Speech by Mr Chee Hong Tat, Senior Minister of State, Minstry of Trade and Industry & Ministry of Education, for the Parliamentary Debate on ElderShield Review Committee Report, 10 July 2018

INTRODUCTION

1    Mr Deputy Speaker, let me first thank Members for supporting the motion, and for their views and questions. I also want to join Members in expressing my appreciation to the ElderShield Review Committee led by Mr Chaly Mah, and the secretariat team from the Ministry of Health.

2    The Committee’s recommendations on the new CareShield Life scheme are significant measures to enhance Singapore’s long-term care financing, and provide a stronger social safety net with our ageing population.

3    Through risk-pooling, CareShield Life will enhance the role of insurance in helping Singaporeans meet our long-term care needs.  It will add to the other sources of funding for long-term care, including government subsidies, personal savings and family support, and financial assistance for the lower-income.

4    I will touch on a few issues in my speech.  

a) First, how the features of CareShield Life provide better protection and greater assurance for Singaporeans; 

b) Second, how the scheme is designed to meet basic long-term care needs while remaining affordable; 

c) Third, what are the support measures for existing cohorts to join CareShield Life; 

d) Fourth, how the scheme can remain sustainable for the longer-term; 

e) and finally, the Government’s plans to explain the scheme and raise public awareness. 

(A) BETTER PROTECTION; GREATER ASSURANCE 

5    Let me start with “Better Protection and Greater Assurance”.

6    The ElderShield Review Committee had engaged a large group of Singaporeans over the course of its work and received many useful feedback and suggestions.  

a) The Committee had to decide which enhancements are most important, and how to balance the improvements in benefits with the need to keep premiums affordable.  

b) If the benefits are not adequate, the scheme would not provide sufficient protection.  On the other hand, if the benefits are very generous, premiums may become too high.   We need to strike a balance, as Mr Chris De Souza had eloquently explained.

7    We agree with the Committee that CareShield Life payouts should be provided for life, to give policyholders and their family better peace of mind.  This is an improvement over the current 5- or 6-year payout duration for ElderShield.

8    We also agree with the Committee’s recommendation to raise starting payouts from $400 to $600 per month, an increase of 50%. 

a) In addition, CareShield Life payouts will increase gradually over time to keep pace with inflation. 

b) These features will offer better protection for policyholders compared to ElderShield, which pays a flat rate of $300 or $400 per month.

9    If we assume that payouts increase by 2% per year, a 30-year old who joins CareShield Life in 2020 will receive a payout amount of $1,200 per month if he becomes severely disabled at age 67 or older. 

a) This is three times the current amount of payouts under ElderShield 400.  And there is no duration cap. 

b) Policyholder will receive monthly payouts of $1,200 for life if he remains severely disabled, until he passes away. 

(B) BALANCING BENEFITS WITH PREMIUM AFFORDABILITY
10    Next, I will explain how CareShield Life is designed to meet basic long-term care needs while remaining affordable.

11    Dr Lily Neo, Er Dr Lee Bee Wah, Mr Melvin Yong and Mr Chris De Souza asked whether $600 per month will be enough, and if payout increases can continue for life even after a claim has been made.

12    Several Members also asked whether the criterion can be relaxed so that those who are unable to perform at least one or two Activities of Daily Living (ADLs) could receive payouts.

13    We understand the rationale for these suggestions, which is to provide more benefits for policyholders. 

a) The Committee has also discussed these ideas and carefully considered the trade-offs of further increasing the payout amount and lowering the claims criterion,

b) versus the need to keep premiums affordable in a universal insurance scheme that caters to a broad segment of Singaporeans.    

14    To illustrate, if we raise the payout amount from $600 to $800 per month, premiums for a 30-year-old male in 2020 could increase by about one-third. 

a) If we further lower the claims criteria from three to two ADLs, premiums will further increase by another one-third.

b) As a result, if we combine both changes, the annual starting premium could be more than two-thirds higher than the currently proposed premium of $206. 

c) If we allow the payout amount to continue increasing for life after a claim has been made, premiums would have to increase further possibly by another one-third.                                   

15    Mr Zainal Sapari and Ms Joan Pereira also asked if premium discounts could be given to ElderShield or CareShield Life policyholders who do not make claims, to incentivise healthy living.  Let me explain why this is not feasible in a pre-funded scheme like ElderShield and CareShield Life.

a) ElderShield and CareShield Life are pre-funded insurance schemes where policyholders pay premiums when they are young and receive coverage for life.  Hence, one can only confirm that a policyholder is not claiming from the scheme after the person has passed away. 

b) In computing the premiums, the actuaries have included the probability that some policyholders will not claim from the scheme because they do not become severely disabled.  In other words, this has already been incorporated in the premium quantum. 

