcare financing last year – increasing Government’s share in healthcare spending, enhancing flexibility in Medisave, and strengthening collective responsibility through MediShield Life.  In doing so, we remain mindful to reinforce the ethos of individual effort and responsibility for the family – values that keep our society together and our economy strong. 

10.         First, Government will do more. The Government has already increased healthcare spending significantly, and will continue to do so.

        a.    We have enhanced subsidies for outpatient and long-term care, and expanded coverage of the Community Health Assist Scheme, or CHAS, for primary care. 

        b.    We have expanded Medifund assistance for more long-term care services, and for primary care. Over the last ten years, we have increased the amount of Medifund assistance three-fold – from $34 million in 2003 to $102 million in 2012.  These changes have made financial assistance more readily available for Singaporeans, and also strengthened the assurance that all Singaporeans, regardless of income, would receive the care that they need. 

11.         The Government’s spending on healthcare will double to about $8 billion this year from just three years ago. The Government has also committed another $8 billion for the Pioneer Generation Package, to provide enhanced support for their healthcare needs, for life.

12.         Second, we are allowing more flexible Medisave use to further reduce Singaporeans’ cash outlay for healthcare expenses.

        a.    We have expanded Medisave use to more types of chronic diseases, and recommended screenings and vaccinations. 

        b.    By next year, we will be extending Medisave use to scans needed for treatment and diagnosis, and allowing the elderly more flexible use of their Medisave for outpatient medical treatment.

13.         With more uses for Medisave and longer life expectancies, we must also ensure that Singaporeans have enough Medisave for their old age needs.

        a.    Therefore for the elderly and lower-income, the Government regularly tops up their Medisave balances through GST-Vouchers and Workfare.

        b.    Employers too play their part, and will contribute an additional 1%-point to their employees’ Medisave accounts starting from next year.   

14.         Finally, MediShield will be enhanced and renamed as MediShield Life, to provide better, lifelong healthcare insurance protection for all Singaporeans.  MediShield Life complements the other policy shifts by targeting larger bills. By sharing the risk among everyone, individual patients pay less of their bills. I will elaborate more on MediShield Life later.

15.         Together, enhanced subsidies, greater use of Medisave and the shift to MediShield Life will provide greater support for Singaporeans to keep healthcare affordable.  

Philosophy of Healthcare Financing – Cost-Effective, Accessible, Sustainable

16.         Our national healthcare spending has risen and Government spending on healthcare has risen even faster. What matters however is not how much we spend, but how we spend it, and the outcomes we get. The key is getting the best outcome at the lowest cost possible.

        a.    At 4% of GDP, we currently spend less than most other countries, but with good outcomes. Life expectancies are high and rising, and our infant mortality rates are among the lowest in the world. 

        b.    However, we are still young compared with many developed countries, and we will spend more as our population ages. Medical and technological advancements coupled with expectations for the latest treatment will also increase costs.   

        c.    We must continue to manage overall healthcare costs to ensure that they do not translate to sharp increases in insurance premiums.

17.         So what are the hallmarks of a good system?  One that achieves high quality outcomes while being (i) cost-effective; (ii) accessible to all; and (iii) sustainable for current and future generations. 

I.              Building a Cost-Effective System

18.         First on cost-effectiveness.  Co-payment imposes discipline on both providers and patients to focus on the most clinically-appropriate and cost-effective options. National insurance schemes with minimal co-pay at the point of treatment may sound alluring, but may not give the best outcomes. With minimal or no co-payment, patients are likely to consume more, or providers supply more – and more doesn’t mean better.  The costs are ultimately borne by the rest of us, in the form of higher premiums or taxes.  

        a.    In Germany for example, co-payments are low while premiums are high,  and employees contribute up to 15.5% of their income towards the insurance fund. 

        b.    And as Germany’s population ages, not unlike Singapore today, their financing model is coming under increasing pressure.

19.         This is why co-payments remain a cornerstone of our healthcare financing framework to guard against over-consumption and over-provision.

20.         To build a cost-effective system and manage healthcare costs, we need to work further with the community, healthcare providers, and insurers to do three things.

21.         The first thrust is to continue efforts announced in the Committee of Supply to help every Singaporean live a healthy lifestyle. We will work with community partners to make healthy living as effortless as possible.

22.         The second thrust is to ensure that healthcare dollars are spent wisely. The government will continue to support healthcare providers to improve productivity, and encourage cost-effective treatments. Providers should not prescribe more costly tests and treatments simply because patients are covered by insurance, if these provide limited value.

