Sunday 17 November 2013

MediShield rebooted

The 11 men and women tasked with advising the Government on the biggest reform of national health insurance scheme MediShield in decades met yesterday for the first time. What difficult issues will they have to grapple with? Senior Health Correspondent Salma Khalik reports.
The Straits Times, 16 Nov 2013

THE members of the MediShield Life Review Committee have a tall task before them and six months to come up with a plan - to reshape health-care financing to better distribute the burden of payment as society ages and costs spiral upwards.

The committee includes corporate chiefs as well as community leaders and unionists who have heard first-hand Singaporeans speak of their fears of not having enough for their own health care or that of family members.

That is in spite of hefty government subsidies, health-care savings and insurance.

Stories of huge hospital bills reducing families to bankruptcy pop up but these are anecdotal. The Health Ministry has stressed that very large bills make up only a tiny percentage of the total for subsidised patients, and even then there is help available for those affected.

Such fears are why Health Minister Gan Kim Yong has assured people his ministry wants "to give Singaporeans greater peace of mind", and why he has launched a big reform of Medishield.

The current health-care financing framework was set up some 30 years ago, with the launch of Medisave, the national medical savings scheme.

At that time, people in Singapore had life expectancies that were 10 years shorter than they are today.

At the point of retirement at age 62, people can expect to live for another 20 years or more, and should set aside enough money for that.

But even for those who keep healthy, the health-care costs in the form of insurance premiums go up with age. In the year they retire, at the age of 62, their MediShield premium would be $455 a year. By the time they are 82 and living off their savings, it would have jumped to $1,123.

And by the time they are 90 - about 10,000 people are older that - MediShield would no longer cover them.

Add to that the spiralling health-care costs, which have doubled in less than a decade, and it is no wonder people break out in cold sweat at the uncertainty that the future holds.

How much more expensive will medical treatments cost in future?

Lifelong coverage

TO MANAGE the problem of soaring health-care costs, the Government has decided to make changes to the current system of health-care financing, to reduce the share of big hospital bills that people need to pay out of their own pockets.

This is basically a two-pronged approach.

First, the Government's share of health-care financing will go up from the current 35 per cent to 40 per cent or more. In dollar terms, it will raise spending from $4 billion a year in 2012 to $8 billion a year by 2016.

But even this, it fears, will not be enough.

Hence the decision to introduce MediShield Life from 2015, to cover everyone for life.

This is a major policy shift from an individual-centric approach to a collective-responsibility approach. It's not just a matter of getting the 8 per cent of people currently not covered by MediShield to join the scheme.

That will have little impact on the rest of the population.

The important change is that everyone will be covered, even those with pre-existing or congenital diseases, and for as long as they live.

The bulk of the 8 per cent currently not covered are either very old, already sick, or at high risk of a major illness - in other words, people who are poor insurance candidates.

Currently, these people have to fend for themselves. They get the usual subsidies at public hospitals if they opt for B2 or C class wards when hospitalised. If they have Medisave, that can pay the remainder of their bills.

But many who are elderly or have suffered from a chronic ailment for years have little by way of Medisave savings. So they would need to pay in cash, or turn to Medifund for help if they are means-tested as poor.

With MediShield Life, these people will get a substantial part of such bills taken care of by insurance.

While it would be a major relief for them, it means a heavier burden on everyone else.

But it reflects the true nature of insurance - where everyone pays into a pool, and those who need it draw on this pooled money - in other words, collective responsibility for the medical bills of a few.

Furthermore, the insurance will be enhanced to take on a larger share of large bills.

But even as many people laud the move, some have questioned why the Government does not take on a larger role instead of spreading the burden among all MediShield policyholders.

Others say the current model of individual responsibility is sound and should just continue.

Yes, both are possible options, as practised by countries like Britain, which provides universal care, and the United States, where currently much is paid for with private insurance.

Having the Government take on the full load would mean higher taxes - as the money has to come from somewhere.

This has the advantage of the rich contributing more. The drawback is that the burden would fall on the working population - which means that younger people will end up paying for the elderly.

As the population ages, there will be more elderly folk to look after, and fewer younger people paying taxes.

As Health Minister Gan Kim Yong explained in Parliament just this week: "If we do not carefully manage health-care costs, the tax burden on the population will increase significantly as we will have more and more elderly folk and our children's generation will be paying for our health-care costs when we ourselves grow old."

People tend to consume more when health care is free. So even with the proposed changes, there will still be a significant part of the bill in the form of deductibles and co-payment, that the individual has to bear.