16     In view of the trade-offs, the Committee recommended that CareShield Life focuses on supporting basic long-term care needs, so that premiums can be kept affordable for all groups of policyholders.

17    Dr Lily Neo and Ms Joan Pereira asked if Singaporeans who wish to have more benefits, such as coverage for less severe disability or higher payouts, and are willing to pay higher premiums, will be able to purchase additional coverage from private insurers.  That is indeed the plan. 

a) Currently, ElderShield policyholders can use up to $600 per year from their MediSave to pay for ElderShield Supplement premiums.

b) The Ministry of Health (MOH) will work with private insurers to adapt the design of their Supplements to complement CareShield Life, and continue to allow policyholders to use MediSave to pay for these Supplements.      

18    It is also important to remember that CareShield Life payouts are not the only source of long-term care financing.  They will complement other financing sources such as Government subsidies and assistance schemes, personal savings and family support. Singaporeans with mild or moderate disabilities, and who need long-term care, can tap on means-tested Government subsidies for nursing home, community care and home care. There are also other Government schemes such as Seniors’ Mobility and Enabling Fund, Pioneer Generation Disability Assistance Scheme, and the Foreign Domestic Worker Grant.

19    Let me illustrate with an example to show how different schemes can come together to support Singaporean families:

a) If the fee for nursing home care is about $2,400 per month, a lower-middle income Singaporean can receive Government subsidies of about $1,400, which reduces his fee to around $1,000 per month. 

b) If he receives $600 per month from CareShield Life, and utilises $200 from his MediSave account under the new MediSave withdrawal scheme, he and his family would need to pay around $200 per month from their savings.

c) Through the package of different measures, a nursing home bill of originally $2,400 reduces to $200 of out-of-pocket expenses, or less than 10% of the original nursing home fee. 

d) If this person chooses home and day care services under the Integrated Home and Day Care pilot programme, he can reduce his out-of-pocket expenses to almost zero through a combination of government subsidies, CareShield Life payouts and MediSave withdrawals.

20    We recognise that there are Singaporeans who may need more financial assistance, for example those who have little savings and low MediSave balances.

21    This is why we have introduced the new ElderFund scheme, to provide further protection for these vulnerable groups of Singaporeans for their long-term care needs. ElderFund will add to the protection offered under existing assistance schemes like MediFund and ComCare. 

Ensuring Affordability for Future Cohorts

22    Mr Deputy Speaker, I have explained how CareShield Life is designed to keep premiums affordable for policyholders.  Mr Saktiandi Supaat and Mr Ang Wei Neng asked how the Government will further support Singaporeans, including the self-employed or un-employed in paying their premiums.

23    As Minster Gan explained in his opening speech, the Government will provide means-tested subsidies of up to 30% for lower- and middle-income policyholders living in a property with an Annual Value of $21,000 or less.  Ms Jessica Tan and Mr Saktiandi Supaat asked why this AV threshold was used.  This threshold covers about 80% of properties, including all HDB flats and some private properties.  We used a similar set of means-testing criteria for MediShield Life.  About 2 in 3 Singaporeans will be eligible for the subsidies.

24    Individuals who do not meet the means-testing criteria, but face genuine financial difficulties in paying their premiums, can apply for Additional Premium Support (APS).  Their application will be considered on a case-by-case basis.   The budget for APS is fully funded by the Government.

25    In addition, we will provide transitional subsides to all Singapore Citizens in the future cohorts for the first five years from scheme launch in 2020.  This will help to further reduce the premium amounts for these policyholders.

26    Mr Melvin Yong asked why the transitional subsidies are provided only for the first five years.  These subsidies aim to ease transition into CareShield Life for the immediate few future cohorts who will be joining the scheme from 2020. 

a) These are the cohorts from age 30 to 40 in 2020 and those turning 30 between 2021 and 2024. 

b) Compared to the subsequent cohorts who will join the scheme later, they have less time to prepare for the higher premiums under CareShield Life. 

c) The transitional subsidies are intended to cushion the impact for these few cohorts.  The amount of subsidies will be gradually reduced over the 5-year period.