23.         Finally the third thrust is to work with insurers and coordinate with the CPF Board, as the MediShield Life operator, to take a closer and harder look at charging practices, as the MediShield Life Review Committee has suggested. Today, hospital bill sizes are published on MOH’s website to encourage awareness and allow for comparisons. The government will do more and work with insurers to develop a framework for sharing of information on unusually large bill sizes and study the reasons for exceptionally high claims if they observe a certain pattern of claims or behaviours by healthcare providers.

II.            Ensuring Accessibility

24.         The second hallmark of a good system is one that ensures that healthcare is accessible to all.  To achieve this, we must calibrate what the patient needs to pay carefully. The very sick and the needy naturally need more help.  This is why we vary subsidies depending on income, as well as the Annual Value of one’s residence, as a proxy for one’s means and wealth.  This enables us to target subsidies at those who really need it.  For those who still cannot afford their share of their bills, including those living in properties with higher Annual Value but are facing genuine financial difficulties for valid reasons, there will be additional help such as from Medifund.

III.           Ensuring Sustainability for Current and Future Generations

25.         Finally, our healthcare system must be sustainable, as otherwise our children’s generation will be paying for the bulk of our healthcare costs when we are old.  With a growing number of elderly, our children will face an immense burden if we do not manage overall costs. 

        a.    We must learn from the experience of other countries.  Many are coming under increasing strain as their shrinking workforce struggles to pay for the healthcare costs of an ageing population.

        b.    An example is Hong Kong, where healthcare is made affordable through subsidies financed by taxes.  The constant challenge is how to balance the finite government budget among the competing needs of healthcare, social services, education and so on. 

        c.    Insurance systems may find that premiums collected are increasingly unable to support the coverage.  Some have opted to cut back on the scope of coverage and benefits.  

        d.    This is why we need to ensure that the Government, providers and patients all have a responsibility in paying for and managing healthcare cost so that their interests are aligned.  This helps to keep healthcare not only affordable, but sustainable too.

MediShield Life - Key Recommendations and Rationale

26.         The key principles of cost-effectiveness, accessibility and sustainability are sound and have served us well.  However, we can do more to give Singaporeans greater assurance and peace of mind about healthcare costs, especially large and unexpected bills that may cause financial hardship to patients and their families.   During Our Singapore Conversation, Singaporeans expressed support for greater collective responsibility, to come together as a community and as a nation, to provide help to those who meet with unexpected shocks.   It is for these reasons that we decided to embark on MediShield Life – a national insurance scheme – as a decisive step towards this objective.

27.         The MediShield Life Review Committee took on the mammoth task of formulating recommendations on MediShield Life. They worked hard to listen to Singaporeans and weigh the pros and cons of the many ideas and suggestions received to come up with a comprehensive package of well thought-through recommendations. In doing so, they had to strike a fine balance between keeping premiums affordable for all Singaporeans while focusing on the most valued and impactful benefits.

28.         The benefit enhancements suggested by the Committee are significant and focused on large bills, which Singaporeans have expressed the most concerns with. Raising the claim limits will allow MediShield Life to cover more of such large bills, while lowering the co-insurance, which is the portion paid by patients, will reduce the out-of-pocket burden of our patients. Take for example Mr Tan, who was warded for a heart attack in Class B2 ward. He incurred a bill of $8,000 after Government subsidy. This is a fairly large bill, as only an estimated 4 out of 100 subsidised Class B2/C bills are of this amount or higher. Under the current MediShield, this bill will exceed the claim limits, and after adding the deductible and co-insurance, Mr Tan would have to pay close to $4,700. MediShield Life’s higher claim limits will fully cover the bill amount. Together with the lower co-insurance rate, Mr Tan’s out-of-pocket payment will be nearly halved – he now only has to pay $2,400 of the $8,000 bill, which can be covered by Medisave.

29.         The Committee’s recommendation for the lifetime claim limit to be completely lifted is also in line with MediShield Life’s intent to provide lifelong coverage, and will ensure that those who accumulate large bills over time, such as dialysis patients, will continue to remain covered, for life. 

30.         While the Committee recommended significant increases in the claim limits, it felt that deductibles ought to be maintained at the current levels, despite calls to remove or lower them. Deductibles help to keep premiums affordable, by sieving out smaller bills. It ensures that MediShield Life remains focused on providing assurance against the fear of large bills, instead of paying for smaller amounts that can be covered by Medisave. 

31.         The Committee also highlighted that premium affordability after retirement needs to be addressed. Many Singaporeans had suggested spreading out premium payments while they were working so as to better afford premiums during retirement.  We agree with the Committee’s recommendation that premiums should be more evenly distributed throughout one’s lifetime.  By paying premiums ahead during our working years, we build up a pool of rebates to cushion future premium increases during retirement.

