Opening Speech by Mr Gan Kim Yong, Minister for Health, for the Parliamentary Debate on ElderShield Review Committee Report, 10 July 2018

1    Speaker, I beg to move:

a) That this House endorses Paper Cmd. 15 of 2018 on the “White Paper on the ElderShield Review Committee’s Report” as the basis for designing CareShield Life, to strengthen our social safety net by providing Singaporeans with basic protection for their long-term care needs, in a scheme that is inclusive, affordable and sustainable. 

RECAP OF THE ELDERSHIELD REVIEW

2    At National Day Rally 2016, Prime Minister announced the review of ElderShield to provide better support for Singaporeans who become severely disabled during their old age. We then appointed the ElderShield Review Committee in October that year. The Committee engaged widely and deliberated rigorously on how to enhance ElderShield and strengthen support for long term care financing.

3    The Committee submitted its report in May 2018. We have accepted the Report including the recommendation on the new name “CareShield Life”.

4    The Committee’s Chairman Mr Chaly Mah 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 hard work for the last two years. I would also like to thank all Singaporeans who contributed their views and suggestions during the process. 

5    CareShield Life will offer better protection and greater assurance for Singaporeans’ long-term care needs. It is a significant step in strengthening our social safety net for long term care.

MORE SINGAPOREANS WILL NEED LONG-TERM CARE AS WE AGE

6    Why the need for the review? It is part of our overall strategy to prepare for the future. Let me give an overview of our efforts over the years to provide the context.

7    Singapore’s population is ageing. By 2030, one in four Singaporeans will be aged 65 years and above, compared to one in seven today.

8    We have around 5 working adults to each Singaporean above 65 today, but by 2030, this ratio will fall to 2.7.

9    Our rising life expectancy and falling mortality rates are positive developments. But living longer also means that we face higher risks of frailty in old age. Some of us may require long-term care, and assistance with daily living activities.

10    This is why we had started investing and preparing years ago. We rolled out Healthcare 2020 in 2012 which included building long term care and aged care facilities, improving the quality of these services, and keeping them affordable.

11    We then went Beyond Healthcare 2020, to ensure that we can meet our long-term healthcare needs in a sustainable manner. We want to go Beyond Hospital to the Community, by investing in community care and bringing social and healthcare services closer to our people. We are moving Beyond Quality to Value, by spurring productivity improvement, and providing better guidance on cost-effective treatment. We are moving Beyond Healthcare to Health, by encouraging Singaporeans to lead healthier lives.

12    We have made several enhancements to better support our seniors: 

• We implemented MediShield Life in 2015, to provide universal coverage with better protection for all, for life, especially the seniors. 

• We also introduced the Pioneer Generation Package to give our Pioneers greater peace of mind. 

• We have been developing eldercare facilities and services, as well as strengthening support for the care of our elderly in our homes and the community. 

• We are also integrating health and social care better, and expanding the Community Network for Seniors.    

• We have been growing and developing the long-term care workforce through recruitment, training, and productivity improvement so that we can be ready for the future. 

13    Our Government expenditure in long term care increased six-fold from $140m in 2011 to around $800m in 2016. And this will continue to grow as our population ages.

PHILOSOPHY FOR OUR LONG-TERM CARE FINANCING SYSTEM

14    The next step is to ensure that our long-term care financing system is strengthened, to complement our efforts to develop eldercare services and support. How should we finance our long-term care needs in a way that keeps costs affordable, yet sustainable for future generations to come?

15    There are four key principles we need to bear in mind when we design our long-term care financing system.

16    First affordability. It should help those who need long-term care to afford basic and essential care, by tapping on the various sources of financing that are available, including Government and community support, personal and family savings, risk-pooling through insurance, and additional safety nets where necessary to prevent people from falling through the cracks.

17    Second, flexibility. Long-term care needs of our seniors are by nature very diverse.  Therefore, the financing system should be flexible and enable individuals to use the services most appropriate for their care needs and circumstances. Whether care is provided at home, or by day care centres or nursing homes, whether it is provided by formal caregivers or by family members, our financing system must have the flexibility to support these options.