Leaving the system as it is, is also not ideal.

Caring for the vulnerable

TODAY, many of those who need health care most - the elderly and those with congenital illnesses or at high risk - are left out in the cold.

For some, the drain on their family finances can be extremely taxing. The problem will only worsen as the population greys.

A caring society is one that looks after the less fortunate.

Making MediShield compulsory for all is also not without its drawbacks.

A major concern is affordability of premiums, especially after retirement. It's well and good to say everyone must be included. But not all can afford to be.

However, Prime Minister Lee Hsien Loong has promised that the poor and the elderly will be given help. The questions now are: Who gets the help, and to what extent?

The MediShield Life review committee has been given six months to come up with its recommendations. The members will be talking to a wide spectrum of people to get their views.

For people who want a say in their future, this is the time to speak up.

As Mr Gan said: "This is a major step we are undertaking, from which there will be no turning back."



The Government's share of health-care financing will go up from 35 per cent to 40 per cent or more


Spending will rise from $4 billion a year in 2012 to $8 billion by 2016.


If we do not carefully manage health-care costs, the tax burden on the population will increase significantly as we will have more and more elderly folk and our children's generation will be paying for our health-care costs when we ourselves grow old.

- Health Minister Gan Kim Yong


If we rely too heavily on the individual, their efforts alone will not be enough, especially among the vulnerable, like the lower-income families, like the elderly.

There are some things which individuals cannot do on their own, and there are other things which we can do much better together. So we must shift the balance; the community and the Government will have to do more to support individuals... strengthen social safety nets, assure people that whatever happens to you, you can get the essential social services that you need, especially health care.

Footing the bill
By Salma Khalik, The Straits Times, 16 Nov 2013


Now: Government pays 35 per cent of national health-care bill.

Future: Government share to rise to 40 per cent or higher.


Now: All workers must contribute 7 to 9.5 per cent of their salaries, between $1,500 and $5,000 a month, to their Medisave, subject to a cap of $43,500.

All children born since August last year are given $3,000 to launch their Medisave accounts at birth.

Up to $400 a year can be used to pay for treatment of chronic ailments.

Between $800 and $1,200 a year can be used to pay for health insurance premiums.

Medisave money can also be used to settle hospital bills and some outpatient treatments such as chemotherapy and dialysis, subject to caps depending on the treatment.

Future: Currently, no change.


Now: Low-cost national medical insurance scheme helps cover large hospital bills. It is not compulsory, but currently covers 92 per cent of residents.

Deductible and co-payment: Patients need to pay the first $1,500 in C class and $2,000 in B2 class before MediShield kicks in. This can be cumulative within each insured year.

Beyond this, patients still need to pay 10 to 20 per cent of the rest of the bill.

Premiums: $50 to $1,190 a year.

Coverage: Stops at 90. Excludes people with pre-existing and congenital diseases diagnosed before March this year.

Future: Compulsory, with MediShield Life to be introduced in 2015. Covers everyone, regardless of existing diseases or age.

More changes expected when review committee submits proposal in May next year.


Now: A safety net for the very poor. Last year, more than $100 million was given out.

Future: No change.

Be affordable and yet offer enough coverage
That's what the MediShield Life plan needs to achieve
By Salma Khalik, The Straits Times, 16 Nov 2013

THE big shift in health insurance coverage involves tough issues for the MediShield Life review committee to weigh up.

The committee has been given two targets that the new product will need to meet:
- Ensuring adequate medical coverage for all Singaporeans, for as long as they live; while at the same time
- Keeping premiums affordable.
Either one is easy to achieve. Getting both right is a huge juggling act.

Adequate coverage

THE introduction of a MediShield that covers people for life involves asking hard questions such as: How long will people live on average? And how much hospital care will they need in their sunset years?

In the past 30 years, average life expectancy here has increased 10 years. There are now about 10,000 people 90 years and older, and almost 1,000 who have passed the century mark.

All indications point to lifespans continuing to rise.

Singapore must not be caught out like Japan, which has the highest life expectancy rate in the world.

In planning for its ageing population a decade ago, Japan had not expected the more than 50,000 centenarians it has today. It is now facing mounting costs and a shortage of facilities.

Estimating the amount of medical treatment people might require is an even more difficult issue facing the committee - especially with improving medical care and the usually high cost that goes with it.

Providing the elderly with adequate coverage - when most will be in and out of hospital - will not be easy.

If the Health Promotion Board succeeds in keeping people healthy for a longer period through campaigns emphasising prevention, then the draw on MediShield will be less.