32.         We recognise that the shift to universal coverage to bring those with pre-existing conditions into MediShield Life will need significant support. The Government will bear the bulk of the cost of including all Singaporeans, including those with pre-existing conditions, at an estimated $850m for the first five years. With the Government covering much of the cost, Singaporeans will need to pay only a small increase from their current premiums due to universal coverage to include everyone.  This strikes a good balance between demonstrating shared responsibility and inclusivity, while keeping premiums manageable.  

33.         Overall, MediShield Life premiums will need to increase, due to the enhanced benefits for the scheme, better spread of premium payments over a lifetime for those of working age, as well as a small component due to the collective support for those with pre-existing conditions.  The premiums can be fully paid for with Medisave. We will revise the Medisave Withdrawal Limits from time to time, to ensure that they always fully cover the MediShield Life premiums.

34.         I want to assure Members that those who need help with premiums will always receive support.

        a.    For the Pioneer Generation, there will be significant Premium Subsidies of up to 60% and Medisave top-ups of up to $800 for them, for life. They will pay less for MediShield Life compared to MediShield today, but with better benefits.

        b.    The Government will provide support also for the lower- to middle- income households through Premium Subsidies, which will be a permanent feature in MediShield Life.  Up to two-thirds of the population will be eligible for Premium Subsidies. For those who need more help to pay their premiums even after these subsidies, Additional Premium Support will be available, similar to Medifund. No Singaporean will lose MediShield Life coverage due to financial needs.

        c.    In order to ease the shift from MediShield to MediShield Life, we will also provide transitional subsidies, over and above permanent subsidies and assistance, to all Singapore Citizens who face premium increases, for four years regardless of income.

35.         For most households, the additional 1%-point employer’s Medisave contribution from next year will be sufficient to cover the increase in their MediShield Life premiums. In fact, after Government subsidies, total MediShield Life premiums for most households will remain within annual Medisave inflows, with no additional cash outlay needed.

36.         With substantial Government subsidies and support, premiums will be more affordable for most Singaporean households. Let me illustrate.

        a.    In the first year of MediShield Life, with Premium Subsidies and first year transitional subsidies, the maximum premium increase will be less than $3 per month for the lower-income, and no more than $6 per month for the higher-income;

        b.    Even after transitional subsidies have been phased out from the fifth year onwards, Singaporeans from lower-income households will continue to benefit from permanent Premium Subsidies. Their premium increases compared to MediShield today will be no more than $11 per month. Those from high-income households will see a maximum premium increase of $30 per month.

        c.    All Pioneers will pay less for MediShield Life premiums than today.

        d.    And for Pioneers aged 80 and above in 2014, they will have their premiums fully covered for life, after Premium Subsidies and Medisave top-ups.

37.         Madam, we are able to afford the hefty $4 billion package of Government help for MediShield Life because of our good governance, strong economy and sound public finances. 

        a.    Universal lifelong coverage under MediShield Life ensures that all Singaporeans will always have assurance against large healthcare bills.  It is in line with our move to a more inclusive society with stronger collective responsibility.  To achieve this, the MediShield Life Review Committee has recommended that MediShield Life coverage be mandatory for all Singaporean Citizens and Permanent Residents, without exemptions. The Government fully agrees with this. As a national scheme, MediShield Life must cover all Singaporeans. We are providing very significant help to all, through premium subsidies and additional support, to ensure that everyone is covered by MediShield Life, and that no Singaporean will be denied coverage due to financial need. This will enable all Singaporeans to play our part in contributing to our national risk pool and benefit from the lifelong coverage.

38.         Some have expressed concerns about duplication in coverage, for those with private insurance plans or employer medical benefits. Unlike MediShield Life, other healthcare coverage may not be guaranteed for life.  Employees with healthcare coverage from their employers will lose such coverage when they leave employment or retire.  For those with other private insurance, they may lose this coverage if they are unable to pay for the premiums when they grow old, and may not be able to re-apply for coverage later if they have already developed some health conditions.

39.         MediShield Life provides an opportunity for stakeholders – employers and unions – to work together to better assure our workers of lifetime medical coverage, and not just for the duration of their employment. The 1%-point increase in the employer Medisave contribution rate from 2015 will help.  But more can be done to encourage both employers and employees to shift to portable medical benefits built on MediShield Life. The NTUC has made this suggestion in its submission to the Committee, and I am encouraged that the public service has taken the lead to increase its employer Medisave contribution to public officers, to help them pay for MediShield Life or Integrated Shield Plans that are built upon MediShield Life.  I hope more employers and unions will work together to do this for their workers.

40.         SNEF, NTUC and the Government have formed a tripartite working group to look into this issue, and the Government will also consider strengthening incentives to companies who are willing to provide portable medical benefits that ride on MediShield Life for their employees, as recommended by the Review Committee.

