Lessons from Obamacare for Singapore

By Eric Finkelstein, Published TODAY, 18 Nov 2013

As a health economist who lived in the United States until I moved to Singapore four years ago, I am often asked how the Singapore health system compares to America’s, especially with both embarking on healthcare reform.

One of the ideas that I stress in my comparative health systems course is that a country’s health system typically reflects the political ideologies that it was founded upon. However, as countries grow wealthier, concerns over access and equity tend to take on a more dominant role in shaping the healthcare system.

Let’s take the US first. The US is a capitalistic society. When health insurance first took hold after World War II, it was offered by private employers as a way to attract and retain workers in a period when both labour and cash were scarce.

The government soon recognised the benefits of private health insurance and the employment-based model of risk pooling. It offered employers tax breaks for providing health insurance to their employees and dependents. Today, it is this tax break that keeps employers in the health insurance business and it is why the majority of full-time employees have employment-based health insurance.

MANY AT RISK

Although it has many advantages, this model left a large percentage of the US population at risk from high medical costs, such as the elderly and those out of the labour market. The latter includes many recent college graduates who have yet to find jobs, the unemployed, the self-employed and those who work for small businesses, which do not offer insurance.

Efforts to find a private-sector solution to insure these groups failed because the premiums that insurers required to insure these high-risk groups were greater than what many were willing or able to afford.

In 1965, after much debate, the US Congress passed legislation that created the Medicare and Medicaid programmes that respectively provide public insurance for the elderly and the disabled, and for low-income households. Over the past 48 years, these programmes have been expanded until coverage is near universal for those who qualify. This is about 30 per cent of the US population. In fact, although most people consider the US healthcare system to be a private insurance model, Medicare and Medicaid are responsible for roughly half of annual US medical expenditures.

SINGAPORE: MORE BANG FOR THE BUCK

Now let’s look at Singapore. Since its creation, it has put individual and family responsibility first, with government assistance provided on an as-needed basis.

The healthcare system clearly reflects this. The Medisave system of forced savings and family-based risk-pooling requires individuals to weigh the costs and benefits of treatment, as they are ultimately spending their own or a family member’s health savings.

However, as with the US system, it also leaves many individuals at risk for high medical costs. This includes low-wage earners whose Medisave account grows less slowly, and those out of the labour market, who often do not have a Medisave account.

To address this, the Government created MediShield (whose basic plan is like a catastrophic insurance plan), need-based subsidies, and Medifund as the payer of last resort. These programmes provide greater healthcare access for citizens than what could be afforded through Medisave alone.

Crucially, these programmes helped to contain cost. Herein lies the major difference between the Singapore and US systems.

In the US, private insurance has historically provided fairly comprehensive coverage, and, as noted above, Medicare and Medicaid provide near universal access to those who qualify. In contrast, in Singapore, individuals remain the main payers for health services. There are caps and limitations on claims on Medisave and MediShield, while Medifund serves primarily as a safety net for the needy.

Just how do these differences play out in real life? When one compares common metrics of health system effectiveness, such as infant mortality rates and life expectancy, Singapore outranks the US and is among the best in the world in both categories. Yet, Singapore is able to spend less on healthcare than the US.

In the US, government health expenditures are roughly half the total spending. In Singapore, government health expenditures are less than a third. Moreover, total expenditures dedicated to health spending are only 4 per cent of gross domestic product in Singapore, much less than the 18 per cent that the US government spends.

In other words, Singapore gets more “bang for its buck”. This is because of greater reliance on cost sharing and coverage limits.

HOW TO WIDEN ACCESS?

So let’s fast forward to today’s healthcare reform efforts. Contrary to what you might expect, the Affordable Care Act, or Obamacare as it is commonly termed, is not about cost control or reining in government funding. It is about the push for greater access and health equity that all developed countries inevitably face.

It primarily targets the roughly 50 million Americans who are too young for Medicare, not poor enough for Medicaid, and for a myriad of reasons — not the least of which is the persistently high rate of unemployment by US standards — do not have private insurance.

Without reform, these individuals are at significant financial risk should they require high-cost medical treatments. Obamacare, by mandating that all individuals purchase health insurance or face a financial penalty, is expected to alleviate this problem.

Singapore’s health-reform effort is also about promoting greater access to health services and greater health equity. The similarities do not end there: Singapore plans to ensure universality of MediShield through an expanded programme termed MediShield Life.

This expansion has similarities to the Obamacare mandate, as it will require individuals to purchase a MediShield plan with a pre-defined benefit package and, like the US plan, give subsidies to those who cannot afford it.

It will also offer more benefits and fewer restrictions; the Government has already announced a lifting of several of the caps and has been slowly expanding MediShield to cover some outpatient and disease management services. This will mean greater health equity. However, the challenge is that greater health equity will mean greater costs.

The formation of the MediShield Life Review Committee is a sure sign that the Singapore Government recognises this reality and is taking it seriously.