But if the level of chronic ailments such as diabetes and hypertension continues to creep up, the need for hospital care will soar.

The committee also needs to look at the cap on annual and lifetime coverage.

Before these were increased, people found themselves kicked out of MediShield when they exceeded the then-lifetime limit of $200,000.

Last year, 63 were hit this way, and 43 in 2011. More than 100 people in those two years maxed out their annual limit of $50,000.

They have been given a breather this year with the increase to $70,000 a year and $300,000 for a lifetime.

The committee might want to scrap annual and lifetime limits, given the promise to cover everyone for life. Such limits result in the exclusion of some. If they are so high that no one is excluded, then they serve no purpose.

Another consideration is how people who are currently excluded can be brought in in a way that is fair to the majority who have been paying premiums for years.

Health Minister Gan Kim Yong has already said they will need to pay some loading. The Government will also help out so payments will not be too onerous.

This raises more questions: How much loading should these people pay, given the high likelihood they will draw on the insurance for medical bills?

And how much more in premiums will others need to pay to cover for them?

Keeping it affordable

AFFORDABLE MediShield premiums to most Singaporeans means being able to pay for premiums through Medisave without having to outlay cash from their own pockets.

For the young with low premiums and the working population who top up their Medisave accounts, this should not be a problem. The difficulty comes when people are older and stop working.

At today's premium rates, someone who retires at 62 needs over $22,000 to pay MediShield premiums till the age of 90.

Should people ensure they have enough in MediShield in case they live beyond 90, like 10,000 people here already do?

For the 90-year-olds today, the premium is $1,190 a year. With the enhanced benefits in MediShield Life and as people get older, the premiums are likely to be higher.

Is the current $40,500 minimum sum required in Medisave before withdrawing money from the Central Provident Fund sufficient?

If the money is just to pay for premiums, then yes. But Medisave might get used up for other things. For example, up to $400 a year can be used for outpatient treatment for chronic ailments such as diabetes and high blood pressure, which more than half the older folk suffer from.

People can also draw on Medisave to pay for the portion of hospital bills not covered by insurance, up to a cap depending on ward class.

Should a person require frequent hospitalisation, even if he opts for a C-class ward with an 80 per cent subsidy, he still needs to pay the first $1,500 of bills incurred each year. On top of that, he has to pay between 10 and 20 per cent of the remaining bills. All this too can come from Medisave.

One solution the committee can weigh in on is to increase Medisave contributions and the required minimum sum.

Another is for the Government to top up accounts of retirees on a permanent and perpetual basis.

Or it might get people to continue working for more years so they can keep contributing to their Medisave accounts and have fewer non-working years when they need to draw on the money.


FOR younger people, one solution the Ministry of Health is keen to implement is pre-funding.

It might not be widely known, but the way MediShield works is that each age group - in 10- to 20-year age bands up to the age of 60 and in narrower two- to five-year age bands for older people - pays for itself, so there is no cross-funding where working adults subsidise non-working retirees.

Today, premiums for people up to the age of 40 are less than $10 a month, or $50 to $105 a year.

One idea the committee needs to consider is raising annual premiums by a few hundred dollars a year for working adults and youngsters born since August last year.

This money is not only paid in advance, but will also earn interest in intervening years.

The accumulated sum will offset higher premiums when they get older.

Out of the box

HEALTH Minister Mr Gan said he has not placed any limits on what the review committee can recommend.

Perhaps it's time to slaughter some sacred cows, such as the current, purely age-based premiums.

If premiums are based on both age and income, it will give greater meaning to the move to collective as well as individual responsibility as the better off will be helping the less wealthy.

Another possibility is to give discounts to people who stay healthy or who can keep their chronic conditions in check.

This has the advantage of getting people to go for regular health screenings and to take greater care of their health, reducing the need on a national level for hospital care.

The Government has promised to help the pioneer generation. But what about the very old of the future, of whom there will be many more than today?

Setting up a donation pool to help with their premiums can also keep them more affordable. Tax-exempt contributions can come from both individuals and corporations.

When Singapore launched Medisave almost 30 years ago, it introduced a new health-care financing concept to the world.

Perhaps it's timely to introduce other out-of-the-box concepts with the move to MediShield Life so that it can remain robust in the coming decades.

Insure only for medical treatment
By Salma Khalik, The Straits Times, 14 Dec 2013

AS THE Ministry of Health continues with its public engagement on what people want from the new MediShield Life, one thing is already clear: Singaporeans are worried about rising premiums, especially as they age.

