Speech by Mr Hawazi Daipi, SPS, at 2nd Health Insurance Conference

07 Jun 2010

By Mr Hawazi Daipi

Venue: Sentosa Amara Santuary Resort, Singapore

Ms Jill Hoffman, President of the Singapore Actuarial Society

Ladies and Gentlemen

1. I am pleased to join you this morning at the 2nd Health Insurance Conference organised by the Singapore Actuarial Society.

2. Healthcare is an important issue worldwide, and very often, a source of much headache and heartache for policymakers as they grapple with balancing social, economic and political objectives while designing healthcare systems. Most countries would share the same underlying principles and goals in health policy: universal coverage, high quality healthcare and cost-effectiveness. However, there isn’t a single model that can be transplanted around the world and made to work for all.

3. In Singapore, we too strive to make constant improvements to our healthcare system. In doing so, we believe that working with all key stakeholders, including the private sector is important. Let me share a local example of public-private partnership and explore how such partnerships can be further established, especially in the area of healthcare finance.

Working together in the provision of health insurance

4. The Singapore Government believes that a competitive healthcare market, in which public and private providers freely compete, would result in improved productivity, access and quality. Thus when designing our healthcare financing policies, we have consciously tried to ensure that we enable market forces to operate optimally. Elements of the US insurance model were carefully incorporated into our general taxation-based model inherited from the British. This hybrid model has enabled Singapore to achieve universal coverage through a multiple layer system of heavy government subsidies, compulsory health savings accounts (Medisave), catastrophic insurance coverage (MediShield and ElderShield) and an ultimate safety net for the needy (Medifund).

5. However, promoting market competition does not mean that that the relationship between the government and the private sector is kept at a distance. Our approach of cooperation between the public and private sector in providing catastrophic healthcare insurance coverage (MediShield) to Singaporeans, is a good example in point.

6. As mentioned earlier, in Singapore, insurance is an important, but by no means the sole pillar in our mixed financing system. All of you present are acutely aware that risk-pooling operates on the principle of large numbers and works best when the chance of claims is low. This is why we have structured our national insurance schemes to focus on catastrophic illness and severe disability. Minor ailments are covered either out-of-pocket or through Medisave. Besides keeping the premiums low, such an approach also ensures that patients remain conscious of the cost of their treatments and make judicious decisions, preventing over-consumption.

7. At the same time, we recognise that the basic no-frills MediShield may not meet the needs of all Singaporeans. Those who can afford it, may desire a higher level of coverage to allow private hospital stays or further reduce their out-of-pocket payments. However, the Government may not be the best player to provide offerings beyond basic healthcare coverage. We have therefore allowed  private insurers to enter the market and offer what we term as Integrated Shield plans for Singaporeans who can and want additional coverage beyond the basic MediShield administered by the Government. These products build on the foundational block of MediShield but leverage upon the strengths of the private insurers to provide innovative, faster-to-market solutions tailored to different sub-segments of the population.

8. Our experience in this public-private partnership has been extremely positive so far. Both the Government and the private insurers have recognised that there is a need for mutual understanding of each other’s position as well as open communications to ensure a successful partnership. We have since partnered the private sector in other collaborations, most notably ElderShield, a severe disability insurance scheme where the plan parameters are designed by the Government and the scheme tendered out to the private insurers for administration.

9. In Singapore, we uphold the principle of individual responsibility and have made use of deductibles and co-insurance to minimise over-consumption and over-servicing. Our private insurers understand our rationale and comply with these features in their Integrated Shield plans. In your roles as actuaries, I encourage you to think of ways to complement the financing model in your country, while adhering to the healthcare philosophies undergirding it.

Getting more people to stay healthy

10. Besides ensuring that people are financially protected against large bills, encouraging them to maintain a healthy lifestyle is just as important. For instance: keeping a healthy diet, eating in moderation and not smoking. We have been actively doing so through the campaigns conducted by the Health Promotion Board in Singapore. If private insurers can provide the incentives and levers to further strengthen this important message, it would be another excellent opportunity for partnership with the Government. 

11. From the government’s perspective, healthy Singaporeans will lower the total healthcare bill for the nation. There is also vested interest from insurers as healthier insured lives would mean that future claim costs will be better controlled. In fact, many insurance companies have started such programmes overseas, such as Aviva’s MyHealthCounts programme. This programme allows their policyholders to understand their current state of health and see how they measure up with others through a scoring system called the “Q” score. Subsequently, they can get advice on how to manage or improve on their health, and finally be rewarded through premium discounts for improved health status or simply for being in good health.

12.  I understand that a similar initiative is being explored locally. The Singapore Armed Forces, Health Promotion Board and Aviva are in early talks about the possibility of adopting the “Q” Score system in Singapore, to incentivise their regulars to improve their health status by adopting positive health behaviours. This is a good step towards providing creative yet workable solutions for the healthcare challenges we face. My Ministry would certainly be keen to work with all private insurers to explore innovations that can be applied in the Singapore context.

13. Slowing down the escalation of healthcare costs is beneficial for everyone and this objective transcend through the different healthcare financing systems in each country. I believe that the actuaries present today would have plenty of innovative ideas to share with each other in this area of keeping individuals healthy.

Getting the silver-hair generation covered

14. Last, but not least, I would like to touch on a major healthcare challenge looming for the industrialised countries: how to meet the healthcare needs of the rapidly ageing population. As all of you are acutely aware, the likelihood of seeking medical treatment and the cost of treatment goes up with age. The increase in healthcare expenditure is especially steep after retirement.

15. In addition, the traditional solutions to funding long-term care needs might not be sufficient to meet this impending silver tsunami. An ageing population means a reduction in the working population and tax base. Increasing life expectancy and the prevalence of chronic rather than acute conditions mean very high premiums for long-term care insurance which might make it out of reach for most citizens. Hence, there is an urgent need to relook at how long-term care can be sustainably provided and funded worldwide, both by the governments as well as individuals.

16. In Singapore, we are fortunate to have Medisave to help reduce this problem. By helping individuals build up a pool of savings for his medical needs and those of his immediate family, funds are kept available for insurance premiums and expenses in old age. However, this will not be the complete solution. There would be a need for all interested parties, public and private, to get together to tackle this problem in a concerted manner.

Conclusion

17. I understand that at this Conference, there will be various speakers sharing about the healthcare and healthcare financing systems in Australia, Hong Kong, Israel, Japan, the US and Singapore. There are similarities, as well as differences in approach. It is my hope that understanding the nature of, and reasons for, these differences will spark a lively discussion and debate among delegates here.

18. Actuaries have an important part to play in the development of healthcare insurance systems. With your skills in financial modelling and risk management, you can help both the public and private sectors in understanding the long-term financial implications of various healthcare financing strategies. However you would need to work closely with key stakeholders to ensure that your models remain relevant and accurate to be used reliably by all parties. I am glad to note that the attendance of this Conference is a good mixture of actuaries and professionals in other areas, including from my Ministry and other public sector bodies.

19. The circumstances in each country are different and the resolution of these issues can also take different forms. However, in all cases, a successful resolution calls for collaboration between the public and private sectors. I hope that discussions on the public-private partnership concept extend far beyond this Conference.

20. I wish all of you a fulfilling conference. To the foreign delegates, I hope that you will have some time to explore and experience Singapore, bring home fond memories of Singapore and souvenirs from the Great Singapore Sale!

21. Thank you.