41.         As a national health insurance scheme, it is essential that MediShield Life remains sustainable in the long run. The Committee has therefore stressed that we must set aside sufficient reserves in the MediShield Life Fund to cater for future liabilities, including long-term recurring claims and future premium rebates that arise from distributing premiums over our lifetime. I should stress that MediShield Life is a not-for-profit scheme. The reserves remain in the pool for the protection and benefit of policyholders. The Government will continue working with the actuaries and CPF Board to ensure adequate provisions are made for expected future pay-out commitments as well as unforeseen circumstances.

Integrated Shield Plans

42.         Let me now move on to another topic that the Committee had studied, on the Integrated Shield Plans.  

43.         Many Singaporeans want to know how their Integrated Shield Plans, or IPs, will be affected with the implementation of MediShield Life. First, let me explain how IPs work together with MediShield. IPs are in fact made of two components. First, a MediShield tier which provides coverage sized based on the charges for Class B2 and C wards.  Second, a top-up component offered by the private insurer, which provides enhanced coverage for stays in higher ward classes or private hospitals.

44.         IP premiums collected by insurance companies are similarly divided into two components:  first, the MediShield component, which is the same as what is paid by those who only have MediShield, and that goes to CPF for the MediShield pool; the second component, which is the remainder, this is kept by the insurance provider.  IP premiums are much higher than MediShield premiums because they are based on charges for higher ward classes. When implemented, MediShield Life will simply replace the current MediShield component within IPs.

45.         Singaporeans who are currently on IPs will not be disadvantaged with the introduction of MediShield Life. Given that MediShield Life will take on a larger share of IP pay-outs, MOH will work with IP providers to take this into account when they set IP premiums. The overall increase for IP premiums resulting from the introduction of MediShield Life is expected to be the same, if not lower than the increase in MediShield Life premiums. IP policyholders will also receive the same premium subsidies on the MediShield Life portion of their IPs.

46.         In fact, all IP policyholders will benefit significantly from MediShield Life. They will enjoy MediShield Life coverage for life, including for pre-existing conditions, even if these have been excluded from coverage by their IPs. This will provide peace of mind to all Singaporeans that they will continue to be covered at the basic level, even if they have exclusions on their IPs or drop out from their IP plans.

47.         To help provide an accessible and easily understood upgrade option for all Singaporeans, the Government agrees with the MediShield Life Review Committee to work with insurers to develop key features of a standard Integrated Shield Plan that provides coverage based on Class B1 charges.  This will provide a good option for those who may want enhanced coverage beyond MediShield Life, and we will provide more details after studying this carefully.

48.         Some Singaporeans have asked if they should consider giving up their IPs altogether and just rely on MediShield Life. They should consider carefully their preferences, and structure their insurance coverage according to their needs and ability to pay over the long term. Many Singaporeans may buy IPs during their younger working years, when they can comfortably afford the IP premiums which are lower given their younger age. As premiums increase sharply in old age, especially after retirement, some start to find IP premiums unaffordable. While downgrading is an option, it is not an easy decision to make. Many feel unsure about how to do it, or whether to do it. Having a good understanding of IPs and MediShield will enable us to decide on the appropriate insurance coverage for ourselves, so we can make informed choices and spend our healthcare dollars wisely. Whether one should buy an IP is very much a personal decision, and may change depending on the stage of life each of us is in, and our desired level of health services, and our individual financial situation.

Conclusion

49.         Madam, let me conclude. Since the Committee announced their recommendations on MediShield Life almost two weeks ago, I am heartened that Singaporeans from all walks of life, young and old, have welcomed MediShield Life, as have employers and unions alike.  The idea of MediShield Life goes beyond healthcare and insurance. It is in fact a reflection of the kind of society we want to build.  

        a.    A more inclusive society – where we pool our resources together to help the sick among us. 

        b.    And a more caring and progressive society – where those who are needy receive more help.

50.         Indeed, MediShield Life is a bold move to strengthen collective responsibility – everyone chipping in to cover those with pre-existing conditions, helping the less well-off through premium subsidies and financial assistance, and risk-pooling through insurance and family support. This shift is a major and timely undertaking for Singapore.

51.         MediShield Life is one major plank of our strategy to improve the social safety net for Singaporeans and build a more caring and inclusive society. At the same time, we will strengthen our efforts to manage healthcare costs, so as to ensure healthcare remains affordable and sustainable in the long term. Every citizen plays an important role in this, by leading a healthy lifestyle and making healthcare decisions wisely. I urge the House to support the motion. Together, we can then fulfil our desire to live long and live well, with peace of mind.

52.         Madam, I beg to move.