18    Third, it should be inclusive. All Singaporeans, regardless of their income or health status, should be well supported by the overall long-term care financing system. They should be assured that our system will help them with their long-term care when they need it, be it from insurance, savings or subsidies.

19    Finally, sustainability. Long-term care needs run far into the future with significant uncertainties. We have to ensure that our system is sustainable over the long term and that we will have sufficient funds to meet the needs in the future when they occur. We should avoid passing the burden to future generations.

20    Generally, long-term care financing system has three key components: insurance, personal and family savings, and Government or community support. These three components work together to achieve our principles of affordability, flexibility, inclusiveness and sustainability.

21    Let me elaborate on how we plan to strengthen and carefully balance the three components to ensure that all Singaporeans can continue to access affordable and good quality long-term care. 

WHY CARESHIELD LIFE?

22    We will expand the role of insurance in our long-term care financing system, with the introduction of the new CareShield Life scheme. In this regard, I would like to thank Ms Sylvia Lim, Prof Daniel Goh, Mr Leon Perera and Mr Dennis Tan, for allowing us to address your PQs in this debate. I would also like to thank Dr Lee Bee Wah and Ms Chia Yong Yong for their earlier PQs as well, which they had withdrawn after we informed them that we were tabling a motion on CareShield Life.

23    How does insurance help? Long-term care needs, and how much we need to save individually for our future needs, are difficult to predict with great accuracy.

24    In fact, our projections are that 1 in 2 Singaporeans who is healthy at age 65 could become severely disabled at some point in their lifetime and require long-term care.

25    Some are surprised by our “1-in-2” statistic, and ask why is it that we do not see half of our elderly being severely disabled. This is mainly because they do not all become severely disabled at the same time. They occur over a period of time, through their life span generally after 65.  

26    There is also uncertainty on the duration a person remains severely disabled. The median duration of disability is 4 years, but 3 in 10 could remain severely disabled for 10 years or more. If we save for 4 years of disability, but remain disabled for 10 years, we would not have saved enough. On the other hand, if we saved for 10 years, but we have been disabled for less, we would have over-saved.

27    Therefore, insurance plays a role. Insurance allows each cohort of Singaporeans to pool our risks together to support the long-term care needs of that cohort in a more efficient manner. There are 2 broad approaches to financing long-term care insurance, across the world.

28    The first is a pay-as-you-go system, where funds collected in a particular year, often through taxes, are used to pay the claims for that year.

a) This means that the younger working population would most likely be funding the claims made mostly by seniors, most of whom have stopped working. 

b) This approach creates significant inter-generational transfers, where younger cohorts pay for the needs of the older cohorts. 

c) This is not sustainable especially for an ageing population, where the number of seniors is growing at a much faster pace than that of the younger working population.

29    The second approach is one where each cohort pays for its own needs.  This is done by putting aside funding while one is still working, and pays for the longer term care needs later, usually after one has retired. Insurance like ElderShield and CareShield Life are such pre-funded schemes, not pay-as-you-go schemes.

a) This approach minimises inter-generational transfers, and avoids passing the burden to future generations and helps to keep the scheme sustainable. 

b) SMS Chee will elaborate more later.

30    Pre-funded insurance schemes like ElderShield and CareShield Life, allow us to prepare for our long-term care needs in a sustainable way, while risk pooling allows us to average out the risk and funds among all of us so that we need not worry about over-saving and yet have the assurance that should the worst happen, we will have sufficient funds.  

CARESHIELD LIFE WILL PROVIDE BETTER PROTECTION AND ASSURANCE.

31    Mr Speaker, having explained the context for enhancing our long-term care insurance scheme, let me discuss the ElderShield Review Committee’s specific recommendations on CareShield Life

32    CareShield Life will be more than an insurance scheme, it will become an integral part of Singapore’s social safety net. It will provide better protection and assurance for all Singaporeans who join the scheme, through higher payouts for Singaporeans who are severely disabled, and for life.