27    CareShield Life is part of our social safety net and we will ensure that no Singaporean will lose coverage due to financial difficulties and inability to pay premiums. I would like to assure the House that with these supporting measures, most Singaporeans in the future cohorts, including those from lower-income households, can cover their CareShield Life and MediShield Life premiums using their annual MediSave contributions.  They do not need to make additional cash payments.  

a) Let me illustrate with an example.  With your permission, Mr Deputy Speaker, may I display a slide?

b) Here we have a family where the husband and wife, Mr and Mrs Koh, are both aged 40 and each one is earning $2,200 per month.  They have two children aged 7 and 10.

c) In 2020, the couple’s CareShield Life premiums would be about $27 per month in total after means-tested subsidies and transitional subsidies, and their aggregate household MediShield Life premiums, including the children’s, add up to around $67 per month. 

d) For this family, the total premiums per month for both CareShield Life and MediShield Life is $94, which is less than a quarter of the couple’s combined MediSave contribution of almost $400 per month.

28    But as Ms Jessica Tan said, MediSave is also needed for other healthcare-related expenses. And that is why we have to keep a balance between the benefits and the premium quantum for CareShield Life, while allowing policyholders to purchase supplements if they wish to do so.

(C) HOW WILL EXISTING COHORTS BE SUPPORTED TO JOIN CARESHIELD LIFE?
29    I will now move on to describe the support measures for existing cohorts to join CareShield Life.  SMS Khor had earlier explained why we decided not to make CareShield Life mandatory for Singaporeans in the existing cohorts.

30    We do want to encourage as many Singaporeans as possible to join the scheme if they are not already severely disabled, so that more Singaporeans can pool our risks together and have better protection and greater peace of mind for everyone as we age.

31    Mr Zainal Sapari asked if the Government will support those who convert from ElderShield to CareShield Life. 

a) We will do so.  The Government will offer participation incentives of up to $2,500 to reduce their premium and encourage participation in the scheme.

b) We will also provide means-tested subsidies and Additional Premium Support under CareShield Life to policyholders from the existing cohorts to ensure no one loses coverage due to financial difficulties.

32    Associate Professor Daniel Goh asked about auto-enrolment. Sir, in 2021, CareShield Life will auto-enrol current ElderShield 400 policyholders born between 1970 and 1979 who are not severely disabled. These are the younger members of the existing cohorts who are currently on ElderShield 400.  

a) Compared to older members of the existing cohorts and those who are not on ElderShield 400, the quantum of their premiums to join CareShield Life will be lower.  

b) The purpose of auto-enrolment is to make it more convenient for this group of Singaporeans to join CareShield Life, and policyholders will receive premium subsidies and participation incentives. 

c) They will be given at least two years, up to 31 Dec 2023, to opt out of CareShield Life if they do not wish to join the scheme. Auto-enrolment is to make it convenient, but it remains optional for them.

33    Older members in existing cohorts who are born in 1969 or earlier, including those who have previously opted out of ElderShield, can also join CareShield Life if they are not already severely disabled. 

a) We will support them if they wish to join the scheme.  Unlike ElderShield, there is no age limit to join CareShield Life. 

b) MOH will make a premium calculator available by the end of this year for existing cohorts to find out more details about their premiums. 

c) We encourage Singaporeans who are interested to join CareShield Life to take their time to understand more about the scheme and how it can meet their long-term care needs before deciding. There is no hurry, as the sign-up period only starts in 2021 for existing cohorts. 

(D) ACHIEVING SUSTAINABILITY

34    Mr Deputy Speaker, let me now turn to how the CareShield Life scheme can remain sustainable for generations of Singaporeans to come.

35    Minister Gan had explained how long-term care insurance schemes like ElderShield and CareShield Life are pre-funded to ensure long-term sustainability. 

a) In designing the scheme, we want to ensure that premiums paid by each generation during their working years can support their future claims when they grow old. 

b) This minimises intergenerational transfers, so that as our population ages and our families get smaller, claims made by the older generation can be met without having the younger generation shoulder a heavier financial burden. 

c) It is an important part of ensuring long-term sustainability, especially when we are facing an ageing society.

36    Ms Chia Yong Yong, Mr Zainal Sapari, Mr Ang Wei Neng and Ms Tin Pei Ling had asked why $3.3 billion in premiums for ElderShield were collected, and only $133 million were paid out as claims. Mr Pritam Singh touched on this in his speech tooMr Leon Perera and Mr Png Eng Huat also asked how premiums are determined.  Allow me to explain.

