Protection Against Large Hospital Bills

26 Jan 2005

After extensive consultations with workers, employers, insurers and the public, the Ministry of Health (MOH) is finalising its MediShield reform plan for implementation on Jul 1, 2005.

The key objective of the reform is to protect Singaporeans against the financial burden of large hospital bills, at least at the Class B2/C level.

This will be achieved by returning MediShield to its original intent of only covering major Class B2/C hospital bills but covering them adequately. Due to inadequate adjustments over the years, the current MediShield has severe limitations.

First, MediShield payouts for patients with large hospital bills have shrunk to about 40% of total bills, landing the patients with a high effective co-payment of about 60%. For a hospital bill of say $10,000, this means a co-payment of about $6,000 by the patient which may not be affordable to many.

Second, MediShield has been in operational deficit since 2002. Its premium collections no longer cover the payouts. This is not sustainable for long.

Reforming MediShield requires adjustments in three areas.

First, increase the MediShield payouts by adjusting the MediShield claim limits and co-insurance rate. This will minimise co-payments by patients and ease their financial burden. Second, restore the financial viability of MediShield by adjusting premium rates. Third, return MediShield to its original purpose of providing catastrophic medical insurance by adjusting the MediShield deductible levels.

Achieving an optimal reform package requires policyholders to make trade-offs, balancing their wishes for higher benefits against the contrasting desire for affordable premiums. For example, better MediShield payouts must mean higher premiums. Lower premiums would mean higher MediShield deductibles.

After extensive public consultations, MOH thinks that an optimal reform package is to half the current effective co-payment by patients, from 60% of the hospital bill to about 30%.

INCREASING MEDISHIELD PAYOUTS

To halve the patients' share of the major hospital bills, MediShield claim limits, which determine the payouts to policyholders, will be raised substantially:

1. Lifetime claim limits from $120,000 to $200,000;

2. Annual claim limits from $30,000 to $50,000;

3. Daily claim limits for normal hospital stays from $150 to $250, and for ICU stays from $300 to $500;

4. Claim limits for surgical procedures from the current range of $120~$900 to $150~$1,100; and

5. Claim limits for surgical implants from $1,500 to $2,500

At the same time, the co-insurance rate (the portion of the claim amount that the policyholder is responsible for paying after the deductible is met) will be reduced from the current 20% to 10% for amounts above $5,000. This ensures higher payouts for large bills.

BUT KEEPING PREMIUMS AFFORDABLE

To fund these substantial increases in benefits and payouts, MediShield premiums will be raised. These premiums have not been updated since the inception of the scheme in 1990. Adjustments are necessary to enable MediShield to provide better benefits.

Premium adjustments are actuarially based. As they are more likely to claim, the elderly will bear higher premium increases than the younger policyholders. Nevertheless, we have been able to limit the monthly premium increase for older policyholders to around $10. (The premium increase for policyholders below 50 years is less than $4 per month.)

To make premiums more affordable for elderly policyholders who have remained loyal to MediShield, MOH will introduce an enhanced loyalty discount programme. Elderly policyholders above 70 will enjoy a discount equivalent to 10% off their premiums for every 10 years that they have been with MediShield, subject to a maximum discount of 40%.

RECALIBRATING DEDUCTIBLES

To restore MediShield's focus on catastrophic medical bills, deductibles will be recalibrated. These deductibles have remained unchanged for the past 12 years. They need to be reset periodically to reflect the cost of hospitalisation. This is to ensure that MediShield focuses only on the large bills but covers them adequately.

MOH will raise MediShield deductibles from $1,000 to $1,500 for Class B2 wards and from $500 to $1,000 for Class C wards.

With average Medisave balances currently at $10,600, almost all patients would have enough in their Medisave to pay for the deductibles.

OPT-OUT SCHEME

The reformed MediShield will continue to be administered by the Central Provident Fund Board (CPFB) on an opt-out basis, as per the current arrangement.

MediShield has achieved widespread coverage, despite not being mandatory. 90% of the working population are insured under MediShield or MediShield-equivalent products. About half of those without such medical insurance are children. Although their risk of catastrophic illness is low, parents are strongly advised to enrol their children for MediShield while they are young and healthy. Doing so will lock in their insurance cover at a young age and guarantee them continuing protection against any future illness which may render them uninsurable. The MediShield premium for the young is only $2.50 a month.

SUMMARY

The key changes to MediShield are tabulated at the Annex A.

MOH welcomes suggestions from the public on how the reform package can be further optimised.

2010 UPDATE

As healthcare cost will continue to change over the years, periodical adjustments to MediShield would have to be made, in order to ensure that the co-payments by patients remain affordable. Current projections suggest that in 5 years time, i.e. in 2010, we would need to revise the claim limits to ensure that the effective co-payment remains at around 30%.

At that time, the deductibles would have to be recalibrated to around $2,300 and $1,500 for Class B2 and C wards, to ensure that MediShield remains focused on catastrophic illnesses. In parallel with the MediShield reform, MOH will continue to focus on managing medical inflation. We will require the cooperation of our patients to moderate their expectation of public hospitals. If we succeed on both fronts, then there may not be a need for major premium adjustments at that time.

MOH will review this closer to the date.

PRIVATE ENHANCEMENT SCHEMES TO MEDISHIELD

Private insurers can build on MediShield, as the basic tier of insurance for Class B2 and C wards, to offer enhancement schemes with better benefits for Singaporeans, including coverage for stays in higher class wards or private hospitals. MOH is in active discussions with private insurers on this. The objective is to achieve a seamless integration between MediShield and the private enhancement schemes, with maximum convenience for policyholders, while keeping administrative cost low.

We will announce more details on this next week.

• Annex A (40 KB)