Monday 11 November 2013

MediShield Life: Panel to examine key issues

Ensuring adequate protection for all while keeping premiums affordable top concern
By Salma Khalik, The Sunday Times, 10 Nov 2013

A panel of health-care, finance and insurance professionals as well as trade unionists and grassroots members will examine the key issues involved in introducing MediShield Life, the national insurance scheme that aims to cover everyone for life.

Health Minister Gan Kim Yong is expecting good input from them as MediShield Life signals a major shift in policy, from treating health costs as purely an individual responsibility to one of collective responsibility.

"It's important for us to discuss this very thoroughly and very carefully so that we can address all the issues and look into all the concerns of Singaporeans," he said.

The panel will be led by senior private sector accountant Bobby Chin, a member of the Council of Presidential Advisers.

He said yesterday: "I look forward to hearing the views of Singaporeans from all walks of life as the committee embarks on its review over the next six months."

Top of the list of issues it must consider is how to ensure adequate protection for all while keeping premiums affordable. Mr Gan said there will be a cost to bringing everyone, especially those who already have medical conditions, into the scheme.

The committee will have to look at whether those already ill should pay more, and if so, how much more? And, what role can the Government play to keep premiums affordable?

It will also study how to implement pre-funding for younger people, who will pay more when they are young so that their premiums can remain manageable as they age.

The panel can recommend improvements, but mind the impact on premiums.

It will comprise about 10 members of diverse backgrounds, who will be named at a press conference on Friday. The Health Ministry hopes to tap on their network of contacts, said Mr Gan.

Mr Chin said he will talk more about his panel's composition and plans after the members are appointed.

The existing MediShield scheme covers 92 per cent of people. In March, it was extended from an upper age limit of 85 to 90.

When introduced in 2015, MediShield Life will be compulsory for all Singaporeans and permanent residents.

Speaking to the media on the sidelines of the 103rd anniversary celebrations of the Kwong Wai Shiu Hospital yesterday, Mr Gan said the Government has committed to helping the lower-middle-income group and others who cannot afford to pay premiums for the insurance.

He said the panel will have to define this group, find out what help they need and suggest ways to make sure that help is available for them.

He stressed that MediShield Life's focus will remain large hospital bills.

"People must understand that the more it tries to cover, the higher the premiums will be. Coverage should target areas people need most protection for, primarily catastrophic bills, so that we can keep premiums affordable yet provide the most effective coverage," he said.

Problems with pre-funding

THE Government says the proposed pre-funding of MediShield Life is to benefit ourselves and not others ("MediShield Life: Panel to examine key issues"; Nov 10).

It explained that when we are young and working and have a good income, we can afford to put aside more into MediShield Life so that when we are old, we do not have to pay as much in premiums as we would otherwise have to.

Whether young working people can pay more is beside the point because premiums are paid using one's Medisave balance, and not current income, and tomorrow's seniors will likely have larger Medisave balances than today's young.

Instead of pre-funding MediShield Life, it is far simpler and more logical to retain the status quo. Leave the pre-funding premium in each young person's Medisave account and use this money, plus interest earned in the future, to pay for the true age-determined cost of MediShield Life when he is old.

Who would put money into a common savings pool if it requires him to surrender ownership of it, and he cannot even tell how much money is in the pool at any time?

And unlike saving the pre-funding premium in his own Medisave account, a person loses all his "unused" pre-funded premiums remaining in MediShield Life when he dies.

Also, new citizens or permanent residents start pre-funding only when they join MediShield Life. In contrast, most Singapore-born citizens will start pre-funding their MediShield Life earlier, possibly in 2015 when it is implemented.

Is it fair that newcomers in, say, 2030 get to enjoy the 15 years of pre-funding premiums paid by others?

Unless the Government succeeds in getting everyone to pay MediShield Life premiums, those who do not pay would also get to enjoy the pre-funding premiums paid by others.

It is difficult to avoid the perception that pre-funding is a "wealth transfer" from today's young to today's old, to make MediShield Life premiums affordable for the latter.

It also exposes today's young to considerable risk because when they become tomorrow's old, they have to depend on tomorrow's young to cross-subsidise their MediShield Life premiums - an inter-generation problem many nations face.

David Boey
ST Forum, 19 Nov 2013

Merits of pre-funding

PRE-FUNDING for MediShield Life has its merits ("Problems with pre-funding" by Mr David Boey; Tuesday).

The concept is already a feature in traditional whole-life, endowment and term insurance policies, where the policyholder pays the same premium throughout the duration of the coverage.

The "additional" premiums paid when one is younger "subsidises" the higher premiums one would otherwise incur in later years. This should encourage people to insure themselves when they are young and healthy.

A younger person may not have had time to accumulate much savings in his Medisave account, but older people will have a higher likelihood of being hospitalised, thus depleting their Medisave savings at a much faster rate.

Many of today's elderly may not have that much Medisave savings to begin with. Many may be housewives who have sacrificed their careers to look after their families.