37    In pre-funded insurance schemes like ElderShield and CareShield Life, premiums are collected when the policyholders are younger and working, so that the fund has enough resources to meet their future claims when they grow old and are no longer paying premiums. As SMS Khor mentioned earlier, the coverage is for life.

38    It is therefore logical and necessary for the scheme to show a positive balance when policyholders are younger and are less likely to be severely disabled. This also answers Dr Lily Neo’s question on why the number of claimants are currently low.

a) ElderShield policyholders are still relatively young, with a median age of 52 in 2017.

b) However, as policyholders grow older and more of them become severely disabled, the balance amount that we see today will be gradually used up to pay for their claims. 

c) The balance amount is not profit, it is to meet future liabilities.

39    If a pre-funded scheme does not have a positive balance when its policyholders are younger, the scheme is actually in trouble.  It means there will not be enough financial resources to meet future liabilities, and when policyholders grow older and more of them start to claim, the scheme will have difficulties making the payouts. The balance amounts for ElderShield that are currently with the three private insurers will be properly accounted for. We are working on this with the insurers.

40    Mr Pritam Singh asked about the statistic of 1-in-2 Singaporeans aged 65 and above could become severely disabled in their lifetime. This is based on a mix of local and international data sources. For example, in 2016, the US Department of Health and Human Services estimated that 52% of Americans turning 65 in 2016 would develop a disability serious enough to require long-term care. It is important to remember that premium calculations are based on a complex, actuarial model with many factors, and not just on one number.

41    I do not intend go through the technical details of the actuarial model in this House, but let me say that the premium pricing model is done by professional actuaries, in line with internationally-accepted industry standards. 

a) Some factors that they incorporate in their model include: the disabled mortality rate, recovery rate, claims continuance rate, mortality rate, improvements to mortality rate, disability incidence, prevalence rate, as well as the risk profile for various cohorts. 

b) In addition, premiums for the existing cohorts need to take into account their circumstances, for example some are on ElderShield 300, some are on ElderShield 400 and some are not insured at all.

42    We will discuss with the council and the actuaries on how best to share information, the details and the assumptions for CareShield Life meaningfully.

43    Mr Zainal Sapari asked about the considerations in having the Government administer CareShield Life instead of the private insurers.

a) The scheme will be administered by the Government on a not-for-profit basis, where all premiums collected and any returns from investments will remain entirely within the fund and used fully for the benefit of policyholders.  I thank Mr Leon Perera for mentioning this point in his speech earlier.

b) It also facilitates the provision of Government subsidies and financial support to Singaporeans and provides greater flexibility for the Government to make future enhancements to the scheme.  

44    There will be no change in contractual terms for ElderShield policyholders who choose to remain on their existing ElderShield 300 or 400 schemes. 

a) This also applies to their ElderShield supplements.

b) ElderShield policyholders will be no worse off, and will continue to be covered by these insurance schemes.

45    The Government will set up an independent council by legislation, comprising of people with relevant expertise and background. We agree with Ms Joan Pereira that the council should consider views from social workers, healthcare professionals and insurance experts.

46    Council will regularly review and recommend changes in premiums and payout, guided by professional advice from independent actuaries, and decide on the optimal investment strategy of the fund.  The council’s recommendations will be made public.

47    The Agency for Integrated Care (AIC), which has experience in implementing disability schemes, will work with the Central Provident Fund (CPF) Board, which has experience in managing insurance schemes, to administer CareShield Life.  CPF Board will also be the administrator of the CareShield Life Fund and will ensure that the funds are safeguarded for the benefit of policyholders.  The annual financial statements for the fund will be made publicly available.

48    Dr Chia Shi-Lu and Mr Ang Wei Neng asked how will premiums and payouts will be adjusted. 

a) We envision the adjustment framework to work like this: if claims are lower than the amount assumed in the actuarial modelling and calculations, the CareShield Life council could recommend higher payout increases or provide policyholders with premium rebates in subsequent years. 

b) Conversely, if claims are higher than what was originally assumed in the actuarial modelling and calculations, the council could recommend raising premiums or slowing down payout increases to ensure the scheme remains sustainable.

49    Sir, I would like to clarify that it is not what Mr Png Eng Huat had said earlier, that CareShield Life premiums will be increased to pay for losses due to risky investment. That would not be the case. The Government will invest the fund prudently to earn stable returns. What is not possible to predict with full accuracy are factors such as the frequency and duration of claims.

