Spend more, to keep healthcare affordable

By Jeremy Lim, Published TODAY, 22 Feb 2013

Singapore’s health system is lauded internationally for its ability to achieve outstanding health outcomes at very low national spending. Yet, 72 per cent of Singaporeans believe “we cannot afford to get sick these days due to high medical costs”, according to a 2012 Mindshare survey.

How can this be? Our low national spending on healthcare is the envy of the world and yet Singaporeans are so worried about healthcare costs.

What makes a great healthcare system? Healthcare planners the world over dream of the ideal health system: High quality, low cost and universal access for all citizens. How would Singapore rank along these dimensions?

The quality of Singapore healthcare is top-notch; 850,000 medical tourists in 2012 is testament to our high standards.

What about access? Geography advantages us and, unlike many large countries which need extraordinary measures to provide for far-flung populations, Singaporeans are hardly a stone’s throw from a doctor and barely a 15-minute drive from a hospital.

Our weakness lies in affordability, or at least the perception of affordability. Ironically, why we spend so little may account for why there is so much anxiety.

INDIVIDUAL RESPONSIBILITY: A DOUBLE-EDGED SWORD

In many developed countries, healthcare is funded collectively. Citizens are enrolled into a national health scheme and funds drawn based on individual need. These “solidarity” schemes are designed to offer medically necessary care without consideration of the ability to pay.

Singapore has eschewed this path, with then-Prime Minister Lee Kuan Yew asserting: “Subsidies on consumption are wrong and ruinous ... for however wealthy a nation, it cannot carry health, unemployment and pension benefits without massive taxation and overloading the system, reducing the incentives to work and to save and care for one’s family — when all can look to the state for welfare.”

The Government declared health an “individual responsibility” in the 1980s and established Medisave and MediShield, enabling individuals to finance and hence be “responsible” for personal healthcare.

The principle of emphasising the private financing of healthcare through individual responsibility supported by family has been praised for helping Singapore achieve remarkable cost constraints, but there has been a human cost. While the Government has successfully mitigated the risk of wanton state spending, the consequence arguably is that financial risk from medical catastrophe has been passed to individual citizens and their families, with resultant anxiety.

Support from Medifund is possible, but only upon application and on a case-by-case basis with no certainty of coverage, complete or otherwise. C-class wards provide subsidies which can be as high as 80 per cent, but paying even the remaining 20 per cent may be impossible for hefty bills; 20 per cent of S$50,000 is still too heavy a burden for low-income Singaporeans.

THE GERMAN EXAMPLE

And healthcare costs can be very unpredictable.

While virtually every country imposes co-payments to guard against over-consumption, many countries, especially European nations, operate on the reverse principle to Singapore. Co-payments are preserved as with Singapore, but the individual’s share of the total bill is capped — for instance, in Germany at 10 per cent of monthly income — with the government assuming the financial risk for unexpectedly large bills. No need to apply for special dispensations or subsidies.

Princeton University economist Uwe Reinhardt, speaking of the German health system, declared about medical bankruptcy: “That’s almost impossible … I have not ever read of Germans going bankrupt over healthcare.”

In Singapore, MediShield lifetime dollar coverage is capped at S$200,000 (soon to be S$300,000) with high deductibles and sub-limits on what clinical services can be covered. All these collectively enable relatively low premiums to be imposed and render MediShield financially very healthy — but similar to the structuring of subsidies, financial risk is borne by individuals and their families, with no certainty of help from Medifund or other schemes.

The theme is consistent: In our healthcare financing model, safeguards are built first and foremost to ensure system financial viability and sustainability.

A HUGE MIDDLE GROUND

Defenders of the system will point out the many financially struggling “welfare states” and proclaim Singapore must never go there. But it should be noted that between where we are today and the “fiscal extravagance” of the welfare states, there is a huge middle ground.

Singapore’s total public spending as a proportion of gross domestic product is only 13 per cent, a far cry from the 40 per cent that Finland spends. Singapore’s government spending on healthcare is just above one-third the total, with a long way to go before even sniffing the four-fifths that is the case in the United Kingdom.

Health Minister Gan Kim Yong’s commitment following the release of the Population White Paper — to “look at how we can restructure our primary care sector, our hospitals including our intermediate long-term care sector”, that is, the entire healthcare landscape — is reassuring, especially when juxtaposed against earlier comments on looking at healthcare affordability from the patient’s perspective. Times are changing.

“To live well, live long & with peace of mind” is the mission of the Ministry of Health. How can we balance “individual responsibility” with ‘peace of mind’? Between 13 per cent and 40 per cent, between one-third and four-fifths, where do we want to be?

Dr Jeremy Lim has held senior executive positions in both public and private healthcare sectors. He is currently writing a book on the Singapore health system. This is part of a series on health policies in Singapore.