The committee’s mandate to review the MediShield Life scheme and make recommendations on how to best balance between ensuring adequate insurance protection for all Singaporeans for life and maintaining premium affordability is an important discussion that Singaporeans must engage in.

As the push for expanded coverage continues, it is worth pausing to make sure that any expansions will meet the desired objectives, yet at a reasonable increase in costs.

Singapore does not want to be in the unenviable position of the US, with both high costs and significant health inequities.

Eric Finkelstein is Director of the Lien Centre for Palliative Care and Professor, Health Services & Systems Research Programme, at Duke-NUS Graduate Medical School.

Allow 'creative destruction' in health-care delivery

Changing the way health care is delivered so doctors work in teams and attend to patients before they need hospitalisation can keep costs down and quality up

By James Bonnette, Published The Straits Times, 22 Nov 2013

THE United States has the most expensive health-care system in the world, spending US$2.8 trillion (S$3.5 trillion) per year or more than US$8,000 per capita. So one would think that there is not much that Singapore could learn from the US.

But high costs have forced the US to make massive changes to its health-care model, which are being put in place under the Patient Protection and Affordable Care Act, or Obamacare.

Obamacare may have grabbed headlines for the wrong reasons recently, no thanks to the fiasco over the roll-out of the federal health-care exchange.

But in fact, this law has freed the market to experiment with both financing mechanisms and care delivery. Both prongs of reform are essential: Doing one without the other is pointless as both are required to rebalance the system.

In America, we have learnt from failed reform efforts in the 1970s, 1980s and 1990s that changes in financial mechanisms alone never produced sustainable results and in the end resulted in far higher costs with lower quality and satisfaction.

America's past health-care system was never designed around the true needs of the patient; that is to say, in the past, we designed a system of care delivery for doctor and hospital convenience rather than for the needs and desires of the patients and families.

Now, America is changing who delivers care and where it is delivered. When care is restructured, we have found that increasing outpatient care delivery resources to the "sickest of the sick" - which is generally just 5 per cent of patients - will actually save significant costs, and often of significant magnitude.

These generated savings can be applied to the rest of the population to provide cost-effective primary care prevention and health promotion.

Not only do we segment the population by sickness level, we have also found that it is best to match health-care providers with the needs of their population.

For example, not all general practitioners are created equal: Some excel at the care of the chronically ill, while others are better at maintaining health and promoting wellness.

Nor can physicians do complex care delivery alone; it requires a team to deliver effective care. The team-based system of care delivery often includes the physician, advanced practice nurse, pharmacist, behavioural therapist, social worker and so on.

We call the doctors managing the sickest patients "extensivists" and they and their teams are critical in managing an ageing population.

Team-based care also means delivering care where it is most convenient and appropriate for the patient, which is not in the hospital or office, but rather closer to home or in the home.

This system has been implemented in diverse disease populations and has achieved marked improvements in outcomes, satisfaction and costs.

In one region of the US, our cost for a cohort of 35,000 elderly patients is 40 per cent less than the national average after only two years of implementation and is still on a declining cost curve.

The methods of financing this care also need to be considered.

Here, Obamacare's community rating is particularly relevant for Singapore as it considers a new insurance scheme to cover the entire population at a reasonable cost.

In community rating, insurance rates are not set by age alone or how sick one is, but rather by wide age bands, where the spread of cost cannot be greater than threefold from the least to the most expensive policy.

All members of the community are mandated to participate in the scheme. Those who cannot afford the premium (based on income, not illiquid assets) are supplemented by the government so that all members of the community are equally covered.

Bringing everyone within the insurance fold is critical because caring for the uninsured comes at a cost which society must otherwise still bear, for example through higher taxes. Unless Singaporeans are prepared to turn away the uninsured, managing the care of the sickest of the sick and bringing them within the insurance fold benefits everyone. If I were to distil the hard-earned lessons from the forced innovation in the US, I would say they are:

- The law can catalyse change in care delivery by restructuring incentives and banning insurers from taking the "easy way out" and excluding high-risk individuals. This is best done through mandating universal coverage regardless of pre-existing conditions.

- When incentives are aligned and innovation in care delivery takes place, health-care spending can come down even as care improves. Hence, it is not a given that better benefits equal higher premiums.

- This "creative destruction" happens in every other industry. In health care, consumers and patients are the better for this. To be sure, there may be short-term "losers". For example, hospital admissions may fall, as we have seen in our experience managing large patient pools where health-care providers can treat patients before their conditions become acute, requiring hospitalisation.

But the freed-up capital and labour in efficient markets will be re-deployed for better national benefit.

MediShield Life is a game-changer in Singapore for extending coverage and reviewing financing.

Next, the Government can look at how to change the delivery of health care to one that is more team-oriented and focused on patient needs, and less focused on doctors and hospitals.

The writer is partner and chief medical officer of the health and life sciences division of global management consultancy Oliver Wyman.