The new MediShield Life scheme, announced by Prime Minister Lee Hsien Loong in his National Day Rally speech in August, will cover basic hospital care for everyone for life - based on subsidised rates in public hospitals.

With MediShield expanded to cover people with pre-existing illnesses and no age limits involved, many have asked how much premiums will rise by.

Historically, medical costs rise faster than general inflation - or incomes. To ensure that people are well protected against big hospital bills, premiums will need to be high enough to cover the cost of treatment not just for the current year, but for chronic ailments such as kidney failure and for the rest of a person's life as well. Once the pool of older people swells with lifelong coverage, costs of coverage will go up - as will premiums.

It is not just premiums of the basic MediShield Life that worry people. With two in three Singaporeans having coverage over and above the basic scheme, premium increases of Integrated Shield plans is a concern. Such plans are enhanced policies offered by private insurers on top of the basic MediShield plan. Premiums for these insurance policies have gone up quite sharply in past years.

At a focus group discussion last weekend on the new MediShield Life national insurance plan, at least three participants brought along letters from their insurers telling them they will need to pay 60 per cent to 75 per cent more in annual premiums.

Private insurers argue that premiums need to rise to cover the greater benefits offered to policyholders.

Unfortunately, policyholders have little say in whether they need such added benefits. Once they are on a scheme, they are more or less stuck with them.

Several people at Saturday's discussion on MediShield Life asked if they should drop their Integrated Shield plans for the new MediShield Life.

Unlike motor vehicle insurance, where owners can easily change from one insurer to another - depending on whether they prefer higher coverage or lower premiums - changing medical insurers can mean reduced coverage, whether you want it or not. This happens when someone is deemed to have a medical problem that raises his level of risk.

Looking at it from a different angle, one way of keeping premiums affordable is to keep medical costs from rising too fast.

This will not be easy, as newer procedures and medicines usually cost more. And because they also often produce superior results, people who are insured will demand them. This is especially so for those who have bought "riders". Riders oblige the insurer to pay the entire bill. Patients do not have to make any out-of-pocket payments.

The result is often over-servicing, sometimes known as the "buffet syndrome". Patients take all the treatments and services offered, even though they do not need them, simply because they are free, thus pushing up overall health-care costs.

One way to prevent this is to disallow riders for all Integrated Shield plans. When patients have to pay part of the bill, they tend to be more cautious about spending on tests and procedures that are not really necessary.

Another way to keep bills down - the Japanese are introducing it for their long-term care insurance - is to remove the cost of board and lodging from the insurance coverage. In other words, the insurance firm pays only the medical treatment, not the expensive room the patient chooses to stay in.

In the public sector, a night's stay in a luxury room could cost more than $700. In the private sector, it can top $12,000. This means that it is quite possible that, in some cases, the cost of medical treatment is less than the cost of lodging during the period of care. There is also no incentive for the patient to want to leave early.

So, two patients covered by the same insurance policy, going for the same treatment but choosing differently priced rooms, would claim different amounts from the insurer. The difference in claims can be significant.

Excluding room charges from insurance payouts would certainly help reduce premiums.

To cater to poorer patients, perhaps all policyholders should be allowed to claim the basic board and lodging charged by public hospital C class wards - less than $50 a day. Patients who want better rooms should pay for that on their own.

Non-coverage of board and lodging by medical insurance should not extend to intensive care costs, as this is a need rather than a choice.

Further regulations on what can reasonably be claimed from insurance for various medical problems could also help reduce unnecessary tests that some doctors might encourage patients to take.

Unlike medical insurance outside the Shield scheme, Integrated Shield plans should be subject to more stringent rules. After all, they are perceived to come with the "blessings" of the Government, since Medisave money can be used to pay their premiums. It is also obligatory for these plans to incorporate the basic MediShield.

People who want super-luxurious medical insurance should look for schemes outside of Integrated Shield plans that do not involve the use of Medisave.

Help! I'm confused about health insurance plans
By Salma Khalik, The Sunday Times, 29 Dec 2013

Something seems to be wrong with the way the five insurance companies offering Integrated Shield Plans (IP) decide on their premiums and coverage.

Either they do not know what their clients want or what the cost of medical treatment is, or have actuaries who are either ultra-conservative or prone to risk-taking.

Why do I say this?

Because the premiums the five insurers - NTUC Income, Great Eastern, AIA, Prudential and Aviva - charge for covering the same ward class can differ by more than 100 per cent.

To add to the confusion, the insurer charging the highest premium is not necessarily the one offering the highest claim - and vice versa.

