Premiums collected to cover potential current and future payouts

MOH's reply

Lianhe Zaobao, 11 Nov 2020

We thank Mr Zheng Chun Gui for his letter (终身健保开源也要节流, 4 Nov).

MediShield Life is a not-for-profit scheme. All premiums collected are placed in the MediShield Life Fund and are used solely for the benefit of policyholders and in the administration of the scheme. We would like to reassure Mr Zheng that the bulk of the remaining $1 billion, from premiums collected between 2016 to 2019 net of claims and amount set aside for future premium rebates, were kept in the fund for future claims expected to occur in the next few years, including multi-year treatments for existing patients such as dialysis and chemotherapy, as well as to ensure that MediShield Life can continue to pay out claims should an unforeseen event occur, such as a sudden surge in claims due to disease outbreaks.

The amounts that need to be set aside in the MediShield Life Fund are computed by external professional actuaries in accordance with the Monetary Authority of Singapore’s requirements, and in line with industry standards.

We would also like to clarify that the bulk of the current payouts is for public hospital claims. Private hospital claims are pro-rated down to the equivalent level of a subsidised bill and accounted for about 15% of the total payouts for inpatient and day surgery claims in 2019.

Further, the increase in current payouts is driven not only by growth in bill sizes but also by the higher number of claims made. Total annual payouts increased by about 12% per annum on average over the last four years. On the other hand, the first premium increase after 5 years since 2016 is no more than about 10% for Singaporean citizens after government subsidies.

We agree with Mr Zheng that it is important that MediShield Life remains sustainable. Slowing the rise in healthcare costs is key to the longer term affordability and sustainability of MediShield Life premiums and the overall healthcare system. All of us have a role to play in keeping healthcare costs sustainable. Working together, we can keep appropriate care affordable for all Singaporeans.

Mr Cham Dao Song 
Director, Finance Policy
Ministry of Health