33    We welcome and support the Committee’s recommendation for universal coverage for future generations. This is an important step forward, as it would ensure basic protection for the long-term care needs of our future generations, regardless of their health, disability or financial status. This is in line with our vision of inclusivity, as it allows those with pre-existing disability to be covered, and also ensures that no one will drop out because they are unable to pay the premiums.

34    Preparing for our old age needs is often of low priority when we are younger, as we tend to focus more on building our career and bringing up our children, which is understandable. But starting to prepare only when we start to grow old would be very challenging.

35    Therefore having a universal long-term care insurance scheme for future cohorts is critical, and will ensure that our future generations will have basic level of protection.    

36    The Government will also do our part in supporting this national initiative.  Earlier in Budget this year, the Minister of Finance had announced that we have put aside $2 billion to support CareShield Life, and this is on top of the Government’s spending in our intermediate and long-term care facilities and services.

37    From 2020, all Singapore residents born in 1980 or later will be covered by CareShield Life. In 2020, we will enrol those who are born between 1980 and 1990. After that, future cohorts of Singapore residents will be enrolled when they reach the age of 30.

38    We will be rolling out CareShield Life for existing cohorts in 2021. Existing cohorts are those who are born in 1979 or earlier. As recommended by the Review Committee, CareShield Life will be optional for them, because of their diverse circumstances.  Some of them may already be severely disabled.  Some may have made their own plans for their long-term care needs. Some of them may also face significantly higher annual premiums, especially for the older generations as they have fewer years to spread their premium payments over.

39    But because CareShield Life will provide better protection and assurance, we will encourage as many existing cohort members to join the scheme as possible, if they are not severely disabled. To do this, we will provide significant support for existing cohorts to join CareShield Life:

a) First, to help lower- and middle-income Singaporeans with their premiums, we will provide similar means-tested premium subsidies as future cohorts, of up to 30%.

b) Second, we will provide participation incentives of between $500 to $2500 to all Singapore Citizens from existing cohorts who join CareShield Life in the first two years from 2021.

c) Third, once they have joined the scheme, they will not lose coverage.  should they find themselves unable to pay for premiums later on even after subsidies and incentives, we will provide Additional Premium Support similar to future cohorts.  

40    To help Singaporeans afford Careshield Life, premiums can be fully paid by MediSave, including the MediSave of Immediate Family Members. 

41    We will also ensure that Singaporeans currently insured on ElderShield can seamlessly upgrade to CareShield Life, and that the premiums they have already paid are taken into account when we compute the premiums they need to pay for CareShield Life.

42    With your permission, Mr Speaker, may I display a slide on the LED screen, to show how these work together to make joining CareShield Life affordable for existing cohorts.

a) Mr Tan is 42 years old, and he’s currently enrolled on ElderShield 400.

b) To join CareShield Life, his starting annual premium in 2021 would be about $380, after taking into account the premiums he had already paid under ElderShield. This is the only premium he needs to pay. He no longer has to pay ElderShield premiums once he switches to CareShield Life.

c) However, as he is low-income, he will receive a 30% subsidy on his premiums.

d) In addition, he will also receive a participation incentive of $500 that will be spread over 10 years. Therefore, his estimated net starting annual premium in 2021 would be $216, which amounts to $18 per month, and he can pay this using MediSave.

e) If he becomes severely disabled at age 67, he will receive around $1000 per month for life. This is on the assumption of a 2% increase for CareShield Life.

43    An older policyholder who is covered on ElderShield 300 would need to pay an additional catch-up component for 10 years, as he would not have paid as much premiums as those insured under ElderShield 400. For someone who is currently uninsured, his catch-up component would be higher, as he would not have paid any premium before.

CARESHIELD LIFE WILL BE ADMINISTERED BY THE GOVERNMENT

44    As recommended by the Review Committee, CareShield Life will be administered by the Government on a not-for-profit basis. 

45    The Government will set up an insurance fund which will be ringfenced for CareShield Life. The fund will be administered by the Central Provident Fund Board. All premiums collected and any returns from investments will remain entirely within the fund and used solely for the benefit of policyholders.  The fund will be audited annually to ensure that all the monies are account for. 