And when it comes to the amount of claims allowed for some treatments, one insurer allows three times the claim of another. Does one insurer know something the other doesn't?

Health Minister Gan Kim Yong's constant refrain is that he wants MediShield, the national basic medical insurance scheme, "to give Singaporeans peace of mind".

Like more than half of insured Singaporeans, I am on an Integrated Plan, which is offered by private insurers and gives higher payouts than the basic MediShield.

Going through the fine print of the IPs offered by the five insurers - which the Ministry of Health (MOH) publishes on its website - the one feeling I do not get is peace of mind.

There is such a huge variation in premiums and claims limits that I worry that I'm either being ripped off or am under-insured - which means that I might not be able to meet huge hospital bills in future.

There are three categories of Integrated Plans. At the top end is insurance for people who want treatment at private hospitals. The other two plans are pegged to the level of care that is equivalent to staying in the A and B1 classes at public hospitals.

It is understandable that insurance pegged at private hospitals could vary greatly, as there are expensive private hospitals and less expensive private hospitals.

So, for a fairer comparison, I decided to look at the IPs pegged at public hospital rates; in particular, the B1 class, where Singaporeans enjoy a 20 per cent government subsidy, and hence, the variation in costs among different public hospitals is not that wide.

The five insurers provide a total of seven Integrated Shield Plans in this category.

When the basic MediShield package was enhanced in March this year, giving higher annual payouts and lifetime claims limits among other things, all the IPs were affected, as they all incorporate MediShield.

It would seem reasonable to expect the seven plans to charge roughly the same premium rates, as they are all meant to cover the same ward class, with some slight variation in coverage.

What was surprising was the huge difference in premium increases imposed by the five insurers for people in the same age band. For people aged 20 years, the increase ranged from 35 per cent to 136 per cent. For 80-year-olds, the increase in premiums ranged from 1 per cent to 29 per cent.

Depending on which IP an 80-year-old is on, the annual premium could be as low as $1,621 or more than double that at $3,599.

Whether they pay the high or low premium, coverage is pegged at B1 class in a public hospital. Both the priciest and the cheapest plans for an 80-year-old have the same $150,000 cap on annual claims but no lifetime claims limit.

But another IP, with a premium of $2,398 for 80-year-olds, caps annual claims at a much higher $250,000, and also has no cap on lifetime claims.

Furthermore, the coverage can vary greatly among the IPs covering people of the same age group in the same ward class.

For example, for "surgical implants and approved medical consumables", some insurers pay "as charged" - which means the policy holder pays only the 10 per cent co-payment no matter how high the bill - one pays up to $3,000 per surgery and another $9,000.

For chemotherapy, the amount a policyholder can claim ranges from $1,240 to $3,000 a month to an as-charged basis (again, co-payment applies to all schemes).

Even payouts for daily ward and treatment charges can vary by more than 100 per cent. Three plans pay "as charged", three pay $450 to $550, and one pays up to $1,000.

This begs the question: Are some of the high claim limits just for show, meaning that they look good on paper, but no patient is likely to reach that limit? And hence, there is no need to buy a policy that has such a high limit? Or is the opposite true - that some insurers are offering inadequate coverage to their policyholders?

From the numerous e-mail messages and calls I have received from readers, it's safe to say that many are as confused as I am over what constitutes good medical coverage.

Although there are regulations all insurers need to abide by when they offer IPs - such as compulsory renewal of a policy after someone falls sick - there is no regulation on how much the insurers can charge or what they need to offer.

It is essentially a free market. But medical insurance, like the practice of medicine itself, is an unequal marketplace, with the buyer rarely sufficiently informed to make sensible choices.

In fact, it is worse than receiving medical care. You can change doctors if you find that the one you are seeing is too expensive or not so good. With medical insurance, once a person has developed any medical problem - and most would have by age 50 - there is usually no changing of insurers or plans without penalty.

In fact, even if a person made the best choice at the time of joining a plan, there is nothing to say that some years down the road, that plan remains the best - or even adequate - since insurers can change coverage, subject to MOH approval, and premiums, any time they like.

It would be good if insurers charging significantly more than others explained why they needed to do so.

In such a marketplace, greater government intervention would not be amiss - at least to make sure that people on IPs are sufficiently covered at a reasonable price.

The ministry could, for example, cap the premiums to be paid, and have all insurers provide sufficient basic coverage for the ward class, leaving insurers to provide more should they wish to, within those parameters. It should do this, at least for the lowest of the IP categories - that pegged at public hospital B1 class.

That would certainly go a long way towards giving people peace of mind.


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