If the elderly are unable to pay their MediShield Life premiums, the burden will likely fall on their children, if they have any. If not, the State will have to provide the subsidy using tax dollars. Ultimately, someone has to foot the bill.

To make paying higher premiums more palatable, perhaps the MediShield Life panel could examine the feasibility of offering no-claim discounts to policyholders after a certain number of years, similar to the approach taken by the motor insurance industry.

This will encourage Singaporeans to opt for healthier lifestyles and go for regular health screenings, to lessen the chance of coming down with a major illness.

Perhaps the tax authorities could also consider a separate tax relief for MediShield Life premiums, in addition to the existing relief for life insurance premiums.

New Singapore citizens or permanent residents who join the scheme would generally be in their prime working years and very likely will not have major health issues. So we can actually benefit from them contributing to the insurance pool and not making many claims in the near future. Further equity can be introduced by having them pay a certain percentage of loading on their premiums, perhaps for the first few years.

If we face our future health-care issues in solidarity, Singapore as a whole will be better off.

Maria Loh Mun Foong (Ms)
ST Forum, 21 Nov 2013

Caring for the old should be the norm

MR DAVID Boey's letter ("MediShield Life: Problems with pre-funding"; Tuesday) highlights a shift in our society's value system.

His comment that "it is difficult to avoid the perception that pre-funding is a 'wealth transfer' from today's young to today's old" caught my attention.

I am retired and belong to the "sandwiched" generation - the older generation had a pension system to look after their retirement needs, and the younger generation will have MediShield Life.

It would also seem that Singaporeans are "sandwiched" between traditional Asian values and modern Western values.

It has been the norm here that "today's young" look after "today's old" because the young of today will become the old of the future. In contrast, Western societies value self-reliance.

It is regrettable to hear objections to MediShield Life, which is meant to cover the seniors who are unable to afford medical insurance in their old age.

"Today's old" have "transferred" their wealth to "today's young" by bringing them up and taking care of them.

Nurturing the young is natural for many animal species, but caring for the old is a distinguishing mark of humans.

Perhaps we should be more positive and suggest ways to make MediShield Life work instead.

Geoffrey Kung
ST Forum, 21 Nov 2013

Pre-funding not feasible for MediShield Life

CURRENTLY, MediShield requires an annual premium that varies according to age. Younger people pay a lower premium, while older people pay a higher sum.

The Government is now planning to introduce MediShield Life, which covers people for life.

There has been some discussion about pre-funding for MediShield Life ("Problems with pre-funding" by Mr David Boey, last Tuesday; "Merits of pre-funding" by Ms Maria Loh Mun Foong; last Thursday; and "Caring for the old should be the norm" by Mr Geoffrey Kung; Forum Online, last Thursday).

The aim is for the insured person to pay a level premium to cover him for life. This is akin to a life insurance policy.

In both cases, the claim rate is lower for younger people and higher for older people. Pre-funding allows a person to pay a level premium that is deemed by an actuary to be sufficient for his lifetime.

There is, however, one key difference that makes pre-funding not feasible for MediShield Life.

In a whole-life policy, the sum assured is fixed for the duration of the contract.

For medical insurance, the cost of treatment is expected to rise over the years due to inflation. Also, the cost depends on the choice of hospital and specialists, and can vary significantly from one claim to another.

Some countries have adopted measures to make medical treatment more affordable for older people through cross-subsidies and supported by general taxation. They do not try to achieve this goal by using pre-funding under individual contracts.

Tan Kin Lian
ST Forum, 25 Nov 2013

Role of pre-funding

WE THANK Mr David Boey ("Problems with pre-funding"; Nov 19), Ms Maria Loh Mun Foong ("Merits of pre-funding"; last Thursday) and Mr Tan Kin Lian ("Pre-funding not feasible for MediShield Life"; Forum Online, Monday) for sharing their views on the concept of pre-funding for MediShield.

The letters from Mr Boey and Ms Loh may have created the wrong impression that the proposed pre-funding concept will require the younger generation to cross-subsidise the current elderly.

For MediShield, the pre-funded amount contributed by each cohort is set aside for the future use of their own respective cohorts, and not used to cross-subsidise the current elderly.

To address concerns over affordability of premiums among the current cohort of elderly Singaporeans, the Government has indicated its plans to provide help for the older generation of Singaporeans.

As noted by Mr Tan, health-care costs tend to be higher for the elderly. This, plus the effects of medical advancements and changing expectations, will put further upward pressure on future premiums as we age.

For this reason, it will be even more important to set aside some premiums in advance, or pre-funding, to address concerns of premium affordability during old age.

With pre-funding, members pay higher premiums during their working ages and, in return, can receive rebates to offset their own future premiums when they grow old.

With the ongoing review and enhancement of MediShield to MediShield Life, one of the key issues the MediShield Life Review Committee hopes to engage the public on is increasing the role of pre-funding. The committee welcomes all Singaporeans to provide their feedback or sign up for upcoming discussion sessions through

Philip Sim
Deputy Director,
Corporate Communications


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