50    Mr Deputy Speaker, we have a responsibility to design CareShield Life so that it remains sustainable for generations to come. 

a) Singaporeans who join the scheme now and start to contribute in their working years, must have assurance that should they become severely disabled, there will be enough funds to draw upon for their long-term care needs. 

b) In addition, we want to ensure that future generations will not be burdened with the cost of financing our long-term care needs when we grow old. 

(E) IMPROVING AWARENESS

51    Over the past week, since we announced further details on CareShield Life, we have heard feedback that the scheme can be rather complicated, and many Singaporeans find it challenging to understand all the details. This feedback has also been raised by several Members today. We agree with the feedback.

52    There is still some time before CareShield Life takes effect in 2020 for future cohorts and 2021 for existing cohorts.  We will use of this period to reach out to different groups of Singaporeans, and explain to everyone the details of the scheme and how it can meet their long-term care needs

53    We will intensify our public education efforts on the risks of severe disability in old age, and what are the available long-term care financing sources that can complement CareShield Life to support the long-term care needs of Singaporeans. 

54    These include government subsidies for nursing home, community care and home care services, assistance schemes like ElderFund; as well as the use of personal savings like MediSave withdrawals for long-term care.

55    MOH will step up our outreach and engagement efforts through mainstream and social media. 

a) We will also partner the grassroots, Silver Generation ambassadors, youth and union leaders, financial advisors,

b) and other Government agencies such as the People’s Association (PA), CPF Board and the Monetary Authority of Singapore (MAS).

CONCLUSION

56    Mr Speaker, in Mandarin please:

57    终身护保将为国人的长期护理需求提供长久的基本保护和更全面的保障。在这计划下，每月的赔付额将于2020年的600元逐年上升。一旦身患重度残障，国人可终身索取赔付额应付长期护理费用，直到康复或终老。

58    我们的长期护理系统涵盖了一系列的资助来源，包括政府津贴及协助计划、个人与家庭储蓄、以及社会援助。终身护保所提供的赔付额将与这些资助发挥互补作用，帮助国人承担基本的长期护理费用。

59    政府将提供保费津贴和经济援助，帮助国人负担保费:

a) 政府会为中低收入受保者提供高达30%的保费津贴；

b) 那些仍无法负担保费的国人也可获得额外保费援助；

c) 计划推行的首五年，政府也会为于1980年或之后出世的公民，提供高达250元的过费津贴。

60    出生于1979年或之前出生的新加坡人、可从2021年开始申请加入终身护保。政府将为头两年加入终身护保的公民提供500元至2500元的参与奖励。我们确保凡是加入终身护保的国人都不会因为付不起保费而断保。

61    国人也能通过两项新计划抵消长期护理费用。从2020年开始，30岁以上重度残障的国人可以从自己或配偶的保健储蓄户头(MediSave)提取每年高达2400元的现款。此外，政府将设立新的乐龄关护基金 (ElderFund)，为重度残障的低收入公民提供每月高达250元的现金资助。

62    在我们人口老化的当下，终身护保和其它相关计划将加强我国的社会安全网，为国人的长期护理需求带来更健全的保障, 让大家更安心。

63    Sir, the introduction of CareShield Life will provide better protection and assurance for Singaporeans. 

a) All future cohorts of Singaporeans will have sustainable, basic protection for their long-term care needs through CareShield Life. 

b) This includes vulnerable groups like low-income families and those who are already severely disabled. 

c) Through a universal risk-pooling scheme like CareShield Life, we can offer coverage for everyone in the future cohorts. 

d) We also want to encourage Singaporeans from the existing cohorts to join the scheme. 

e) Under CareShield Life, the Government will provide Singaporeans with premium subsidies and financial support so that no one will lose coverage if they face financial difficulties and are unable to pay their premiums. 

f) For those who are not able to join CareShield Life, the Government will help them through other schemes, such as MediSave withdrawal for long-term care and ElderFund.

64    As our society grows older, some of us will become severely disabled and require long-term care. 

a) We have to take steps to prepare for this ahead of time, when we are still young and healthy.  This is what we want to achieve with long-term care insurance schemes like CareShield Life. 

b) Together with Government subsidies, personal savings and family support, CareShield Life will further strengthen our social safety net and provide Singaporeans with better protection and greater assurance when we grow old.

65    Mr Speaker, I support the Motion.