46    The Government will also set up an independent council to provide advice on the administration of the scheme. The Council will also regularly review CareShield Life and recommend premiums and payout adjustments to the Government, in accordance with an actuarially sound adjustment framework. SMS Chee will share more on this. 

47    We intend to introduce a bill next year to set up the CareShield Life fund and the independent council, and to effect the scheme by 2020 for future cohorts.

SUPPORT BEYOND CARESHIELD LIFE

48    While CareShield Life will provide better assurance for our future cohorts, we recognise that not everyone will be able to join CareShield Life. For example, those in existing cohorts who are already severely disabled will not be able to join the scheme. Those who are are healthy but very old also have fewer years to spread their premium payments compared to the younger ones, so they may also find the annual premiums a high barrier.

49    At the same time, some of those who join CareShield Life may require additional support, depending on their care needs and financial resources.

50    We will therefore strengthen two other parts of our long-term care financing system – savings and subsidies – that will help to provide better assurance and support for all Singaporeans.

MEDISAVE WITHDRAWALS FOR LONG-TERM CARE

51    First, we will enable Singaporeans to tap on their personal and spouse’s MediSave savings for long-term care needs. Today, Singaporeans can use their MediSave to pay for ElderShield premiums, and in time to come, CareShield Life premiums. We can also allow MediSave to be used for long term care expenses, just like we allow it to be used for medical expenses.

52    From 2020, severely disabled Singapore residents aged 30 and above will be able to withdraw cash from their own or their spouse’s MediSave accounts to support their long-term care needs.

a) Given the diverse needs of long-term care, withdrawals will be in cash so that there is more flexibility on how to use the money, including on home and community care or residential care.   

b) Withdrawals can be up to $200 per month, depending on the balance in the respective MediSave Accounts. This is to ensure there are some savings to provide for other healthcare costs.

ELDERFUND

53    Second, just like we have MediFund for medical services, we will set up a new ElderFund scheme in 2020, to support Singaporeans from low-income households who are severely disabled.

a) Eligible Singapore Citizens can receive up to $250 per month in cash, for as long as they are severely disabled. There will be no cap on payout duration for ElderFund payouts.

b) The scheme will benefit those who may not be able to join CareShield Life, such as those among the existing cohorts who may already be severely disabled before the launch of CareShield Life.

c) It will also provide additional support for Singaporeans with low MediSave balances and savings to meet their long-term care needs.

54    The three enhancements taken together – CareShield Life, use of MediSave for long-term care, and ElderFund – will provide all Singaporeans with better protection and assurance for their long-term care needs, for life. The payouts from these schemes should not be viewed in isolation, but as part of our overall long-term care financing framework. These schemes will work with existing social safety net including Government subsidies and assistance schemes such as MediFund and ComCare, community support, and personal savings and family support, to help Singaporeans in need. 

55    This reflects our key social objective of forging an inclusive society – where society, individuals and their families, as well as the Government come together to support the long-term care needs of our ageing society through insurance, savings and Government assistance.

CONCLUSION

56    Sir, let me conclude. We are launching a package of enhancements to long-term care financing so as to better prepare Singaporeans for our future long-term care needs.

a) First, we are enhancing risk-pooling through a new long-term care insurance scheme, CareShield Life, and the Government will do its part by providing significant support for Singaporeans joining the scheme.

b) Second, we are allowing more flexibility in the use of MediSave by allowing severely disabled Singaporeans to make cash withdrawals for long-term care needs.

c) Finally, we are providing more Government support and assistance for lower-income severely disabled Singaporeans, through the new ElderFund.

57    These enhancements to our long-term care financing system are new, and we expect that Singaporeans will need time to digest and understand them. 

58    We will be reaching out to Singaporeans over the next few years to explain how these schemes will work and help them. We will intensify our public education and communications efforts, and work with community partners and other stakeholders. SMS Chee will elaborate on these. 

59    I look forward to hearing the views of Members regarding the proposed changes.

60    Mr Speaker Sir, I beg to move.